Dubai Bank top owner suffers blow after High Court allows winding up

The quest by Dubai Bank principal shareholder Hassan Zubeidi to stop liquidation of the collapsed lender has failed after the High Court issued orders allowing its winding up.

The High Court on Friday refused to extend an order against winding up of the bank, giving the Kenya Deposit Insurance Corporation (KDIC) the green light to liquidate it.

High Court judge Grace Nzioka issued the orders after the collapsed bank’s receiver manager Adam Boru argued that there is no viable revival bid for the lender.

The receiver manager said he had reached the conclusion after evaluating proposals by several local and foreign suitors as directed by the court.

Mr Boru of KDIC further argued that the High Court has no authority to further extend the 60 days that had been given to the receiver manager to consider bids for capital injection.

Supplies firm Richardson & David — Dubai Bank’s second largest depositor — secured an order from the Court of Appeal in March barring the lender’s liquidation for 60 days within which the KDIC was directed to consider revival bids from interested parties.

Richardson & David secured another order from the High Court extending the restraining order against Dubai Bank’s liquidation for 14 days on May 27. Lady Justice Nzioka declined to extend the order after the KDIC argued that the supplies firm should have filed a fresh application if it wanted to extend the order.

“The KDIC and the Central Bank of Kenya (CBK) have filed the report on the viability of proposals to revive Dubai Bank by one of the depositors of Dubai Bank and other interested parties as ordered by the court. The order extending the injunctive order for 14 days was without jurisdiction and is consequently null and void,” the KDIC held.

The CBK ordered Dubai Bank’s liquidation last August after an audit report showed that it was in gross violation of industry regulations that could expose depositors to a loss of more than Sh1.7 billion.

READ: CBK rejects takeover bids by seven suitors of collapsed Dubai Bank

The regulator cited serious cases of parallel banking, a mountain of unsecured loans that were not being serviced, interference with client accounts and a lack of a full organisational chart as provided for by the law while shutting Dubai Bank’s operations.

Dubai Bank founder Mr Zubeidi who was enjoined in the case as an interested party claimed that the CBK has treated Dubai Bank unfairly by rushing to liquidate it while sparing Imperial Bank and Chase Bank the same fate.

He argued that Imperial and Chase Bank were given a soft landing despite having larger amounts of customer deposits at stake.

But the CBK in response says each of the three lenders placed under receivership was facing different challenges hence the regulator had to treat each case in a specific manner.

“Each case must be considered in its own facts and the assertion that the CBK and KDIC should undertake similar corrective measures for Dubai Bank, Imperial Bank and Chase Bank are misinformed and untenable,” said Gerald Nyaoma, director of bank supervision at the CBK.

Mr Nyaoma added that Dubai Bank’s revival is not just about capital injection but also about meeting other requirements like organisational structures and management policies.

Failure to disclose ownership and source of funds saw the banking industry regulator turn down seven capital injection proposals.