The depositors are seeking orders stopping CBK and the Kenya Deposit Insurance Corporation (KDIC), from constituting a committee to discuss liquidation of the bank.
The depositors through lawyer Steve Luseno, told Justice Chacha Mwita that imperial Bank was placed under receivership on October 13, 2015, “in a decision made out of the blues as far as we are concerned.”
The Central Bank of Kenya (CBK) ordered the privately owned bank to be put into receivership in October 2015 after the board of the mid-sized lender alerted it to alleged malpractices.
Depositors have waded into the controversy surrounding the troubled Imperial Bank with claims it was unlawfully placed under receivership because the Central Bank of Kenya (CBK) did not have a board of directors at the time the decision was made.
The depositors are seeking orders stopping CBK and the Kenya Deposit Insurance Corporation (KDIC), from constituting a committee to discuss liquidation of the bank, pending hearing and determination of their case.
Also sought is an order directed at CBK and KDIC to allow the depositors’ agents to access and review information, documents and data relating to Imperial Bank, as would be necessary to ascertain the true and current position of the bank.
The depositors through lawyer Steve Luseno, told Justice Chacha Mwita that imperial Bank was placed under receivership on October 13, 2015, “in a decision made out of the blues as far as we are concerned.”
On that date, there was no CBK Board of Directors, appointed as provided by the CBK Act, who are legally mandated to decide whether a bank should be placed under receivership.
It was not until November 3, 2016 when the board was constituted.
The Central Bank of Kenya (CBK) ordered the privately owned bank to be put into receivership in October 2015 after the board of the mid-sized lender alerted it to alleged malpractices.
Some executives of the bank have been charged in a conspiracy to defraud the institution and depositors of Sh29 billion through an irregular and illegal overdraft disbursement scheme,” the charge sheet said.
CBK said earlier options on dealing with Imperial Bank include liquidation, acquisition by another bank or a capital injection by shareholders to restart operations.
“The appointment of KDIC as a receiver of the bank can only be lawfully made by CBK, through its Board of Directors, in consultation with the Cabinet Secretary. There having been no Board of Directors at the time, the decision to place the bank under receivership is laced with illegality,” said lawyer Luseno.
The depositors added that the decision to place the bank under receivership was made in contravention of the Fair Administrative Act which requires CBK in making a decision that is likely to affect the legal rights of a group of persons or the public, should notify them of the proposed decision, consider all their views and all the relevant factors.
The lawyer added that the CBK Act does not donate powers to the CBK Governor to place a financial institution under receivership not does he have powers to make an appointment of KDIC, as the receiver manager.
They are apprehensive that CBK and KDIC continue to act on the receivership with the risk of recommendations being made by the now constituted CBK Board of Directors, “who may ratify the illegality by recommending the placement of Imperial Bank under liquidation.”
The case will be heard on May 8.
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