The Court of Appeal has stopped the Central Bank of Kenya (CBK) from liquidating Dubai Bank for 60 days.
Judges Alnashir Visram, Hannah Okwengu, and Wanjiru Karanja dismissed an application filed by CBK in December seeking to stop the ruling by High Court judge Eric Ogola that directed the banking sector regulator to consider a proposal to save the bank from liquidation.
“We order that the 60 days in the said orders start running from the date of this ruling (March 16),” the appellate judges said.
In upholding the court ruling, the three-judge bench noted that Mr Justice Ogola was driven by the plight of the vulnerable depositors and believed the proposal to revive the bank was worth trying even though he was skeptical it could work.
The judges observed that Mr Justice Ogola had just asked the parties to explore other channels of resolving the issue.
The regulator had argued in court documents that if the orders by the High Court judge were enforced it would “have far-reaching and irreparable consequences on the mandate to regulate the banking industry and protecting depositors.”
The judges, however, faulted the CBK for not saying exactly what the irreparable consequences were.
“If the parties failed to reach any viable resolution within 60 days then the suit would proceed. We do not see what harm or prejudice that would have occasioned the applicants,” they ruled.
“In fact, had they not filed these applications and accepted to consider the proposals the same would have failed or succeeded and these orders would have fallen by the wayside and given way to the hearing of the main suit.”
The CBK placed Dubai bank under receivership last year and appointed the Kenya Deposit Insurance Corporation (KDIC) as the receiver for a period of 12 months for violation of banking laws and failure to maintain adequate capital, among other reasons.
The KDIC in August recommended that the bank’s problems could not be resolved using any other method other than liquidation.
One of Dubai Bank’s top depositors, Richardson & David, argued that the decision to liquidate the lender was rushed and that CBK had not carried out sufficient investigations to establish whether it is possible to turn around the bank.
The company wants the court to compel the CBK and the KDIC to create a framework within which willing depositors and creditors could convert the sums owed to them into equity.
Richardson & David says a British Virgin Islands-registered company, Sovereign Financial Holdings, had proposed to inject Sh2.2 billion to help revive the bank.