Dubai Bank managing director Binay Dutta has fled the country in the middle of a Central Bank of Kenya investigation into his role in a suspect share sale guarantee scheme that is now threatening to bring down the lender.
The bank revealed Mr Dutta’s flight in a Nairobi court where it is seeking to stop a winding-up petition filed by a Turkish businessman.
Dubai Bank says in papers filed at Nairobi’s Milimani Commercial Court that Mr Dutta travelled to India with all his belongings on May 8, the day he was to appear before the board of directors to respond to queries on the share sale scheme, leaving behind a handwritten request for 25 days relief.
“On May 12, Mr Hassan Zubeidi (the bank’s chairman) received a handwritten note from Mr Dutta’s driver requesting for leave. By May 11, Mr Dutta was already gone. His driver reported that Mr Dutta had in fact packed his belongings and delivered them to a shipping company in Nairobi,” Dubai Bank’s acting managing director Adam Ali says in the court papers.
“It is suspicious why Mr Dutta would leave the country as he did before his request for leave was granted. I am wondering whether he feared that proceedings would be filed against him,” Mr Ali says.
The CBK is investigating the integrity of the guarantee that Mr Dutta issued for a share sale involving Tunasco Insaat, a Turkish firm whose co-owner wants the bank wound up for refusing to pay him $544,900 (Sh52.8 million) from the transaction.
Sevket Tunc, a Turkish businessman, accuses Dubai Bank of refusing to pay him for his stake in Tunasco, a company he co-owned with his partner Abdulwalli Shariff.
Dubai Bank, however, insists that it cannot honour the guarantee documents because they neither bear a company seal nor its chairman’s signature and that it suspects the said deal to have been a scheme by Mr Dutta, Mr Shariff and Mr Tunc to defraud it of funds. The guarantee was issued to Mr Shariff.
Dubai Bank has in the past three years been fighting to disprove claims that its clients risk losing billions of shillings to dodgy book and record keeping.
Dubai Bank filed the suit against Mr Dutta on May 20, a day after the ultimatum for settlement of Mr Tunc’s debt expired. Mr Tunc is yet to respond to the petition.
The CBK has joined the suit as an interested party, pointing to the regulator’s concern that depositors’ funds may be at risk. It has filed a notice appointing Njoroge Regeru and Company Advocates to act for it.
Justice Eric Ogola issued a restraining order stopping Mr Tunc from initiating winding-up proceedings against Dubai Bank until the suit is heard and determined. The case was adjourned to give the CBK and Mr Tunc time to respond to the application.
The parties are expected to appear in court on June 9 for a hearing.
Mr Dutta, who is an Indian national, had indicated in his request for leave that he was going back to India to prepare for his daughter’s wedding but Dubai Bank now says there was no justification to leave before the request was approved, and before the letter was delivered to Mr Zubeidi.
Dubai Bank says the request for leave was suspect because it came only two weeks after Mr Dutta returned from leave.
The Dubai Bank board had granted Mr Dutta two weeks to resolve the guarantee issue and he was expected to brief the board before travelling to India.
The bank claims that Mr Dutta had been secretly meeting Mr Tunc’s lawyers to settle the brewing storm “quietly”. The lender says investigations had revealed that Mr Dutta in February struck a deal to pay Mr Tunc the Sh52.8 million from his personal account in Sh400,000 monthly instalments.
A letter from Mr Tunc’s lawyers TripleOKLaw dated December 18, 2014 indicated that Mr Dutta had not remitted any instalment despite agreeing to personally settle the debt. The letter gave him 30 days to pay the full amount.
Mr Ali says Mr Dutta had kept Mr Tunc’s claim against the bank under wraps, and that the bank only discovered the matter on March 26, when the Turk’s lawyers wrote to the chairman (Mr Zubeidi). Mr Dutta was at the time on leave.
Mr Ali says he immediately suspended Nick Sisco, the bank’s official who signed the guarantee document.
“There is no record of any agreement of sale of Mr Tunc’s shares. Mr Tunc was also still represented to the bank as managing director for three years up to November 2015. Hence the reluctance to pay the sum under a suspect arrangement and looks like a scam to rip off Dubai Bank,” Mr Ali says.
Besides, Dubai Bank says Mr Dutta has been contacting CBK officers and Mr Tunc’s lawyers after fleeing Kenya but without involving Mr Zubeidi. It insists that Mr Dutta has neither been fired, nor has he resigned from the bank.
“By a letter dated May 14, the CBK wrote through its bank supervision directorate concerning critical issues said to have been raised in an email from Mr Dutta dated May 13. Mr Dutta has not been relieved of his duties as at the time of presenting this petition,” Mr Ali says.
The share sale tussle is the latest to pit the regulator against the lender whose loss-making and vulnerable information systems have in the past caused a delay in renewal of its operating licence.
Mr Zubeidi last October survived being jailed after the bank was accused of defaulting on a Sh197 million debt it was ordered to pay real estate developer Kwanza Estates.
Dubai Bank’s shaky financial position was first exposed in 2012 in the wake of a bitter fallout between Mr Zubeidi and former managing director Nerea Said.
Ms Said accused Mr Zubeidi of siphoning funds from customers’ accounts and engaging in irregular lending to friends, exposing the bank to huge losses.
Dubai Bank has also asked Justice Ogola to determine whether it should be held liable for the debt Mr Dutta left it carrying.
“I believe Dubai Bank has a strong case for setting aside and avoiding the winding-up notice. The court needs to delve into the matter and investigate whether indeed Dubai Bank is indebted and if so, to what extent,” Mr Ali says.
Mr Dutta, the lender adds, introduced both Mr Tunc and Mr Abdulwalli to Dubai Bank in 2013, which also raised suspicions that the claim could be a scheme to defraud the bank of money.