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Interfin loses $26m law suit

The Depositors’ Protection Corporation has failed to block a global financier, Al Shams Global BVI Ltd, from recovering $26 million that it was owed by Interfin Bank Limited, which is now under liquidation.

Interfin Bank
Interfin Bank

The $26 million debt accrued after Al Shams bought a slew of bankers acceptances (BAs) from Interfin Bank on a buy-back basis.

As security for due payment upon maturity of the BAs, Interfin provided security to Al Shams. This was done by way of cession of various agreements with the drawers and issuers of the BAs and cession of the security affected by Al Shams.

A banker’s acceptance is a short-term debt instrument issued by a firm that is guaranteed by a commercial bank. Banker’s acceptances are issued by firms as part of a commercial transaction. They are similar to Treasury Bills and are frequently used in money market funds.

The DPC, which was appointed curator of the bank, wanted to block Al Shams and its local representative business tycoon Mr Jayesh Shah from swooping on the bank’s sureties provided by the bank in the business deal.

The High Court last week ruled that the Assignment and Security Trust Deed concluded between Al Shams and Interfin Bank in April 2012 was binding and enforceable on DPC and its chief executive Mr John Chikura.

“The first respondent (Mr John Chikura) and second respondent (DPC) be and are hereby ordered to adhere to the terms of the Security Assignment agreement and Security Deed between the applicant and Interfin Bank dated April 2015,” ruled Justice Owen Tagu.

The judge threw out the counter claim by the DPC for lack of merit. After the court’s ruling last week DPC, which is being represented by its lawyers Scanlen and Holderness, is now seeking to overturn the ruling on appeal at the Supreme Court.

In terms of the security trust deed signed in April 2012, Interfin Bank confirmed that all its rights to and in the security furnished to it by the drawers and or issuers of the BAs were held in trust and for the benefit of Al Shams.

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As fate would have it, sometime in July 2011 Interfin was placed under curatorship by the Reserve Bank of Zimbabwe and Mr Peter Bailey appointed curator of the troubled bank.

The agreements were brought to the attention of the curator. Mr Bailey confirmed that he was indeed bound by terms of the agreements and undertook to abide by them since they were valid.

He further confirmed that Interfin would continue to collect amounts in respect of the assigned security on account of Al Shams and ceded accounts without deductions in accordance with the terms and conditions of the agreements.

The curator also provided Al Shams with regular updates on the progress and collecting outstanding amounts from debtors. The last update and account of funds collected on behalf of Al Shams totalled $5 962 194,74 of which $5 472 304,74 was paid to the firm. However, trouble started when Interfin was placed under final liquidation in February last year.

DPC was appointed liquidator in accordance with the provisions of the Banking Act (Chapter 24:20). The liquidator stopped paying Al Shams, prompting the company to seek the intervention of the High Court.

Firms and individuals who invested millions of dollars in Interfin Bank lost their investments due to gross mismanagement of the funds by the bank. Many clients failed to access their money on demand.

The bank’s top depositors have a combined $70 million in deposits followed by Al Shams with US$22 393 731, the Ministry of Finance $17 913 689 and NSSA has $15 371 204.

Other major depositors were Zimra with $3 053 743, ABC Holdings $3 000 000, Seed Co $2 549 782, POSB $1 812 500 and High Court Temp $1 737 191. Swixfield Investments and Havercroft NA also deposited $1 214 675 and $1 167 606 respectively.

Al Shams at the time of going to court was owed $26 million while Second Nominees (Pvt) Limited $3 million, which it lent the bank in 2010 through a revolving credit facility.

FBC is owed $309 000 plus interest at the rate of 25 percent per month calculated on a daily balance and compounded on a monthly basis as from February 2012 to the date of payment in full.

City of Masvingo lost $110 000 that it transferred through Real Time Gross Settlement for the purchase of motor vehicles from Zimoco.

Advocates Lewis Uriri and Thabani Mpofu acted for Mr Shah.