The Guptas argued that Baroda was tasked to close their accounts by its Mumbai-based executives.
If several companies controlled by the Gupta family max out their loans they can still access about R370-million from the Bank of Baroda, a court judgment this week shows — and use Nedbank to do business in South Africa.
Nedbank itself, like all other banks in the country, has refused to do business directly with the Gupta family or companies in their Oakbay group, but Nedbank still does business with Baroda.
“There is no suggestion that Nedbank has threatened to terminate its relationship with [the Bank of Baroda],” Judge Tati Makgoka said in the high court in Pretoria this week.
Makgoka on Monday ruled that Baroda, as the Gupta companies’ last banker standing, was prohibited from “in any way limiting the manner in which the banking accounts are operated” by a list of Gupta companies, including Sahara Computers and Optimum Coal.
The order in effect gave the companies a reprieve until they can argue for a final interdict in the matter, in a case very likely to run well into 2018. Ultimately the Gupta companies want a lot more time to get their affairs in order before Baroda is allowed to close their accounts.
But Baroda wants to end its relationships with these companies because their accounts cost a lot of money to watch for dubious transactions, and association with the Gupta family is bad for business.
Nedbank, which was not party to the proceedings, would not comment on “specific client relationships”, saying only that dealings with other banks are subject to legal, governance and regulatory requirements.
Although Baroda has recovered about R1.2-billion from the companies since it started winding down ties in June 2016, four companies still have loans outstanding, and further loans available. Makgoka also ruled these may not be called up.
The last repayment on one loan is only due in May 2019.
Makgoka said he had to take into account the prospect of Gupta employees losing their jobs if Baroda closed the accounts. In addition he believed the reputational risk of being associated with the Gupta family “will be ameliorated by the public knowledge that the bank is in an unwilling relationship”.
At the same time Makgoka lashed Baroda for its conduct. He said the bank had been “particularly unreasonable” in refusing to keep the Gupta companies’ accounts open while the issue was before the courts — creating “confusion and uncertainty”.
Baroda later made a “disingenuous” argument that the companies were abusing legal process, used “circular reasoning” and put the Gupta companies “in an impossible position”.
The Gupta companies had argued that the local Bank of Baroda operation was acting under orders from its Indian state owners in Mumbai to close their accounts, and that the bank’s bosses there in turn were under pressure from others to act against them.
Baroda had been central to various Gupta business coups in South Africa for years, making available billions of rand in loans for major acquisitions and acting as conduit for billions more in funds with sometimes dubious origins.
In October last year, then public protector Thuli Madonsela said in her State of Capture report that Baroda’s involvement, particularly in the purchase of Optimum Coal and the handling of a ring-fenced rehabilitation fund, requires further investigation.