DISPUTE

Guardian Bank embroiled in Sh1bn merger refund court tussle

In Summary
  • Justice Mary Kasango adjourned the case to March 25 after hearing evidence from Guardian Bank chief executive officer Narayanmurthy Sabesan
  • Guardian Bank alleged that it established that the shareholders misrepresented to them the true net value of Guilders as of December 31, 1998
COURTS
COURTS

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 two banks was approved by the minister of Finance through a gazette notice in 1999 but the former shareholders of Guilders International limited allege that the amount of Sh196, which was the total value of bank in 1999, was never paid as agreed.

But in reply, Guardian Bank has dismissed the claims and is seeking a refund of Sh827 million, accusing the shareholders of Guilders of misrepresenting the true value of the bank and making them incur expenses while trying to recover loans.

 
 
 

In the documents filed in court last week, Guardian Bank alleges after the buyout, it later discovered that several of the loans listed as performing were actually unrecoverable and that a number of securities Guilders shareholders gave for the deal turned out to be defective.

Guardian Bank alleged that it established that the shareholders misrepresented to them the true net value of Guilders as of December 31, 1998.

The bank further claims it discovered that out of recoverable and performing loan portfolios, which they were informed was Sh678,074,000, only Sh261,069,887 was realised.

And in the process of recovering the loans, the company incurred expenses of Sh7,319,809.

There were also undisclosed liabilities of Sh10,623,414.

In the case filed in 2005, Shivali Investments ltd, Naval Holdings ltd, Ketty Investments ltd, and SAAF Holdings said they decided to sell some 200,000 shares held at Guilders International Bank for Sh196 million, is the asset value of the bank as at December 31, 1998.

The buyers were Maganlal Motichad Chandaria, Nisha Dinesh Chandaria, Dinesh Maganlal Chandaria, Mahesh Maganlal Chandaria, and six companies among them Guardian Bank.

 

Documents filed in court showed that the payment was to be made in ten equal installments, starting December 31, 2001.

 
 

The two institutions later entered into another agreement dated December 31, 199 whereby Guardian took over the assets and business of Guilders including its business premises.

But since then, the former shareholders of Guilders allege that Guardian breached the agreements and failed to make the payments as agreed.

Further, Guilders accused Guardian of failing to render the full accounts and disclose receipts and proceeds from the disposal of securities and debts recovered on their behalf.

When Guardian took over Guilder's assets, its books indicated that it had issued loans of Sh829 million and of that, Sh678 million was recoverable.

But in a counter-claim, Guardian is demanding Sh Sh827 million, with interest accruing each year.

The bank also wants the case dismissed saying Guilders International Bank’s shareholders had until six years from October 1999 to file any case under the Limitation of Actions Act.

Justice Mary Kasango adjourned the case to March 25 after hearing evidence from Guardian Bank chief executive officer Narayanmurthy Sabesan.