Jailed Somaia faces another fraud charge

The appellate court has allowed an investor to pursue jailed Kenyan billionaire Ketan Somaia to recover more than Sh164 million he swindled out of Caneland Ltd through his collapsed Delphis Bank and Dolphin Holdings.

Mr Somaia, through Dolphin, entered into an agreement with Caneland in 1995 to sell all its shares in Miwani Sugar Company, which the controversial businessman then owned, but refused to transfer the shares after he was paid Sh72.9 million.

The fraudster who is in a UK jail for defrauding a friend and business associate, offered Caneland 51 per cent of Dolphin shares in Vanessa Associates Inc — the holding company of the defunct sugar firm — but when the deal fell through, he only refunded Sh15 million to Caneland.

Mr Somaia, Mr Raji Nsomee, Mr CS Aiyeh and Mr RS Chartesh were named as the directors of Vanessa Associates.

Caneland, an agricultural equipment and farming supplier, moved to the High Court and filed case No 1135 of 1998 against Delphis Bank and Dolphin seeking Sh94 million together with interest and costs of the suit.

DEFENCES STRUCK
Subsequently, retired judge Tom Mbaluto struck the defences of Delphis and Dolphin defences and entered judgement in favour of Caneland.

“I hereby strike the defences of Delphis and Dolphin and direct them to pay Caneland Sh164.8 million together with accruing interest,” ruled the judge.

Dolphin argued before Justice Mbaluto that the suit by Caneland was premature as the agreement had provided for arbitration in the event of a dispute. Delphis denied owing Caneland.

However, the judge said Caneland had established that it not only paid Sh72.9m under an agreement that failed but Dolphin had agreed to refund the money.

The judge also dismissed claims by Delphis Bank that its involvement in the deal was that of a collecting and clearing bank.

The bank claimed it was a complete stranger to the transaction between Dolphin and Caneland.

Justice Mbaluto observed that in all the cheques involved in the transaction, the payee was “not Dolphin as one would have thought but Delphis Bank.”

“Is it not generally accepted that payments through clearing banks are not made to the banks themselves?” posed the judge.

SEPARATE ENTITIES
He added: “Given those facts, it cannot surely be correct or even true that Delphis only acted as a collecting and clearing bank.”

The judge ruled that the bank’s denial of receipt of the money from Caneland was baseless and an attempt to mislead the court.

Evidence before the trial judge indicated that Caneland issued three cheques to Delphis Bank of Sh37.9 million, Sh10 million and Sh25 million between July 18 and December 25, 1995.

Aggrieved by the High Court ruling, the Somaia companies moved to the Court of Appeal. Dolphin was later dropped as an appellant leaving its associate Delphis against Caneland.

Mr Somaia through lawyer Julie Soweto accused the trial judge of misapprehending the law by failing to distinguish that Dolphin and Delphis were separate corporate entities competent to sue and be sued.

“In the result, the judge misdirected himself by finding that Delphis and Dolphin were jointly liable to Caneland,” said Ms Soweto.

MERIT NOT FOUND
On November 28, three appellate judges Roselyn Nambuye, GBM Kariuki and William Ouko upheld Justice Mbaluto’s judgement and ordered Mr Somaia to pay Caneland Sh164 million.

“We are in agreement with Justice Mbaluto’s ruling and we find no merit in the appeal which we hereby dismiss with costs to Caneland,” said the judges.

Mr Somaia, 52, owned Delphis Bank in Kenya, which he acquired after Bank of Credit and Commerce International collapsed in the early 1990s.

Delphis had five subsidiaries with one in Tanzania and another in Mauritius. After the collapse of Delphis in Tanzania in 2002, the authorities pursued him to refund huge sums he owed the bank.