Ruling may signal the end for the Guptas
Publish date: 22 September 2017
Issue Number: 4312
Diary: Legalbrief Today
Category: General
The Gupta family has eight days to find a new bank to take them on as clients or – in their own words – face an ‘inevitable demise’. This, notes Legalbrief, follows yesterday's Gauteng High Court (Pretoria) ruling by Judge Hans Fabricius, dismissing an application by 20 companies owned by or linked to the Gupta family to halt the Bank of Baroda‚ the last remaining bank open to the Guptas‚ from closing all their accounts on 30 September. The applicants sought interim relief to delay the closures until the main application for an interdict could be heard on 7 December. But, in his judgment, Fabricius held out little comfort for the Gupta-linked firms, saying the companies had very little prospect of success in December because of the ramifications it would have on the bank. A TimesLIVE report says Fabricius‚ in his 74-page judgment‚ delivered what it describes as one of the most scathing indictments of the Gupta family and their companies in relation to numerous allegations of state capture to date. ‘The bank can obviously not rely on the truth of such allegations‚ and neither does it have to‚’ Fabricius said after listing a comprehensive summary of the allegations against the Gupta family and the Oakbay group of companies relating to state capture. ‘I am obviously also not in a position to comment‚ save to say the following: when reading details of the various allegations in the answering affidavit‚ I could not help to wonder whether‚ unbeknown to me‚ democracy and the rule of law had somehow been suspended pro tanto (as far as it can go)? Could it be possible that the future‚ so bright in 1994‚ was now only history,’ asked the judge. ‘Do the constitutional obligations imposed on the prosecuting authority as set out in section 179 of the Constitution still exist? Do the various bodies of the Police Service referred to in section 205 of the Constitution still remember their constitutional duty to combat and investigate crime?'
The Bank of Baroda included a summary of public allegations over state capture levelled at the Gupta family‚ using the numerous examples as proof of reputational harm a continued association with the family would hold. Included in this summary, notes the TimesLIVE report, was that between 16 September 2016 to 14 July 2017 the bank made no fewer than 45 suspicious transaction reports to the Financial Intelligence Centre on the Gupta family‚ including members of the Gupta family and other companies associated with them. These transactions amount to more than R4.25bn. ‘As I have set out in some detail‚ the bank is subject to a number of statutory provisions which in the main seek to uphold the integrity of the financial system in the country. It seeks to uphold such integrity with honest transparency. On the other hand‚ there is the well-founded suspicion‚ having regard to the uncontested events that I have referred to‚ that the applicants (Gupta family and businesses) subverted the integrity of the financial system‚ to put it gently‚’ said Fabricius. ‘Irrespective of whether negative publicly about the client is true‚ a bank is fully entitled to terminate the relationship with a client that has a bad reputation‚’ his judgment read.
Fabricius also chided the applicants for not disclosing material facts, notes Legalbrief. He pointed out 20 companies associated with the Gupta family failed to disclose that they not only could continue to pay their staff if their last bank accounts are closed, but already had made arrangements to do so. A Mail & Guardian Online report notes Fabricius said they had made out no case while ‘balance of convenience weighs heavily in favour of a party which seeks to uphold and preserve the integrity of the established financial system and the rule of law’. ‘Integrity’ was not a word he would associate with the Gupta companies, Fabricius’ judgment made clear. He was told the Gupta companies had not been truthful about how they were paying staff, Fabricius said, because they were already using a payment agent rather than a bank. He agreed that ‘the failure to disclose this material fact is highly objectionable’. Fabricius wrote: ‘In this context it was argued, and in my view correctly so, that in addition to suffering no prejudice the (Gupta companies) also do have a suitable alternative remedy.’ But the companies ‘will be perfectly capable of paying their employees and suppliers’, said Fabricius. They could use foreign bank accounts to pay local pay agents, or get their own debtors to pay the pay agents, who could then distribute the money. The companies’ assertion that they would suffer ‘was not real', said Fabricius. The various allegations of state capture and other breaches by the Gupta family makes up eight pages of the judgment, notes the report.
The Gupta companies, however, will still have a shot at trying to stop the bank in the main application for an interim interdict in December, notes a Business Day report. However, the judge held out little hope for a successful challenge. 'I am of the view that the application to be heard in December and the main application has very little prospect of success in the light of the … state of the law in this particular relationship, and the harm that (Bank of Baroda) is very likely to suffer should it be forced, against its will, to continue with the relationship with the applicants,' Fabricius said. 'In our law, there is no recognised cause of action for an ‘interim-interim’ interdict based on requirements other than those recognised at common law for an interim interdict,' Fabricius noted.
Outa acted quickly after the ruling to file an urgent interdict to compel the bank to freeze R1.75bn in rehabilitation funds for the Optimum and Koornfontein collieries. Outa expects the application to be heard within days. ‘We want to ensure that this money doesn’t leave the country or find its way into the Gupta family’s pockets,’ Outa’s Ben Theron is quoted as saying in a BusinessLIVE report. The Department of Mineral Resources gave an assurance about three weeks ago that the rehabilitation funds – intended to rehabilitate the areas surrounding the mines when mining activities cease – were intact.
The judgment may prove a significant nail in the coffin of the Guptas’ SA empire, suggests a Daily Maverick report. The only option for the Guptas now is to sell their companies in SA, according to an unnamed ‘local banking expert’ quoted by the DM. Without banking facilities, the Oakbay group cannot continue to do business in SA – leaving the sale of the relevant companies the only plausible option, the expert said. However, banking research expert Petar Soldo, CEO of Digital Republic Consulting, says that while the court’s decision may be good news for Gupta critics, there is little for the local banking sector to congratulate itself over. ‘I believe the banks have been far too late in terms of acting on the Gupta saga,’ Soldo reportedly told the DM. He contends that bank accounts associated with the Guptas should have been closed some time ago. ‘The inaction was even worse by the smaller niche banks, like Bank of Baroda and the State Bank of India. Much of the Gupta business they handled came after the large commercial banks had given notice to the Gupta-related companies. That should have been an additional red flag.’
There is concern that workers could lose their jobs as a result of the judgment, says a report in The New Age. Leader of the activist group Black First Land First (BLF) Andile Mngxitama is quoted as saying: ‘Our biggest concern is to the workers who the court itself clearly did not think deserved to be protected.’ Mngxitama said the courts remained under the influence of white monopoly capital whose interests seeks to protect. ‘Our courts are not aware that they need to protect our people. They still run under a Roman-Dutch apartheid thinking,’ he said. Mngxitama noted this was not the end and banks must not be allowed to shut down accounts due to ‘a narrow political battle’ and BLF will study the judgment further before charting a way forward.
