The Employment and Labour Relations Court has absolved a senior bank manager of wrongdoing following alleged contravention of Consolidated Bank’s credit procedures regarding loan facilities issued to customers.
Subsequently, the court ordered Consolidated Bank to pay its former Mombasa branch manager, Geoffrey Kisaka, Sh3.4 million in compensation for unfair dismissal.
The court ruled that the summary dismissal against Mr Kisaka was invalid, unreasonable and cannot be justified by the bank’s audit report.
“The alleged breach of credit policy and procedures occurred in the credit department not with the claimant (Mr Kisaka), as the proposer (of the loan) he was not the ultimate approver,” ruled the court.
The court said that, since the management credit committee members failed to undertake their due diligence, blaming Mr Kisaka was not the answer.
It also noted that the audit team had recommended that the management credit committee members undergo a refresher training in credit appraisal.
The court noted that the bank’s human resources manager had testified that several employees had been invited to show cause, but that only two, including Mr Kisaka, were suspended and denied access to work records to facilitate their responses.
The court also noted that the HR manager also testified that several credit department employees mentioned in the internal audit were not taken through the disciplinary process.
The court noted that on November 1, 2022, the head of credit, the credit analyst and the manager of credit, under the credit and finance committee, approved Sh51 million loan for a customer, a transaction which was further approved by the management credit committee, comprising the head of credit, head of finance, manager of legal affairs, head of operations and central processing, chief commercial officer and the chief executive officer.
“All these officers are senior and supervise the claimant,” noted the court in its October 30 judgment.
The court said that Mr Kisaka had served the bank diligently since 2010, rising through the ranks to become a branch manager. It also said that he had no record until the incident involving the customer, during which he secured benefits for the bank, but the credit department failed to provide him with the necessary support.
“Blaming the claimant is shifting responsibility to the wrong employee,” ruled the court.
The court ruled that Sections 41, 43 and 45 of the Employment Act not only concern the presence of valid reasons or grounds for termination of employment, but also require the employer to observe due process when dismissing an offending employee.
“The employee must be informed of the accusations against him, given a chance to defend himself, permitted to call witnesses in support of his case and notified of the decision taken by the employer to terminate his services,” ruled the court.
The claimant told the court that he had worked as the branch manager until October 17, 2024 and had been issued a notice to show cause dated August 20, 2024 regarding allegations that he had contravened the bank's credit policy and procedures with respect to a loan facility advanced to Jowak Agencies Ltd and David Kanyi, and his related accounts, African Budget and Executive Homes Company Ltd.
The reasons, the court heard, were that the claimant had flouted the bank’s credit policy procedures, thereby exposing it to imminent loss.
However, Mr Kisaka said that the reasons were invalid because he had conducted due diligence when appraising the loan facilities for Jowak Agencies Limited and Mr Kanyi, as well as his related account of African Budget and Executive Homes Company Ltd. As the branch manager, he only recommended approval of the loan facility, he said, not approving it himself.
He said that the loan facilities had been analysed and approved by the credit department, management credit and the board of directors in accordance with the delegated limits, and not by the branch or himself.
The bank claimed that the audit review revealed flaws in the process of granting loans amounting to Sh75 million to the client and his related accounts, from the branch to the credit department at the head office.
The bank argued that the audit team had concluded that there were many obvious inadequacies in the customer’s application, which the branch and the credit department should have noted, resulting in the application being declined.
The bank told the court that it had identified significant flaws in the claimant's handling of the loan applications, and that the disciplinary committee had deemed his integrity questionable, given that many of the errors could have been avoided based on his experience as a bank manager.
