The Supreme Court has allowed the Capital Markets Authority (CMA) to go after directors of collapsed Imperial Bank who issued a Ksh2 billion bond a month before it collapsed.
In court filings, CMA said that the lender issued the bond despite the directors knowing that the bank was on the red line, and would collapse soon.
“The petitioners’ appeal is allowed to the extent that the respondent may proceed with its enforcement proceedings against the petitioners through its delegated authority under Section 11A(1) and or Section 14(1) of the CMA Act,” Justices David Maraga (chief justice), Mohamed Ibrahim, Smokin Wanjala, Njoki Ndung’u and Isaac Lenaola said.
The lender was placed under receivership in October 2015, after malpractices were reported within orchestrated by the top management.
The eight directors of the bank, if found guilty, could face financial penalties as well as being blacklisted from holding a similar position in any listed company.
The eight directors include Alnashir Popat, Omurembe Iyadi, Jinit Shah, Anwar Hajee and Hanif Somji.
In their court submissions, the eight argued that Section 11(3)(cc) & (h) of the CMA Act is unconstitutional, because it allows the regulator overlapping roles.
By the time the lender went under, it had lost Ksh34 billion in 13 years engineered by the former managing director the late Abdulmalek Janmohamed and former chief finance officer James Kaburu through withdrawals that were not recorded with the bank’s system.