Durban: Ithala SOC Limited is facing off against a repayment administrator in a fight for its independence and survival, seeking the court’s intervention to keep the administrator out of its daily affairs.
The repayment administrator, Johannes Kruger, was brought in by the Prudential Authority to manage customer deposits that the bank had taken.
These deposits are considered to have been taken illegally because they were collected after the bank had been ordered to stop taking deposits.
A judgment handed down by Pietermaritzburg High Court Judge Muzikawukhelwana Ncube last month lays bare the “fight” between the bank and the repayment administrator.
The judgment shows that the administrator took the matter to court. Kruger had brought an application in which he sought a declaration that he be empowered to recover and take possession of all the assets of Ithala in terms of the Banks Act.
However, Ithala launched its counteraction, in a bid to prevent the administrator from interfering with its daily operations that do not constitute deposit taking.
The court dismissed the application by the repayment administrator and found in favour of Ithala in some aspects of its counter-application.
Ithala yesterday said it welcomes the judgment.
Detailing the history leading to the court case, the court said the repayment administrator had been brought in to deal with managing deposits taken by the bank after the banking exemption that allowed it to take deposits, despite not being a bank, lapsed in December 2023.
“Ithala is not a bank but has been taking deposits for many years, which constitutes the business of a bank. Ithala accepted deposits from customers in terms of an exemption granted to it under sections of the Banks Act; such exemption expired on December 15, 2023.
“After that date, Ithala could no longer accept deposits from the public. It applied for a new exemption notice, which was rejected by the Prudential Authority.”
The judgment noted that despite the expiry of the exemption notice, Ithala continued accepting deposits from the public.
On December 18, the Prudential Authority appointed Kruger as the Repayment Administrator; his appointment relates to the repayment of the deposits collected unlawfully by Ithala.
In its ruling, the court dismissed the administrator’s application and directed him to consult with the Prudential Authority if he was unsure about the extent of his powers.
“It is clear that the Prudential Authority is concerned with the deposit-taking activity of Ithala, not assets,” the court said.
The court also ruled on the issues raised by Ithala SOC and found in favour of the bank on some of the matters.
However the court did not grant relief in respect of some matters saying: “It is common cause that at present, Ithala has no authority to conduct the business of a bank; therefore, there are relief sought in the counter-application that cannot be granted.”
The court concluded that the repayment administrator has no authority to take over human resources, treasury, marketing, finance, and other operational functions of Ithala SOC Limited, including the removal of Ithala’s authorised signatories to bank accounts used for these functions.
Furthermore, the court ruled that the board of Ithala SOC Limited is not divested of its management powers and responsibilities, and the Repayment Administrator may not interfere with the board’s management powers.