NAIROBI, Kenya – A commercial court has rejected a petition by shareholders of the now-defunct Fidelity Commercial Bank (FCB) to compel SBM Holdings Limited to deposit Sh2.5 billion as security amidst fears of its potential exit from the Kenyan market.
Leading the shareholders, Sultan Khimji expressed concerns that SBM might divest SBM Kenya and exit the banking industry, which would impact their ongoing litigation.
However, the judge ruled that the shareholders did not present sufficient evidence to justify such a security deposit.
“There is no evidence that the defendants will 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,” the judge stated.
Additionally, the court declined to suspend the case’s hearing pending the determination of an appeal filed by SBM Bank Holdings.
The bank had sought to halt the Sh2.5 billion compensation claim to allow for arbitration as stipulated in the Share Purchase Agreement (SPA).
According to the SPA, disputes should be resolved through consultation, and if unresolved within 30 days, they should proceed to arbitration.
Justice Mabeya, however, refused to pause the proceedings, emphasizing that such an order should be used sparingly to avoid hindering a litigant’s right to pursue their case.
“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 impacts negatively on the right to access to justice,” he asserted.
The backdrop to this legal tussle dates back to May 2017 when Mauritius’ SBM Holdings acquired Fidelity Commercial Bank for a nominal sum of Sh100, a deal brokered by the Central Bank of Kenya (CBK). The acquisition also led to the rebranding of Fidelity to SBM Bank.
Khimji, the largest shareholder of Fidelity, alleges that there were deliberate misrepresentations that coerced him into accepting what he describes as a “raw deal.” He contends that Fidelity was significantly undervalued during the takeover by SBM.
The shareholders are seeking compensation for the full market value of Fidelity Bank as of December 2016, totaling Sh2.5 billion, claiming that their investment was grossly undervalued in the SBM acquisition deal.
