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Equity Bank gets reprieve in Sh39m fraud case

An Equity branch: The lender has been allowed to challenge High Court verdict. PHOTO | FILE
An Equity branch: The lender has been allowed to challenge High Court verdict. PHOTO | FILE 

A local bank that was on the verge of paying more than Sh39 million to one of its customers owing to fraudulent transaction by its tellers has obtained reprieve after the Court of Appeal allowed it to challenge that verdict.

Court of Appeal judges Asike Makhandia, William Ouko and Kathurima M’Inoti set aside a High Court ruling delivered by sacked judge Muga Apondi on February 2010 against Equity Bank.

“We are satisfied that this appeal had considerable merit and that the learned judge misdirected himself when he concluded that Equity’s defence did not raise any triable issue; we allow the appeal,” the three-judge bench sitting in Nairobi ruled.

The Bench faulted the High Court verdict, saying that Justice Apondi should have ordered a proper trial before he concluding the case.

Equity had moved to the Court of Appeal to protest against a verdict that required them to pay Westlink Mbo Limited, a distributor who supplied Safaricom agents’ technology products for sale, Sh39, 720,000.

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The firm had claimed that it lost the monies as a result of fraudulent transactions on the part of Peter Njuguna and Martin Ngochi who served as tellers at the said bank in 2008.

According to the firm, Safaricom agents were required to deposit cash at the Equity Community Corporate branch before the firm could supply products upon production of deposit slips indicating payment of the monies.

The dispute arose when monies were lost on the part of an agent known as Elijah Zablon Tai and the firm sued the two tellers and the bank in March 2009 seeking to be paid the said monies as well as damages.

The firm had claimed that the two got Sh27,835,000 from the agent between August 9 and 30, 2008 but fraudulently failed to credit it in its account at Equity.

It also accused Mr Tai of authorising Equity to transfer Sh7,500,000 to the account of the firm but fraudulently and wrongfully failed to credit the same as required.

As a result only Sh4,485,000 was debited after the firm reported to Equity the fraud committed on its account by its employees that had resulted to the total loss of Sh39,720,000.

The firm argued that Equity was liable for the acts of its two employees.

But since the bank and the two did not respond to the suit, Justice Apondi delivered the verdict in favour of the firm.

However, the bank in the appeal, has since denied liability, arguing that Mr Njuguna and Mr Ngochi could not have received Sh27,835,000 concurrently on the dates specified.

Equity claimed that it was not privy to any arrangement with the said agent and that the alleged deposit slips were not conclusive that monies had been deposited.

The bank also claimed that the two were not cashiers at the counters at the time, that deposits alleged to have been made to the firm’s account were never reflected and that the said agent’s transactions as well as goods did not exist.

Instead the bank accused the firm, Mr Tai and the two of colluding to defraud the bank. But the judges ruled that indeed the monies were lost through fraudulent activities and that the issues in the case are weighty.

“We seriously doubt whether the learned judge could in the circumstances of this case, determine conclusively on the basis of an affidavit evidence alone that fraud was committed by any of the parties, we hereby set aside the order,” they ruled.

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