Mauritius’ SBM Holdings Ltd will not deposit security of Sh2.5billion as sought by former shareholders of Fidelity Commercial Bank Ltd (renamed to SBM Bank Kenya), pending the determination of a dispute over the acquisition of the Kenya-based lender in 2017.
High Court judge Alfred Mabeya dismissed the application by the litigants led by Sultan Khimji, seeking to compel SBM Holdings to deposit the money as security, pending the determination of the case.
The applicants want the acquisition nullified and they be compensated for the full value of the lender as of December 2016 at Sh2.5 billion, as well as full profits arising for the sale of the bank to the Mauritius lender and damages compounded at an annual interest of 12 percent from January 2017.
The multinational paid a token price of 35 Mauritian Rupees (about Sh100) in the deal that the applicants say was done under pressure from the Central Bank of Kenya (CBK).
Mr Khimji said he was apprehensive that SBM Holdings was likely to sell SBM Kenya and exit the Kenyan banking industry.
But Justice Mabeya dismissed the application saying Mr Khimji has not demonstrated why SBM Holdings should deposit the security.
“There is no evidence that the defendants dispose of their assets in Kenya. I find that the plaintiff’s apprehension is not enough to invoke the Court's draconian discretion to order the giving of security,” said the judge.
In a win for Mr Khimji, the court in the ruling on Wednesday declined to suspend the hearing of the case as sought by SBM Holdings.
The judge said suspension of proceedings ought to be made sparingly not to interfere with the right of a litigant to prosecute its case.
SBM Holdings Ltd submitted that there is an arbitral clause found in the contract executed by the parties.
The lender had also challenged the court’s jurisdiction on the ground that the applicable law was the English law and that all disputes were to be determined by arbitration and that the application had been caught by limitation.
Justice Mabeya however ruled that the court had jurisdiction that an order for stay of proceedings should be granted sparingly as it impacts on a party’s right to a fair hearing.
“The discretionary power of the court should be invoked upon satisfaction that there is sufficient cause to stay the proceedings. When a stay of proceedings is ordered, it leads to case backlog which impacts negatively on the right to access to justice,” Justice Mabeya said. Mr Khimji pointed out there were parallel proceedings filed by SBM Holdings in the United Kingdom and Mauritius.
According to Mr Khimji, two orders blocking the proceedings in Kenya were granted by the said courts.
He therefore, asked the court to affirm its jurisdiction to determine the dispute and order SBM to withdraw the cases filed in Mauritius and UK.
In the ruling, Justice Mabeya said the courts in the UK and Mauritius cannot purport to exercise their jurisdiction over what happens in Kenya.
“To the extent that they purport to injunct the plaintiff from proceeding with these proceedings, it is an exercise in futility. These proceedings will proceed to the full extent permitted by law,” said the judge.
SBM Holdings entered the Kenyan market in May 2017 through its take-over of the operations of the then Fidelity Commercial Bank.
The take-over was effected through a special purchase agreement (SPA) between SBM Africa Holdings Ltd, which is a subsidiary of SBM Holdings Ltd, and the former shareholders of Fidelity.
