The Court of Appeal has suspended a decision requiring the Kenya Deposit Insurance Corporation (KDIC) to refund Absa Bank some Sh215.3 million in alleged excess premium payments to the agency.
A bench of three judges of the appellate court ruled that the corporation was apprehensive that if granted the go-ahead, the ruling that it refunds the amount of have its assets attached would have far-reaching implications on several institutions, let alone KDIC, following the suspension of certain provisions of the law, which blocks attaching government properties.
In a ruling in March, High Court judge Nixon Sifuna declared sections of the Government Proceedings Act requiring litigants to notify the Attorney-General before filing suits against the State or its agencies, unconstitutional.
Justices Asike-Makhandia, Sankale ole Kantai and Grace Ngenye-Macharia said there was the possibility of wanton attachments of national and county government assets previously shielded by the provisions of the quashed law.
“In our view, these fears are not idle,” said the judges, adding that the KDIC had demonstrated an arguable appeal.
In the March ruling, Justice Sifuna dismissed KDIC’s application, which sought more time to file its defence and stop the decision, allowing the lender to attach the corporation’s assets to get the money.
The judge went ahead and then declared sections 13A and 21 of the Government Proceedings Act unconstitutional.
The KDIC moved to the appellate court, arguing that allowing Absa to attach its assets was wrong as it deals with the protection of depositors in the financial sector and does not hold funds of its own to transact business.
The corporation submitted that the consequence of the ruling nullifying section 21 of the Government Proceedings Act, exposes the national and county governments to execution proceedings to the detriment of the larger public.
Absa opposed the application, arguing the High Court held that the Sh215.3 million would not accumulate immediately but it would be applied going forward towards its annual contribution from the date of the ruling until payment in full. The lender said there was no real danger that it would proceed with execution to require the intervention of the court.
While declaring section 13a and section 21 illegal, Justice Sifuna said it was a colonial relic that has no place in modern society.
“The legislation is an archaic colonial outfit that inadvertently escaped the post-2010 legal reforms that sought to align the laws with the Kenya Constitution 2010 and the new legal order it had established as well as the wind of change that it brought,” said the judge.
The said section states “No proceedings shall lie or instituted until after the expiry of a period of 30 days after a notice in writing in the prescribed form has been served on the government in relation to those proceedings.”
The lender had sought a refund of Sh215.3 million from the state corporation arising from monies deposited annually to KDIC as required by section 75 of the Banking Act.
