Court rules against Guptas on forcing Bank of Baroda to stay

The Indian state-owned international Bank of Baroda (BoB) cannot be forced to keep its doors open in South Africa to do business with 20 Gupta-linked companies, the High Court in Pretoria has ruled.

Judge Ntendeya Mavundla dismissed an application by the Gupta-linked companies, including Oakbay Investments and the Optimum coal mine, to compel BoB to continue offering services to them even though the bank informed them last month that it intended closing its South African branch at the end of March.

The move followed after Nedbank, on which BoB relied to provide banking services to its own clients,  informed BoB in January that it would terminate their relationship within three months.

The Gupta-linked companies insisted BoB was in contempt of a court order granted in October last year compelling the bank to keep on doing business with them pending further legal action.

This was after all other South African banks refused to do business with them.

BoB opposed the application, pointing out that it did not operate a clearing bank in South Africa and in the past enjoyed a correspondent banking relationship with Nedbank which permitted funds of Baroda’s customers to be transferred from Nedbank’s infrastructure to third parties.

BoB, which only employed 16 people in its branches in Durban and Johannesburg, said it had decided to exit the South African banking sector because it was not economically viable for it to remain in South Africa.

The bank said since Nedbank had terminated its relationship with BoB, it was unable to provide any meaningful banking services to customers as it could not procure a correspondent banking relationship with any other South African bank.

Judge Mavundla said without the infrastructure of Nedbank, BoB could not be expected to service the accounts of the Gupta companies. Neither could the court compel it to “go belly crawling” to Nedbank to demand re-installation of the infrastructure while the other major banks have also turned their back against BoB.

“Baroda has every right to terminate any business contract, including that of the applicants.

“…(Its) decision to close its business and exit the South African banking sector is predicated on commercial consideration. In my view the (previous) court order has nothing to do with the exit of BoB from South Africa. It cannot therefore be said that the exit is … calculated to frustrate the (court) order.

“…The respondent’s right to trade or not to trade supersedes whatever right, if any, the applicants might have,” the judge said.

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