Imperial Bank Limited depositors have moved to court demanding the unconditional release of their deposits totaling more than Ksh 100 million, interest on the said deposits and other unspecified damages.
In the constitutional petition filed by MMC Africa Law at the High Court in Nairobi against the Central Bank of Kenya and the Kenya Depositors Insurance Corporation (KDIC), the depositors contend that the actions of the CBK and KDIC have violated their right to property as protected under Article 40 of the Constitution and the right to fair administrative action.
In a public interest case steered by MMC Africa Law that could see more petitioners join this precedent-setting suit, the outcome could have huge implications on the banking sector, consumer rights and the CBK’s institutional accountability under the new constitution.
On 13th October 2015, the Central Bank of Kenya placed Imperial Bank Limited under receivership and subsequently, appointed the Kenya Deposit Insurance Corporation (KDIC) as the Receiver. This in effect suspended all the banking business of the bank and as a consequence, depositors have been unable to access their lifetime deposits. The depositors argue that by closing the bank without giving information, justification or notice of the proposed administrative action to the Petitioners, the CBK and KDIC violated Article 47 that guarantees the right to fair administrative action.
Article 46 of the Constitution which guarantees consumers, including depositors of banking institutions, protection of their economic interests, services of reasonable quality, information necessary to gain full benefit of the services and compensation for loss arising from defective services.
“As a State organ, the CBK has the obligation to observe, protect, promote and fulfil the rights guaranteed in the Constitution. Additionally, the CBK and the KDIC are also bound by the national values and principles at Article 10 which include transparency, accountability and good governance,” said Edward Muriu, the Team Leader at MMC Africa Law.
The petitioners through MMC Africa Law argue that CBK has statutory obligations under the Central Bank of Kenya Act, the Banking Act and the Prudential Guidelines which include licensing, supervision and regulation of banking institutions. The petitioners further pose that by licensing the Imperial Bank and renewing the said licence annually, the CBK was satisfied with the capacity of Imperial Bank to fulfil all the statutory requirements. Citizens also have legitimate expectation that the CBK will ensure that banks and all persons holding office in licensed banks meet all the legal and ethical requirements.
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Owing to the requirements under the Banking Act and the Prudential Guidelines, CBK is deemed to have known the activities in the banks even before the collapse. The depositors contend that had the CBK diligently carried out its statutory obligations of vetting bank officials, auditing, and inspection to ensure compliance with the law, the now frequent collapse of banks would likely not have occurred.
As the law stands currently, the maximum claim guaranteed under the Kenya Deposit Insurance Corporation Fund is Ksh. 100,000. This remedy is neither appropriate, sufficient nor just according to the petitioners.
They are seeking declarations that the CBK and the KDIC violated their rights to fair administrative action, right to property, and right to consumer protection. As such, they seek the court to make orders that include: immediate access to their deposits, interest and damages.