In Summary:
- Aviation firm associated with South Sudanese first family is seeking ksh 9.2 billion damage from Stanbic Banks over termination of a plane leasing agreement
- Stanbic Bank allegedly froze and reversed over Sh9.2 billion that had been credited to its bank account in February 2016.
- Stanbic Bank says credit note from South Sudan government did not have funds and the lender could not use its own money.
An aviation firm associated with South Sudanese first family has said that its business operations were totally crippled after Stanbic Bank froze and reversed over Sh9.2 billion that had been credited to its bank account in February 2016.
Captain Eric Lugalia, Air Afrik Aviation managing director testified that the bank froze and later reversed the funds, a move that led to the termination of a plane leasing agreement with the government of South Sudan.
According Lugalia, the reversal rendered firm was unable to meet its obligations under the leasing agreement dated September 4, 2014. The contract was eventually terminated.
“I am further aware that the Plaintiff (Air Afrik) spent substantial time, resources and also incurred substantial loss and damages in pursuit of the illegal freezing of its account but the 1st Defendant (Stanbic) adamantly refused to unfreeze or allow the Plaintiff to access the said credit balance,” Mr Lugalia said in the sworn statement.
Air Afrik sued Stanbic in 2018 over alleged breach of banking regulations after crediting $7.2 million into its accounts before the funds were frozen and later reversed, without a valid court order or a directive from the Central Bank of Kenya.
The company is seeking to be paid damages for losses suffered after a plane leasing contract of $20 million with South Sudan government was terminated after the funds were withheld.
According to the airline, the money had been deposited for a plane-leasing contract it signed with the Ministry of Defence and Veteran Affairs of South Sudan in September 2014.
Under the agreement, Juba was required to pay Air Afrik a deposit of 35 per cent ($7.2 million) of the value of total contract sum estimated at $20.64 million.
“I believe that since the Payment Order pursuant to which the 1st Defendant paid to the Plaintiff the sum of USD.7,224,000.00 was in the form of a Credit Advice, the same connoted an electronic transfer from one of the 1st Defendant’s customers (1 st Defendant and/or GOSS) to another one of the 1st Defendant’s customers (the Plaintiff),” Lugalia said.
He added that there was therefore no requirement of actual funds changing hands as the bank claims.
Stanbic has denied the claims and reversal stating that the transaction was reversed after realizing that the credit note from South Sudan government did not have funds and the lender could not use its own money.
The bank maintained it was forced to reverse the entry that it had made to the customer’s account since it was made in error and not backed by the actual transfer of funds.
