The High Court has rejected a bid by Mauritian multinational SBM Holdings Limited, to stop a court case in which former shareholders of Fidelity Commercial Bank are seeking a compensation of Sh2.5 billion.
This is the second such decision by the court after a similar application by the multinational’s subsidiary, SBM Bank Holdings, was thrown out on July 28, 2023.
The multinational through another subsidiary, SBM Africa Holdings, fully acquired Fidelity on May 10, 2017 and renamed the lender to SBM Bank (Kenya) Limited.
The sellers, led by Sultan Khimji, later went to court and claimed that SBM had reneged on an agreement to pay them a deferred amount of Sh2.5 billion.
The aggrieved parties had initially sued SBM Bank Holdings which is the parent company of SBM Africa Holdings –the vehicle through which the Kenyan acquisition was conducted.
SBM Bank Holdings sought to stop the case on the basis that the share purchase agreement provided that disputes should first be settled through consultation and if it fails, the matter should be taken to arbitration.
The High Court however ruled that the case should proceed, noting that the Khimji group’s application demonstrated major disagreements between the parties.
The former owners of Fidelity told court there was fraud, misrepresentation and coercion by the Central Bank of Kenya (CBK) –the second defendant in the case— when they signed the deal to sell the bank.
SBM Holdings replaced SBM Bank Holdings as the first defendant on July 31, 2024 and it later made a move to stop the case but this has also been thwarted by the court.
“As was rightly observed by the good judge, the correct judicial intervention upon these pronouncements would be an appeal, rather than a fresh application for stay of proceedings,” Nairobi’s High Court Judge Francis Gikonyo Muthuku ruled on February 20, 2025.
“As such, the 1st Defendant’s application for stay of proceedings is not merited. It is dismissed –and given the nature of the proceedings— with no orders as to costs.”
The former Fidelity shareholders are accusing the CBK and SBM of defrauding them, by making promises they had no intention of fulfilling.
A document dated November 17, 2016 included signatures by CBK’s top leadership and outlined the broad terms of the deal, such as additional compensation based on Fidelity’s net asset value.
This was a prelude to the share purchase agreement dated March 28, 2017 which provided for a maximum payout of Sh600 million to the former Fidelity shareholders.
In its defense, CBK says that it is not a party to the share purchase agreement between SBM and the former Fidelity shareholders.
SBM on the other hand says the conditions for paying the Khimji group were not met as Fidelity suffered substantial shortfalls.
