Guardian Bank will not be required to pay Sh196 million to former shareholders of the now-defunct Guilders International Bank, the Court of Appeal has ruled, ending a legal struggle that has stretched over two decades.
The three-judge bench, consisting of Justices Daniel Musinga, Francis Tuiyott and George Odunga, determined that eight guarantors, not the bank, are liable for the payment tied to the 1999 acquisition.
"The sale agreement clearly placed primary payment obligation on the purchasers, not Guardian Bank," the judges emphasized. They added, "It cannot fall on the first appellant (Guardian) to pay as no such obligation was placed on it by the contract."
The court named the eight guarantors responsible for the debt as Maganlal Motichand Chandaria, Dinesh Maganlal Chandaria, Mahesh Maganlal Chandaria, Conifers Trading Limited, Chandaria Holdings Limited, Dima Limited, Goldera Limited, and Kevis Investments Limited. The bench noted that they acted as purchasers and executed the transaction as personal guarantees for Guardian Bank.
The disputed sum corresponds to Guilders’ net worth at the time the bank was acquired. It will now be paid by the guarantors with interest at a court rate of 12 percent per year, backdated to 2005 when the lawsuit was filed, potentially raising the total to Sh470.4 million.
The appellate decision overturns a February 2023 High Court ruling that had placed Guardian Bank at risk of a Sh2.1 billion claim.
The conflict traces back to Guardian Bank’s 1999 takeover of Guilders International Bank, a deal approved by the Finance Minister and published in the Kenya Gazette.
Following the acquisition, former Guilders shareholders—Shivali Investments Limited, Naval Holdings, Ketty Investments, and SAAF Holdings Limited—sought legal recourse, claiming that the agreed payment for their shares was never completed.
The dispute arose because, after Guardian took over Guilders’ business operations and assets, including its premises, the purchasers had not made the payments stipulated in the agreement.
The Court of Appeal noted that the contract required the payment to be made by the guarantors on behalf of Guardian, not by the bank itself.
By clarifying the responsibilities under the original agreement, the Court of Appeal has finally concluded a 20-year-old legal battle, establishing that the bank is not liable and shifting the financial obligation entirely to the guarantors.