The Court of Appeal has discharged Guardian Bank from a High Court order requiring it to pay Sh196 million to former shareholders of the defunct Guilders International Bank, ending one of Kenya’s longest-running business acquisition disputes that began in 2005.
A three-judge bench — Justices Daniel Musinga, Francis Tuiyott, and George Odunga — ruled that eight guarantors, not Guardian Bank, are responsible for settling the 200,000-share purchase debt from the 1999 takeover deal.
“The sale agreement clearly placed primary payment obligation on the purchasers, not Guardian Bank,” the judges said. “It cannot fall on the first appellant (Guardian) to pay as no such obligation was placed on it by the contract.”
The court named eight liable guarantors: Maganlal Motichand Chandaria, Dinesh Maganlal Chandaria, Mahesh Maganlal Chandaria, Conifers Trading Limited, Chandaria Holdings Limited, Dima Limited, Goldera Limited, and Kevis Investments Limited.
They were described in court as purchasers and that they executed the transaction as personal guarantees of Guardian Bank.
The judgment indicated that the Sh196 million—equivalent to Guilder’s net worth at the time of takeover—will be repaid with interest at 12 percent (court rates) backdated to 2005, potentially totalling Sh470.4 million.
The ruling overturns a February 2023 High Court order that had exposed Guardian to a Sh2.1 billion debt claim.
The dispute arose from Guardian’s 1999 acquisition of Guilders International Bank, approved by the Finance Minister through a Gazette Notice. Former shareholders—Shivali Investments Limited, Naval Holdings, Ketty Investments, and SAAF Holdings Limited—sued, alleging non-payment for shares.
The dispute was pegged on claims that after the two institutions entered into a deal, where Guardian took over the assets and business of Guilders, including its premises, the purchasers failed to make the payments as agreed.
The Court of Appeal emphasised that under the agreement, the guarantors, not Guardian, were tasked with paying the purchase price.
"It is not an obligation to be shared between them and the purchaser. Neither is it a secondary responsibility to simply guarantee payment of the purchase price; it is the primary obligation to pay," the judges said.
The verdict spares the lender from the liability of Sh2.1 billion, which had led to auctioneers acting for the former shareholders seeking to attach Guardian’s assets in 2023, in an attempt to recover the disputed sum.
The judges ruled that the defendants' argument that the bank should have been included on the list of purchasers went against the explicit terms of the sales agreement.
According to the Guardian, the agreement specifically tasked the eight guarantors with paying the purchase price to the vendors on the bank's behalf.
The bank's advocates argued that the High Court's decision to extend the obligation to the bank amounted to rewriting the contract between the parties.
They also said that, as a lender Guardian Bank was an easy target for the former shareholders of Guilders. The ruling clarifies the enforceability of guarantee agreements in corporate acquisitions.
Legal costs
The judges also set aside a High Court order requiring Guardian to pay all legal costs. Instead, the bank will cover a quarter of the costs, with the guarantors shouldering the rest.
“The first appellant (Guardian) shall bear one quarter of the respondents’ entire costs, while the second to ninth appellants (Guardian purchasers) shall bear three quarters of the respondents’ costs of the appeal and in the court below,” the ruling stated.
Additionally, the court reversed a High Court order compelling Guardian to return securities worth Sh380 million. It directed that only the securities specified in the sale agreement be returned—excluding four parcels of land that had already been sold with Guilders’ directors’ approval.
“There can be no justification for the inclusion of the four securities because the respondents neither alleged nor proved that the approval they gave was obtained by misrepresentation, coercion, fraud, or mistake,” the judges noted. “In any event, the securities are now in the hands of third parties who were not parties to the proceedings and cannot be condemned unheard.”
Guardian’s counterclaim—seeking Sh799.8 million in damages for breach of contract, misrepresentation, and unrecoverable loans—was dismissed for lack of proof.
The bank argued that Guilders’ shareholders overstated the value of its loan portfolio, leaving a shortfall of Sh439.9 million and undisclosed liabilities of Sh6 million. However, the court found no evidence to support the claims.
Guardian Bank, incorporated in 1992 as Euro Finance Limited and converted to a commercial bank in 1996, with branches in Nairobi, Mombasa, Kisumu, and Eldoret.
