The High Court is set to hear a Sh1 billion dispute over the takeover of Guilders International Bank Ltd by Guardian Bank two decades ago.
Documents filed in court show that the merger of the two banks was approved by the finance minister through a gazette notice in 1999. However, former shareholders of Guilders International Ltd say Sh196 million, which was the total value of bank in 1999, was never paid as agreed.
In a rejoinder, Guardian Bank dismissed the claims. It wants a refund of Sh827 million and accuses Guilders shareholders of misrepresenting the true value of the bank and making them incur expenses in recovery of loans.
Justice Mary Kasango adjourned the case to March 25, 2020, after hearing evidence from Guardian Bank CEO Narayanmurthy Sabesan.
In the documents filed in court, Guardian Bank says that after the buyout, it discovered that several loans listed as performing were unrecoverable. The number of securities Guilders shareholders gave for the deal also turned out to be defective, it said.
Guardian Bank says the shareholders misrepresented the true net value of Guilders as of December 31, 1998.
The bank said they discovered that out of a recoverable and performing loan portfolio, which they were informed was Sh678.074 million, only Sh26.06 million was realised.
And in the process of recovering the loans, they incurred expenses of Sh7.32 million. There were also undisclosed liabilities of Sh10.62 million.
In the case filed in 2005, Shivali Investments Ltd, Naval Holdings Ltd, Ketty Investments Ltd and SAAF Holdings said they sold 200,000 shares held at Guilders International Bank for Sh196 million.
The buyers Maganlal Motichad Chandaria, Nisha Dinesh Chandaria, Dinesh Maganlal Chandaria, Mahesh Maganlal Chandaria and six firms, among them Guardian Bank. Documents filed in court show that the payment was to be made in ten equal instalments, starting December 31, 2001.
The two institutions later entered into another agreement dated December 31, 1999, whereby Guardian took over the assets and business of Guilders, including its premises.
Later on June 12, 2000, Guardian Bank, it is claimed, agreed to pay the sellers Sh180 million, causing them to sign money receipt but failed to honour the deal.
Former shareholders of Guilders say that Guardian breached agreements and failed to make the payments as agreed. They accuse Guardian of failing to render the full accounts and disclose receipts and proceeds from the disposal of securities and debts recovered on their behalf.
