Court of Appeal suspends liquidation of Dubai Bank
Wananchi walk past a closed Dubai Bank branch in Nairobi. PHOTO | FILE
The Court of Appeal has stopped liquidation of the collapsed Dubai Bank pending a High Court ruling on the matter.
The Central Bank (CBK) is seeking to overturn a ruling by Justice Eric Ogola, who had earlier issued orders suspending liquidation for 60 days.
Mr Justice Ogola had directed CBK to consider a proposal by a British Virgin Islands company to inject $21.5 million (Sh2.2 billion) into Dubai Bank to save the lender from liquidation.
In its application, the Virgin Islands company Richardson & David wanted the court to stop Dubai Bank’s liquidation, arguing that the lender has top clients who are willing to convert their deposits into equity.
Richardson & David says the deposits conversion could raise an additional Sh1 billion.
Judges Alnashir Visram, W. Karanja, H. M Okwengu said pending a ruling on this matter, which will be delivered on March 16, the liquidation of the bank is “hereby frozen”.
The judges gave the order on the strength of a consent of the parties in the suit.
It was also ordered that the second respondent in the case, the Kenya Deposit Insurance Corporation (KDIC) “be and is at liberty to pay Sh100,000 insured money to depositors” of the collapsed lender.
The Central Bank ordered the closure of Dubai Bank over its failure to pay its debtors and for flouting regulations.
The lender had on August 14 been put under receivership following “violations of banking laws and regulations, including failure to maintain adequate capital and liquidity ratios as well as provisions for non-performing loans and weak corporate governance structures”.
The regulator said that such violations and indebtedness were detrimental to the interests of its depositors, creditors and public.
The KDIC made a recommendation to the CBK to liquidate Dubai Bank.
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