Companies

New Chase Bank owner in Sh725m deposit row over legal notice hitch

chase

Collapsed Chase Bank outlet in Nairobi. FILE PHOTO | NMG

Mauritius-based Afrasia Bank has sued SBM Bank (Kenya), seeking to recover $7.5 million (Sh765 million) it had deposited in Chase Bank on March 18, 2016.

The money was placed in a one-month fixed deposit account earning interest of 2.35 per annum.

Chase Bank, however, collapsed and was placed under receivership on April 7, 2016. This was before Afrasia’s short-term investment was due to mature on April 18, 2016.

The lender was on August 17, 2018, acquired by SBM Bank, which Afrasia says has inherited the liability.

Afrasia says SBM is on the hook because it did not publish notices in the Kenya Gazette and national newspapers for two months stating whether it is assuming all the liabilities of Chase bank.

“The plaintiff avers that the defendant has failed to publish the said mandatory notice and as such is now fully and directly liable to the plaintiff in the sum claimed of $7,500,000 together with interest accrued thereon,” said Afrasia in court papers.

The plaintiff said the requirement to make the publications is based on provisions of Section 3(1) of the Transfer of Business Act and as read together with Section 4 of the said Act.

Afrasia wrote to SBM demanding to be paid on January 15, 2019. SBM’s law firm (Walter Kontos) has responded to the suit, saying the demand was time-barred and that its client was under no obligations to make the publications as claimed by Afrasia.

The law firm added that the transaction was approved under different laws — the Banking Act and the Kenya Deposit Insurance Act.

“The defendant denies that it received within the period required by law, any demand from the plaintiff, as alleged in Paragraph 12 of the plaint, and avers that in any event, it was under no obligation to settle the same,” the law firm said.

“With regard to paragraph 10 of the plaint, the defendant avers that it was not required to publish such notice as alleged by the plaintiff and denies any liability in any manner whatsoever, to the Plaintiff, and reiterates the contents of Paragraph 9 of this defence.”

The law firm added that Afrasia’s deposit was among Chase Bank’s assets and liabilities that remained with Kenya Deposit Insurance Corporation.

The Central Bank of Kenya (CBK) had announced that 75 per cent of the value of Chase Bank’s deposits would be transferred to SBM.

“Following the completion of the acquisition and assumption process, CBK and the Kenya Deposit Insurance Corporation will continue working to recover and realise the assets that remain in Chase Bank, in order to enhance the recovery for Chase Bank stakeholders,” said the CBK in the August 20, 2018 press release announcing the transaction.