A judge has rejected an application by former employees of collapsed Dubai Bank to be paid more than Sh44 million of their withheld salaries among other benefits after losing their jobs when the lender was shut in August 2015.
Nairobi’s Employment and Labour Relations Court Justice Maureen Onyango rejected the application by the 44 former employees saying the collapsed lender had no funds when they demanded the money.
The former employees sued Kenya Deposit Insurance Corporation (KDIC) and the liquidation agent seeking to be paid August 2014 salaries plus terminal dues among other benefits.
Justice Onyango said KDIC and its appointed agent Adam Boru were not in a position to pay the money to the employees as the priority was given to insured depositors.
“I, therefore, find that the 2nd Respondent was insolvent and therefore there were no funds to be applied to payment of the monies owed to the Claimants as at the time that they demanded payment or at the time they approached the court,” the judge said.
The court was told that as of August 2015 the bank had cash balances of Sh36.7 million against insured deposits of Sh123 million.
Mr Boru said the bank was owed a total of Sh4.1 billion made up of loans of Sh161.6 million, overdrafts of Sh3.9 billion and staff loans of Sh26.6 million.
He said by January 2017 he had managed to pay Sh54.6 million out of the insured deposits, leaving a balance of about Sh68.4 million, which was about 40 per cent of the total amount.
The KDIC said in a press release early this year that it had paid 92 per cent of claims by depositors and creditors.
The judge indicated that the fact that there were no funds to pay the former employers at the time of moving to court does not mean that they are not entitled to payment.
She said the liquidator should collect sufficient funds and pay them after paying the insured debts.
“The Claimants still rank second in priority after the insured deposits and are entitled to payment should there be any funds available after payment of insured deposits,” the judge said.
The Central Bank of Kenya (CBK) shut down Dubai Bank in 2014 citing serious cases of parallel banking, a mountain of unsecured loans that were not being serviced, interference with client accounts and overstating of cash balances.
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