BY SAM ALFAN.
An aviation firm has blamed Stanbic Bank for the termination of USD 20Million plane leasing contract with the South Sudan Government.
Air Afrik Ltd claims the lucrative deal was crippled after the bank unilaterally froze and reversed USD7.2Million (KSh9.2Billion) that had been credited by Juba to it’s account in February 2016.
The firm’s Managing Director, Eric Lugalia, testified that the bank’s actions resulted in the termination of the contract dated September 4, 2014.
The aviation firm was unable to finance and execute it’s obligations to the Ministry of Defence and Veterans Affairs after the debacle, Lugalia explained in a sworn statement filed in the Commercial Court in Nairobi.
“Air Afrik spent substantial time and resources and also incurred substantial loss and damage in pursuit of the illegal freezing of its account but the bank refused to unfreeze or allow Air Afrik access the credit balance,” he said.
The aggrieved firm sued the bank in 2018 over alleged breach of banking regulations without a valid court order or directives from the Central Bank. The firm is seeking compensation from the bank.
Lugalia testified before High Court Judge Nixon Sifuna that under the agreement, the South Sudan Government was required to pay Air Afrik 35 per cent down-payment of USD 7.2Million (KSH9.2Billion) of the contract sum worth USD20Million. The transaction was an electronic transfer and there was no requirement of actual funds changing hands contrary to the bank’s assertions, he said.
However, Stanbic Bank has denied any wrongdoing and claims the transfer of the funds was reversed after realization that the credit note from the South Sudan Government could not be honoured by insufficient funds.
The bank has maintained it was forced to reverse the credit made to the account of Air Afrik since it was in error and not backed by actual transfer of money.
Further, the bank has said it was under no obligation, contractual or otherwise, requiring it to use it’s own funds to settle a debt by a third party.
The lender has acknowledged that it received the credit advice note on February 5, 2016 from the Bank of South Sudan confirming payment on account of Air Afrik by the Ministry of Finance and Economic Planning.
The bank conceded that on February 8, 2016, the airline’s account was credited with the funds and the applicable commissions were deducted. Once the error was discovered, the entry was reversed a few days later.
