Contraversial Guardian bank ordered to pay over Sh 1billion to former shareholder after attempted fraud

Imagine investing your millions in a bank and later you be denied access to get them back as profit.

The High Court has ordered Guardian Bank to pay Sh 196 million plus accrued interest to the shareholders of Guilders International Bank (formerly Guardian Bank)

Justice Alfred Mabeya directed Guardian Bank to pay the money plus interest since the takeover of the business in 2001, until payment in full.

“I find that the plaintiffs have proved their case to the required standards against the defendants, jointly and severally for Sh 196 million being the consideration price for the sale of 200,000 shares in Guilders International Bank as per the memorandum of understanding,” the judge said.

However, the money could run into more than Sh 1 billion if securities, which the court ordered should be returned to former directors of Guilders.

Rajendra Sanghani, a director of Guilders sued Guardian Bank, the shareholders of the bank and executors of the Chandaria Estate including the bank’s executive director Hetul Chandaria.

The named shareholders of the bank are Conifers Trading Limited, Dima Limited and Kevis Investment, Chandaria Holdings Limited.

Sanghani sued through Shivali Investments, Naval Holdings, Ketty Investments and Saaf Holdings, as chief executive officer of the four companies, which he claimed were instrumental in the sale.

According to him, Guardian Bank agreed to pay Sh 196 million and made him sign a “money receipt” but he and other directors never received any funds from the sale.

He also claimed that Guardian shareholders were allowed to collect all dues from its debtors as part of the agreement.

The court heard that the two banks merged after approval from the minister of Finance through a gazette notice in 1999.

The two institutions entered a deal where Guardian took over the assets and business of Guilders including its business premises.

Guardian Bank dismissed the claims and sought a refund of Sh 827 million, accusing the shareholders of Guilders of misrepresenting the true value of the bank and making them incur expenses while trying to recover loans.

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

The bank claimed that 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.

The court heard that out of recoverable and performing loan portfolio, which they were informed was Sh 678 million, only Sh261 million was realised.

Guardian said it incurred expenses in excess of Sh 7 million while trying to recover the loans adding that there were undisclosed liabilities of Sh 10.6 million.