29 March 2014

Zimbabwe: Lifeline for Trust Bank

TRUST BANK was yesterday thrown a life line after the High Court ruled that an order placing it under liquidation was defective and lacked any legal force.The bank was placed under provisional liquidation last December after the Reserve Bank of Zimbabwe cancelled its operating licence on charges of abusing depositors' funds and violation of the provisions of the Banking Act.

But Justice Martin Mafusire reversed the decision throwing a lifeline to the bank and depositors who were against the central bank's move.

"The provisional order for liquidation granted on December 18, 2013 be and is hereby set aside with cost," said Justice Mafusire.

The judge ruled against the RBZ saying it placed the bank under provisional liquidation on the strength of the order that was obtained without informing Trust Bank and yet the law requires that the application by which the order is sought should be served on the other party as well.

After the court ruling, the bank's lawyer Advocate Thabani Mpofu immediately filed a claim for declaratory order seeking a stay of any further proceedings from the RBZ.

The bank is also now seeking an order authorising the central bank to facilitate the recapitalisation drive which the financial institution has embarked upon.

A South African company, Mining, Oil and Gas Services is waiting in the wings with plans to transform Trust Bank into an energy bank through an investment of US$800 million.

According to the papers filed at the High Court, Trust Bank contends that the RBZ was aware that the bank has pursued certain recapitalisation initiatives which continue to be hampered by the approach the central bank has taken against it.

"The intention by defendant to liquidate plaintiff in the current economic conditions and when it is a lot more financially stable than rival banking institutions which defendant has not liquidated smacks of bad faith, is malicious, takes away plaintiffs rights to fundamental justice and is grossly unreasonable as an administrative act," stated Adv Mpofu.

He further stated that the treatment of his client by the RBZ offends the equality guaranteed by the law and therefore unlawful.

"Plaintiff consequently avers that the contemplated actions of the defendant should be declared to be wholly void as being unconstitutional and not reasonably justified in a democratic society," stated Adv Mpofu.

"Plaintiff also avers that defendant should be ordered to do all such things as are necessary to facilitate plaintiff's recapitalisation efforts.'

The RBZ cancelled the bank's licence saying it was financially unsound and was not operating in line with sound administrative and accounting practices and procedures.

The bank, which was said to be critically undercapitalised with a core capital of US$1,9 million, has been posting persistent losses since its banking licence was reissued in September 2011.

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