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Judge backs Co-op Bank for freezing union account in signature row
Wednesday August 09 2023
Co-operative bank along Moi Avenue in Nairobi on January 25, 2023. PHOTO | LUCY WANJIRU | NMG
A judge has sided with the Co-operative Bank of Kenya for flagging and freezing a bank account belonging to a union until confusion over signatories is resolved.
Mr Elijah Otieno Awach filed the case in May accusing Co-op Bank of flagging an account belonging to the Kenya Union of Water and Sewerage Employees, Buruburu branch, stopping withdrawals temporarily until the union resolved the issue of signatories to the account.
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But Justice Byram Ongaya said the lender cannot be faulted for discharging its obligation by protecting the deposits credited in the account until the dispute at hand is resolved.
“The court, therefore, returns that the 1st respondent (Co-op Bank) has discharged its obligations as a bank per prevailing bank’s regulatory provisions so that the applicant cannot fault the bank at all,” the judge said.
Justice Ongaya said the lender is a neutral party to the dispute involving the union officials and bank signatories and it cannot be validly sued for executing its mandate.
Mr Otieno said the union holds its gazetted bank account with Co-op Bank, where sums belonging to the union members are held.
He said the union runs its affairs including payment of salaries and allowances to its employees and officials, paying office rent, recruitment of members, and training amongst other costs, from said bank account.
He said the freeze was drastic as it had the effect of grounding the union operations, and was detrimental to the 3,000 members and employees of the union who had not been paid salaries from January 2023.
The court heard that Mr Otieno, acting as the general secretary, issued a cheque for Sh24,000 to one of the members but the cheque was returned unpaid.
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The bank said it made the decision to temporarily flag the account against any withdrawals pending resolution of the dispute regarding the bona fide signatories and the decision to freeze the account was communicated to the union through a letter on April 26.
