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CBK secures order to auction Ajay Shah assets

Mr Ajay Shah, one of collapsed Trust Bank directors. Photo/FILE
Mr Ajay Shah, one of collapsed Trust Bank directors. Photo/FILE 

The Central Bank of Kenya has received court orders allowing it to auction the private property of Trust Bank directors, accused of being responsible for the lender’s collapse, leading to loss of depositor’s cash.

The High Court has issued a decree to the Deposit Protection Fund Board (DPFB) allowing it to recover an estimated Sh1.5 billion from Ajay Shah and Praful Shah, who were accused of having been liable for office misconduct that resulted in the collapse of Trust Bank.

Execution of the decree could give fresh impetus to the DPFB’s ongoing efforts to recover cash belonging to the members of the public that was lost in the 1990’s and early 2000, following successive collapse of banks through directors’ fraud.

“We have a decree and we are in the process of executing it,” said the DPFB. The Business Daily could not immediately get a listing of the Shahs’ assets which are expected to fall under the auctioneer’s hammer.

Both Shahs are associated with various multi-million shilling real estate projects.

Ajay Shah was said to have been behind the controversial Valley Estate in Mlolongo which was sold to Kenya Police for Sh100 million. Some of the units were found to have developed cracks barely a year after occupation and were without a sewer system.

The Shahs are, however, said to have fled the country which may make it difficult for the fund to execute the order.

A successful recovery process could, however, send a tough message to former directors of collapsed financial institutions. It could also serve as a deterrent of such behaviour in the future.

“This case affords DPFB the opportunity to recover funds from the judgment directors for the benefit of depositors who lost their hard-earned savings in Trust Bank Limited due to mismanagement and plunder,” said DPFB in its latest annual report.

Last week, the High Court also found former directors of Prudential Building Society personally liable for its woes and ordered them to pay Sh1.2 billion to the Fund. The directors James Kahumbura and Wilson Kipkoti have appealed the ruling, which required them to pay the money together with Lucy Kahumbura.

Businesses associated with the three were also attached in the case. The businesses were said to have benefited from the actions of the directors.

They include Standard Assurance which is also under receivership in the insurance industry, Hazel Promotions, Interstate Commercial Agencies, Pacific Holdings and Pelican Engineering and Construction Company.

Ms Kahumbura is a director of Le Vogue Hair and Beauty Salon, where Mr Kahumbura is also a director. The salon is said to have been used to siphon cash from the building society. The relationship between Ms Kahumbura and Mr Kahumbura is not disclosed but she revealed in court documents that she had differences with the man.

Prudential Building Society had Sh2 billion in customer deposits when it was liquidated in 2005 having loaned out Sh3.2 billion.

Trust Bank had Sh159 million in deposits at the time of liquidation of which Sh111 million was insured, but only Sh20 million had been paid by end of June 2013.

The bank had Sh13.8 billion in outstanding loans at the time of liquidation of which only Sh1.5 billion had been recovered by end of June last year.

Trust Bank collapsed in 1998 with unspecified amount of deposits as most of the cash was stashed in a parallel system of banking called ‘‘shroff/chopdee,’’ principally used to hide money from the taxman.

Ajay and his co-accused were directors of Trust Capital Limited, together with Nitin Chandaria. It is this vehicle that was used to siphon more than Sh241 million (that ballooned through accruing interest charges to Sh1.5 billion).

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