The depositor, Pontrilas Investment Limited, has in court filings accused CBK of failing to exercise its oversight duty
CBK has in its response, however, held that it has always practised its oversight duties diligently.
The hearing of a case in which a customer of the collapsed Imperial Bank has sued the Central Bank of Kenya (CBK) for loss of cash deposits has commenced at the Arusha-based East African Court of Justice.
The depositor, Pontrilas Investment Limited, has in court filings accused CBK of failing to exercise its oversight duty despite being aware of widespread mismanagement at Imperial Bank, in the process leading to the loss of customer deposits in excess of Sh32 billion.
CBK has in its response, however, held that it has always practised its oversight duties diligently, noting that its actions against the bank were based on an audit report and information provided by the lender’s management.
The depositor has also enjoined the Attorney-General as a respondent in the case.
Pontrilas Investment wants the court to make “a declaration that both respondents (CBK and AG) are in breach of their obligations under the treaty for the establishment of the East African Community (as amended on December 14, 2006 and August 20, 2007) and the objectives of the protocol for the establishment of the East African Community Monetary Union in allowing the applicant’s deposit to be lost.”
Imperial Bank Limited (IBL) was put under receivership in October 2015. The bank collapsed while holding deposits of about 53,000 customers.
The depositor also wants the court to order compensation by CBK and the Government of Kenya for the depositor losses suffered as a result of the breaches.
Pontrilas does not, however, disclose the value of deposits it was holding in the collapsed lender, nor the expected compensation amount.
The matter is being heard by judges Monica Mugenyi, Dr Faustin Ntezilyayao, Fakihi A Jundu, Audace Ngiye and Charles Nyachae.
The firm claims that its right to property, consumer protection and fair administrative action was infringed.
The banking sector regulator through lawyer Ochieng Oduol has, however, asked the court to dismiss the suit against it, noting that only partner States and organs of the East African Community can be sued at the regional court under the EAC treaty.
CBK further argues that the EAC Court has no jurisdiction to entertain the claim against it since the right to property, consumer protection and fair administrative actions are rights granted to citizens by the Kenyan Constitution not the EAC treaty.
CBK has also claimed that the issues in the case are a matter reserved for the Kenya’s High Court, noting the suit is sub-judice since several matters touching on the same subject are pending in Kenyan courts.
The depositor has, however, held that CBK is conceptually and functionally an institution of the EAC and a proper party to the suit in accordance with Protocol of the EAC Monetary Union, which gives a pivotal role to Partner States’ Central Banks in the implementation of the said Protocol.
To support its case, Pontrilas Investment reproduced in court alleged emails detailing how former Central Bank governor Njuguna Ndung’u and other officials were compromised to ignore mismanagement at Imperial Bank.
The firm says that CBK had received information on theft of funds at the bank from a whistleblower in 2012, but allegedly failed to take action.
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