KCB sues for Safaricom refund

KCB Group has filed yet another multi-million- shilling claim against stock brokerage firm Suntra over the botched purchase of Safaricom shares during the telecommunication company’s IPO in 2008.

The lender is seeking a refund of Sh22.2 million and interest dating back five years for share purchase orders, which it claims Suntra Investment Bank failed to honour.

The suit filed at the Milimani Commercial Court becomes the third that KCB has filed against Suntra arising from the Safaricom IPO.

“The plaintiff’s claim as against the defendant is for Sh22,188,500, being the amount due and owing from the defendant for shares applied and not allotted to the various clients some of which were financed by the plaintiff full particulars of which the defendant is fully aware,” says KCB in court documents.

The lender says 165 clients had borrowed cash to buy Safaricom shares, money that was paid directly to Suntra Investment Bank, but the stockbroker failed to deliver on the order.

KCB says the investment bank contracted it in April 2008 to promote and facilitate the participation of its clients and general public in the multi-billion- shilling Safaricom IPO.

READ: KCB, Suntra in battle over Safaricom IPO

KCB’s role was to receive the applications for the shares and forward the same to Suntra for purchase of the shares on behalf of the clients.

The bank claims it was only an agent of Suntra, and its role was to receive the applications and the deposit for onward transmission or alternatively to advance loans to the applicants.

Suntra Investment Bank allegedly undertook to expeditiously allocate the shares and refund the monies not used in the purchase of the shares.

Under the agreement, all refunds were to be remitted to clients’ accounts with KCB to offset the loans or to be paid to the clients who had deposited cash with the lender.

KCB claims that more than five years later, Suntra has failed to account for the cash or to refund it despite several demands, which KCB says necessitated filing of the new suit.

The three pending suits emanating from the Safaricom IPO involve separate claims.

KCB Group last year filed a claim against Suntra seeking a refund of Sh10 million and interest covering five years after the firm failed to buy Safaricom shares on behalf of its client, Magic Movers.

Magic Movers had borrowed the money from KCB to buy the shares through Suntra, which allegedly failed to forward the share allotment form together with the money to Citi Bank, the receiving lender.

READ: Police on the trail of Safaricom IPO refund fraudsters

Magic Movers has separately sued KCB for missing out on capital gains arguing that Safaricom is currently trading at its highest level compared to the IPO price of Sh5.

In 2012 KCB sued Suntra seeking a refund of Sh50 million paid on behalf of its client, whom the investment bank allegedly failed to refund fully.

The bank further in the suit asked the High Court to compel Suntra to pay it Sh10 million as commission for facilitating the sale of shares to its customers worth Sh993 million.

KCB argued that on April 23, 2008, one of its customers Sudhir Ruparelia, through KCB Uganda, applied for 23.4 million Safaricom shares worth Sh117 million and the stockbroker received the payment.

Due to heavy oversubscription, a share allocation criterion was devised where Ruparelia was entitled to an allocation of 21 per cent of the shares and a monetary refund of 79 per cent.

KCB claimed that Suntra refunded Ruparelia Sh92 million, but retained Sh24.7 million yet no shares for the value retained by the stockbroker were allotted to the investor or credited in his CDS account, forcing KCB to pay him back.