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Habib Bank urgent court bid is self-created – Treasury, SARB

Pretoria – Vardospan’s urgent application brought to the North Gauteng High Court has been self-created, National Treasury and the SA Reserve Bank (SARB) said in court papers on Thursday.

The matter is currently being heard in the North Gauteng High Court in Pretoria.

Registrar of Banks and deputy governor of SARB Kuben Naidoo as well as Treasury director general Lungisa Fuzile argued in their responding affidavits that the urgency was self-created by Vardospan.

Vardospan - headed by Hamza Farooqui and Salim Essa, close associates of the controversial Gupta family - is seeking an order to review and set aside the alleged failure by Naidoo, Gordhan and the SA Reserve Bank to determine its application and grant it permission to buy a majority stake in Habib Overseas Bank and be registered as the controlling company.

The agreement Vardospan made with Pitcairns Finance on 31 August 2016 to purchase a majority stake was based on a condition that they got regulatory approval by 31 January 2017, extended to 31 March 2017.

No law that gives timeline for process

“At the time when Vardospan and Pitcairns agreed to the relevant conditions, no effort or attempt was made by either of them to first ascertain … how long it takes to process and finalise the Banks Act applications,” said Naidoo.

Had they done this, the SA Reserve Bank and Treasury would have “informed them that the Banks Act makes no provision for the time period within which such applications must be considered and finalised”.

Fuzile said law states that it should take a minimum of four years for a person to proceed from holding less than 15% of the shares or voting rights of a bank or controlling company to the point at which their holding can exceed 74%.

“The applicant seeks, in less than seven months, to move from having no shareholding at all, to holding 99.9% of the shares” in Habib Bank and “wants this court to compel” Treasury and SARB “to rush their decisions to meet its timetable”.

“This problem is compounded by the fact that all of the companies involved in the proposed transaction … are all newly established companies with no known business activities, financial statements or management accounts.

“So the process of assessing the applicant's suitability to control a bank is considerably more complicated than the ordinary process contemplated by section 37(2)(a) of the Act where an established minority shareholder, with an ascertainable track record, gradually increases its stake in a bank over a period of more than four years.”

Urgent application should be struck from roll - Naidoo

Naidoo finds it curious that an urgent application has been made on Monday, when Vardospan knew for “weeks (if not months) that such applications could not possibly be finalised by 31 March 2016”.

“This alone warrants the striking of this application for lack of urgency, with an appropriate cost award.”

“The fulfilment of a suspensive condition between private parties can never inform the processes that must be followed by the central bank respondents when carefully and meticulously considering the Banks Act applications.”

Fuzile concurred, saying the “ostensible urgency is the product of a date that the applicant has itself chosen as its long-stop date in its contract with Pitcairns …

“If the applicant chose to conclude a contract with inappropriate resolutive conditions it cannot compel the minister and this court to alter their ordinary processes so that these inappropriate conditions can be fulfilled.”  

There is still information outstanding

Regarding the agreement that was made between the private parties, Naidoo said that “if such agreements were permitted to influence the central bank respondents' decision-making processes, this would defeat the very purpose of sections 37 and 43 of the Banks Act, the interests of justice and the protection of the public interest”.

“There has been no unreasonable delay in taking the decision to process the Banks Act applications.

“There is still information outstanding which has been requested from the applicant for the processing of the section 37 application.

Naidoo also requires Gordhan to sign off on section 37.

In addition, Fuzile said Vardospan “provided no evidence that the long-stop date of 31 March 2017 is immutable”.

“That date has already been extended in negotiations with the fourth respondent, the applicant has not made out a case that it cannot be extended again, still less that it has taken all reasonable steps to attempt to extend it again, but has been unable to do so.”

He said that Vardospan and Pitcaims “seek arbitrarily to impose their own deadlines” on the SARB and Treasury, “who are tasked with important decisions which impact the public”.

“These are decisions which cannot be taken lightly.”

Fuzile said that if Finance Minister Pravin Gordhan "is forced to make a decision on 31 March 2017 he will not be in a position to approve the application because of outstanding information requested from the applicant without which the minister cannot satisfy himself of the financial strength of the applicant to support Habib Overseas Bank; or the fit and proper status of the senior executives that the applicant proposes to deploy to the management of Habib Overseas Bank."


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