Five Forty director sues CBK over Imperial Bank loan
Donald Smith, a director of Five Forty Aviation Limited, has sued the Central Bank of Kenya over credit facilities advanced to him by Imperial Bank, now under receivership.
He claims that he wrote to the receiver in January proposing his money held in a deposit account to be used for settling an outstanding debt with the collapsed lender, and is accusing the receiver of failing to heed his request saying that its aim is to continue earning interest and imposing penalties that expose him to being listed with the credit reference bureau.
“This state of affairs leaves me in great financial hardship… while being charged unnecessary interest and penalties and further puts me at risk of my name being forwarded to Credit reference Bureau as a loan defaulter,” says Mr Smith in court submissions.
He says in April 2015 he opened a current account with Imperial Bank and obtained an overdraft facility of Sh20 million. He also guaranteed overdraft of $200,000 (Sh20.6 million) for Five Forty.
He again opened two fixed deposit accounts with the bank and deposited Sh20 million in each earning interest at 11 per cent and 10.5 per cent respectively.
In April 2015, he took a hire purchase of Sh9.8 million to buy a motor vehicle which was disbursed from his overdraft facility.
The bank says arrears in relation to his overdraft facility stand at Sh8.5 million and continue to attract daily interest of Sh6,535. He says the total payment made in relation to the hire purchase is Sh3.7 million.
Mr Smith says the receiver informed him that the outstanding arrears from his overdraft facility is Sh33 million, and continues attracting daily interest.
He argues that the sum of Sh33 million arises from Sh20 million overdraft facility to Five Forty and Sh13 million advanced to him.
He says he was instead informed that the outstanding amount from the Aviation account is $214,941, which continues to attract interest separately.
He says the receiver has merged the two facilities and continues to charge the aviation facility again separately.