SBM, rival now take Sh972m deposit dispute out of court

SBM Bank Kenya

Photo credit: File| Wachira Mwangi | Nation Media Group

SBM Bank Kenya and Mauritius-based lender AfrAsia Bank have now withdrawn a $7.5 million (Sh971.89 million) deposit dispute from court to pave way for negotiations, although the Kenyan lender says it does not expect any liability to arise from the matter.

The two lenders have been fighting in court over the money, which AfrAsia says it deposited with Chase Bank Kenya, which collapsed in April 2016.

SBM Holdings, the parent company of SBM Kenya, subsequently acquired certain assets and liabilities of Chase Bank in 2018.

AfrAsia first made the claim in 2019, sparking a legal battle, although SBM claimed the $7.5 million was not part of the liabilities it took over.

The Mauritian lender initially took the case to the High Court, which referred the matter to arbitration, which ruled in SBM’s favour in April 2021.

However, AfrAsia appealed to the High Court, which ruled in its favour in July 2022, forcing SBM to appeal to the Court of Appeal.

SBM was granted a stay of execution, meaning that it could not pay the money until the matter had been heard and concluded.

The appeal was due to be heard in the Court of Appeal on March 18, 2024, but AfrAsia informed the court on the same day that it had made a proposal for an out-of-court settlement.

SBM Holdings says the proposal is “likely to extinguish” AfrAsia’s claim without any payment being made.

“The financial institution (AfrAsia) applied for an adjournment of the matter and SBM Kenya did not oppose the adjournment.

The Court allowed the adjournment to facilitate negotiations by the parties, which if successfully completed, will result in the setting aside of the High Court judgement which was in favour of the Financial Institution,” SBM Holdings said in its latest annual report.

“The effect of this is that the matter will be marked as settled, without any liability to SBM Kenya.

No provision in relation to this claim has been recognised in these financial statements as the directors have been advised by the lawyers that the probability of a liability arising is remote.”

AfrAsia had placed the money in a fixed deposit account at Chase Bank, earning about 2.35 per cent per annum.

Chase Bank went into receivership on April 7, 2016, days before AfrAsia’s investment was due to mature on April 18, 2016.

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