Relief for Guardian Bank as court slashes Sh2.5b award to Sh700 million

The Court of Appeal has handed the Guardian Bank reprieve by reviewing the Sh2.5 billion awarded by the High Court in a row with former Guilders International Bank ownership.

The Court of Appeal reviewed the figure down to Sh700 million, which includes Sh196 million principal amount for the purchase of Guilders.

Justices Daniel Musinga, Francis Tuiyott, and George Odunga unanimously agreed that there was

Instead, the Court of Appeal bench found that Maganlal Chandaria’s family and Kevis Investment Limited were to pay.

According to the three judges, Guardian was a soft target as it is a bank.

“Ultimately, the appeal is partially successful. We hereby set aside the judgment of February 17, 2023,” the bench headed by, headed by Justice Musinga ruled.

They found that High Court Judge Alfred Mabeya erred by finding that the agreement to buy Guilder was based on a memorandum of understanding. Hence, Guardian and Chandarias ought to pay 12 per cent interest.

The trio instead said the deal was based on a sale agreement, which was distinguishable and did not attract any interest.

“The arguments by the respondents are no doubt attractive, but crumble in the face of the express terms of the Sale Agreement. In recital F, it is provided that the obligors undertake to pay the purchase price on behalf of the purchaser. More decisive is clause 6 which contains provisions on payment of the consideration. Sub- clause 6.1 is unequivocal that “the obligors shall pay the total purchase price on behalf of the purchaser.”

“It is not an obligation to be shared between them and the purchaser. Neither is it a secondary responsibility to simply guarantee payment of the purchase price, it is the primary obligation to pay. Indubitably, it cannot fall on the first appellant (Guardian) to pay as no such obligation was placed on it by the contract,” judges ruled.

They directed that Guardian should now release securities which were used to secure the deal, save for four. If it does not have the security, the court said that it should pay their value at the time they were deposited.

The appeal was filed by Guardian, Amit Chandaria, Hetul Chandaria,and  Bhavnish Chandaria (who are executors of Maganlal Motichand Chandaria) and Denish Chandaria, Mahesh Chandaria, Conifers Trading,Chandaria Holdings Limited, Dima Limited, Goldera Limited and Kevis.

They sued Shivali Investments Limited, Naval Holdings Limited, Ketty Investments Limited and Saaf Holdings Limited, who are the former Guilders shareholders.

They argued that Guilders shareholders did not give the true value of the bank, which made them incur expenses in recovery of loans.

They further argued that after the buyout, they discovered that several loans listed as performing were unrecoverable.

The court heard that Guardian discovered that out of a recoverable and performing loan portfolio, which they were informed was Sh678.074 million, only Sh26.06 million was realised.

In addition, in the process of recovering the loans, they incurred expenses of Sh7.32 million. There were also undisclosed liabilities of Sh10.62 million.

The Chandarias and Guardian also argued that sellers failed to provide warranties and tangible security worth Sht hea380 million together with personal guarantees as agreed in the sale agreement.