- The shareholders led by Sultan Khimji were afraid that SBM was likely to sell SBM Kenya and exit the Kenyan Banking industry which would ultimately affect their case before court.
- But the Judge in his ruling said the shareholders failed to demonstrate why security should be deposited.
Image: FILE
A commercial court has declined a request by shareholders of the defunct Fidelity Commercial Bank (FCB) to have SBM Holdings Limited deposit Sh2.5 billion in security over fears of its exiting the Kenyan market.
The shareholders led by Sultan Khimji feared that SBM was likely to sell SBM Kenya and exit the Kenyan Banking industry which would ultimately affect their case before court.
But the Judge in his ruling said the shareholders failed to demonstrate why security should be deposited.
"There is no evidence that the defendants dispose of their assets in Kenya. I find the plaintiff's apprehension is not enough to invoke the court's discretion to order the giving of security," he said.
The Judge at the same time declined to suspend the hearing of the case pending determination of an appeal filed by the Bank.
The bank (SBM Bank Holdings) wanted the case in which the shareholders are seeking a sh 2.5bn compensation to to be stopped and allowed to proceed to arbitration.
It cited a Share Purchase Agreement (SPA) which provides that any arising disputes would be resolved by consultation.
If the dispute could not be resolved within 30 days, then the matter could be referred to arbitration.
But Justice Mabeya declined to suspend the case saying "taking all factors into account, an order of stay of proceedings ought to be given sparingly so as not to interfere with the right of a litigant to prosecute its case".
Such order he remarked should be granted sparingly as it impacts on a party's right to a fair hearing.
"Discretionary power of the court should be invoked upon satisfaction that there is sufficient cause to stay the proceedings. When a stay of proceedings is ordered, it leads to case backlog which pacts negatively on the right to access to justice," Justice Mabeya said.
Fidelity was allegedly taken over by Mauritius' SBM Holdings for sh 100 in May 2017.
CBK brokered a deal with SBM Mauritius to sell Fidelity.
It also approved the change of name from Fidelity to SBM Bank and the only assets it has in Kenya is the SBM Bank, the shares of which are alleged to have been purchased from Khimji and others.
Khimji who is the largest shareholder claims there were deliberate misrepresentations knowingly made to allegedly force him to enter into 'a raw deal'.
It's his case that Fidelity was grossly undervalued in the takeover by SBM.
They seek compensation by way of restitution for the full market value of Fidelity Bank as of December 2016 at Sh 2.5bn.