Win for Fidelity Bank shareholders as court declines to stop Sh2.5bn claim dispute against SBM
Fidelity Bank branch on Nairobi’s Kaunda Street in this photo taken in 2013.
Mauritius-based banking group SBM Holdings has failed to stop the proceedings of a Sh2.5 billion claim by the shareholders of the defunct Kenyan lender Fidelity Commercial Bank (FCB).
SBM Holdings wanted the court to suspend the case pending the final determination of the arbitration proceedings ongoing in London between the two parties. The request was also backed by the Central Bank of Kenya.
But Justice Francis Gikonyo dismissed the application stating that the issue had been ruled on by another judge in July 2024. In that ruling the court held the claim against the SBM Holdings was not a dispute contemplated in the agreement on acquisition of the Fidelity bank.
“As was rightly observed by the good judge, the correct judicial intervention upon these pronouncements would be an appeal, rather than a fresh application for stay of proceedings. As such, SBM Holdings’ application for a stay of proceedings is not merited. It is dismissed,” said Justice Gikonyo.
Compensation dispute
The court dispute concerns a compensation of Sh2.5 billion to the shareholders of the Kenyan lender following the acquisition of the bank by SBM Holdings in 2017.
The dispute between the parties stems from a Head of Terms agreement entered into on November 17, 2016, between the parties in respect to the acquisition of shares of Fidelity Commercial Bank Limited.
The Head of Terms contained an outline of the proposed transaction and envisioned a further agreement to effect the sale.
Urging the court to stop the proceedings, SBM Holdings through its Company Secretary Dayawantee Ram-jug Chumun and another representative Chiraag Ramesh Shah told the judge that the document titled Head of Terms provided that any issues arising would be governed by English law.
Further that all disputes which could not be resolved amicably would be resolved by arbitration under the London Court of International Arbitration (LCIA) Rules. It also stipulated that the place of arbitration would be London, England.
The court heard that the dispute has been ongoing in England since March 2024. In addition, the High Court of England had on March 22, 2024, granted a final anti-suit injunction against the former shareholders of Fidelity holding that the dispute was for resolution through arbitration under English law.
SBM petition
SBM said there was no appeal by the Plaintiff against that decision and that under the doctrine of comity, the Nairobi Court should have suspended the proceedings pending the determination of the London Arbitration proceedings.
In response, the former shareholders said the arbitral proceedings in London were an afterthought as they were initiated by SBM Holdings on March 17, 2024, subsequent to the commencement of the Nairobi case on August 31, 2022.
The court heard that the former shareholders have not submitted to the jurisdiction of the London arbitral tribunal as they have raised an objection challenging its jurisdiction to hear and resolve the claim before it.
In the dispute filed at the Commercial Court Milimani, the shareholders of the defunct lender led by Kenyan billionaire Sultan Khimji are seeking a declaration that the Head of Terms are invalid, null, void and of no legal effect.
They argue that the former shareholders of Fidelity Commercial Bank Limited are entitled to compensation for the value of the Bank as at December 2016.
They want the court to block the SBM Holdings from dealing with the shares and ownership of SBM Bank Kenya Limited without paying full compensation to the former shareholders an amount of Sh2.5 billion, being the alleged full market value of the Bank as at December 2016.