August 19, 2022

Stanbic Bank Slapped With Ksh9.6 Million Compensation Claim

0 0
Read Time:3 Minute, 0 Second

Stanbic Bank has been slapped with a Sh9.6 billion compensation claim after it froze and reversed funds in an account held by cargo air carrier, Air Afrik.

In its ruling, the High Court has allowed the carrier to amend its compensation claim from the initial $14.4 million (Sh1.74 billion) for losses suffered after the South Sudan government terminated a $20 million (Sh2.41 billion) plane leasing contract due to a financial hitch.

Air Afrik sued the financial institution in 2018 over an alleged breach of banking regulations after crediting $7.2 million into its accounts before freezing and reversing the money without a valid directive from the Central Bank of Kenya (CBK).

Stanbic says it froze the money and reversed the transactions after realising that the credit note from the South Sudanese government did not have funds and the bank could not use its own funds.

High Court judge David Majanja said the bank would not suffer any prejudice if the carrier were allowed to amend the compensation claim.

The bank and the South Sudan government are currently pursuing an out-of-court settlement that exposes the Nairobi bourse-listed lender to a multi-billion shilling compensation.

“While I agree with the 1st defendant that there has been a delay in seeking the amendment given the information was in the plaintiff’s possession, I think the proposed amendment, in substance, does not change the cause of action but expands the scope of damages pleaded,” judge Majanja ruled
Through its lawyer, the bank rejected the upward review of the compensation, saying it was brought in bad faith with the intention of bundling up the issues before court. Stanbic said the amendment introduces a new dimension to the case and is at risk of delaying the conclusion of the suit.

Air Afrik, with offices in Kenya and South Sudan, claims the bank, which also has operations in the two countries, did breach banking regulations by failing to act diligently before crediting funds and freezing its accounts.

Air Afrik says when the $7.2 million went into its account, the transaction was complete in law and that the bank could not lawfully reverse the funds without a proper signing mandate or a court order.

The payment was the deposit for a plane-leasing contract that Air Afrik had signed with the Ministry of Defence and Veteran Affairs of South Sudan in September 2014. The contract was to lease several aircrafts for the period running October 1, 2014, to August 30, 2015

Under the agreement, South Sudan was required to pay Air Afrik a deposit of 35 percent ($7.2 million) of the value of total contract sum estimated at $20.64 million.

Air Afrik claims that upon the money being credited in its account, it withdrew $1.1 million without any hindrance and the bank debited its accounts.

However, efforts to push the Bank of South Sudan to release the $7.2 million did not bear fruit as the central bank did not respond to their letters.

The lender says it notified Air Afrik that the amount had been credited to its account in error and therefore reversed it.

According to Air Afrik, the failure to get access to the funds weakened its capacity to service the plane-leasing contract. The contract was terminated, causing the carrier losses and damages.

Besides the loss of the South Sudan contract, the company says it failed to execute other contracts of similar nature.

Stanbic said it subjected its officers to disciplinary procedures and tried to arbitrate on condition that the company does not press charges.

Happy
Happy
0 %
Sad
Sad
0 %
Excited
Excited
0 %
Sleepy
Sleepy
0 %
Angry
Angry
0 %
Surprise
Surprise
0 %