The Kenya Deposit Insurance Corporation (KDIC) has intensified its dispute with Absa Bank Kenya regarding a KSh215 million refund claim made by the bank, concerning purported over payments in statutory deposit protection fund premiums.
The lender listed on the Nairobi Securities Exchange (NSE), filed a legal action against KDIC on October 14, 2023, requesting a reimbursement of Ksh215, 346,841, claiming it was an excess payment on premiums.
Additionally, the lender sought interest at commercial rates of 14 per cent on the disputed amount, accruing from the date of each premium payment until full repayment.
Absa Bank’s lawsuit stated that it had remitted its annual premium to KDIC, calculated at 0.15 percent of its annual total deposits.
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However, the bank discovered an unintentional overpayment amounting to Ksh215, 346,841.
The lawsuit also included a secondary request for the excess amount, along with accrued interest, to be applied from the court’s judgment date onwards to Absa’s annual contribution until complete reconciliation is achieved.
The court ruled that KDIC had not submitted a defense within the allotted time. As a result, High Court Judge Nixon Sifuna issued a verdict in favor of Absa Bank on March 15, 2024.
“The defendant (KDIC), having inordinately failed to file a defence within the stipulated time, judgment in default of defense is hereby entered for the Plaintiff (Absa Bank) against the defendant in accordance with Order 10 Rule 10 of the Civil Procedure Rules. The plaintiff (Absa Bank)’s claim being a liquidated demand, this is a final judgment and not an interlocutory judgment,” said Prof Sifuna.
“The same is entered in terms of prayer of (iii) of the plaint (charge), which is that this sum be applied prospectively towards the plaintiff’s (Absa Bank) annual contribution from the date of this judgement until full reconciliation. Each party shall bear its own costs of this Application, as well as those of the suit itself”
However, KDIC appealed the ruling and sought orders to stay the execution of the ruling pending the hearing and determination of the application and the intended appeal in October this year.
KDIC, represented by Waweru Gatonye and Company Advocates, suggests that the ruling might create a loophole allowing other member institutions to use it as grounds to lower their contributions to the statutory deposit protection fund.
“This will render meaningless the deposit insurance scheme and expose customers/depositors of banking and financial institutions,” KDIC says through court papers.
“Furthermore, as a consequence of nullifying Section 21 of the Government Proceedings Act, Cap 40 Laws of Kenya, the ruling now exposes the National Government departments as well as the County Government to the real risk of execution proceedings being instituted against them to the detriment of the larger public,” it added.
By Frank Mugwe
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