Capital Bank workers have urged the High Court to dismiss the National Social Security Authority's application to liquidate the troubled bank on the basis that the application is defective and lacks Government's authority.
NSSA on Tuesday filed an application for provisional liquidation of Capital Bank arguing that the bank is no longer able to carry out any banking business.
The workers say NSSA does not have both the Minister of Labour and the Minister of Finance and Economic Development's written authority to dispose or disinvest from Capital bank as required by Section 28 of the NSSA Act (Chapter 17:04), read together with Section 8 of the Schedule to the NSSA Act.
"We contend that the absence of such authority is fatal against NSSA. We therefore contend that this application ought to be dismissed on the above procedural grounds alone," said Mr Edwin Chavora, Capital Bank head of treasury.
Mr Chavora is representing 30 other senior managers of Capital Bank who have also deposed supporting affidavits. He said NSSA should not be allowed to benefit from its own omissions since it voluntarily surrendered its banking licence held by Capital Bank.
"We do not accept that there were good grounds for the surrender of the banking license and for this reason, we confirm that we have noted an appeal to the Minister of Finance, in terms of Section 73 of the Banking Act," said Mr Chavora.
He wants the court not to entertain NSSA's application before their appeal has been determined by the Minister.
Mr Chavora argues that Capital Bank is unable to pay its liabilities nor that it is no longer able to continue trading as a going concern as mentioned in the application for liquidation by NSSA. He said the position is that NSSA committed serious omissions and commissions which it cannot hide behind or use as an excuse in shutting down the bank.
He cited NSSA's failure to honour its agreement with the curator of Renaissance Merchant Bank, which agreement was executed on December 19 2011. NSSA's own failure to comply with the common law by reaching an agreement with the main shareholder in RMB and Renaissance Financial Holdings, represented by Mr Patterson Timba.
"It is our contention that the curator could not have had powers of selling and disposing of shares but rather, the shareholders that controlled RMB and RFHL. We contend that NSSA hurried to do this and obviated the main shareholders, in order to achieve its subjective aim and intention of using RMB as a vehicle of acquiring a majority stake in First Mutual Life. We therefore contend that the original agreement between NSSA and the curator was unlawful and should be set aside. Consequently, the impairment of the bank's capital arose out of NSSA's refusal to allow the bank to follow up its rights offer in FML," said Mr Chavora.
The bank's employees, who are in excess of one hundred, said liquidation of Capital Bank would result in loss of employment, in recoverable loss to unsecured depositors and other creditors, loss to NSSA of about $48 million in pensioners' money (being goodwill impairment, provisions for guarantees to PTA bank and NORSAD and share losses recorded by the bank since NSSA took over.
The workers argued that NSSA has not had a board of directors for more than 10 months and the decision to disinvest from the troubled bank can only be legitimately made by an authorised competent board.
"The point is that only the board of the applicant (NSSA) could have brought this application in the name of the company. If at all shareholders had a right to bring an application for winding up of a company, then such an application must be brought in the shareholder's name with the affected company being cited as the respondent," said Mr Chavora.
The workers argue that in the court papers filed by NSSA, there is nothing that shows that the company has authorised anyone to institute the liquidation proceedings.