By Tony Obiechina, Abuja
The Investments and Securities Tribunal (SIT) has ordered the Nigeria Deposit Insurance Corporation (NDIC) to refund the sum of N5m to Winners Medical Diagnostics & Research
Institute Limited, following a botched Public Offer.
Presiding chairman of the Tribunal, Hon Onyemaechi Elujokor who gave the order in Abuja, also awared N500,000 as costs in favour of the plaintiff.
But in a prompt reaction, the NDIC said in a statement on Monday that it will appeal against the judgment describing it as “misconstrued and misapplied “.
According to the judgement, the company had subscribed to 2,500, 000 units of shares in the 2005 Initial Public Offer of the former All States Trust Bank Plc (now Ecobank Plc.), at N2.00 per shares of 50k each and paid N5m.
However, prior to the conclusion of the offer, All States Trust Bank became distressed and its licence was revoked, with its assets and liabilities transferred to Ecobank Nigeria Limited, including the Share/IPO Suspense Account No.
0170102746018, created to receive deposits for the sales.
The Tribunal further stated that
whilst alleging breach of legal duty and negligence against the 6-8 Respondents (NDIC, CBN & SEC respectively), the Claimant made efforts through its letter of
appeal and demand the 1st defendant and others for a refund of his subscription money, adding that the Claimant’s right to a refund was duly acknowledged by the 6th defendant.
In the statement, the NDIC said it has instructed its lawyers to appeal against the Tribunal decision.
Part of the statement reads: “We most respectfully hold the position that the decision of the Honourable Tribunal was in error as it misconstrued and consequently misapplied the clear and express provisions of the relevant legislations governing bank liquidation in Nigeria.
“The NDIC as the statutory liquidator of the Allstates Trust Bank would like to restate its position in the matter for record purposes. In carrying out its functions as a liquidator, the NDIC complies with the applicable laws in the realization and distribution of the assets of defunct banks, inclusive of Allstates Trust Bank.
“The applicable legislations here include the Companies and Allied Matters Act [CAMA] 2020, Banks and Other Financial Institutions Act, [BOFIA] 2020, the NDIC Act 2006, Failed Banks Act (FBA) 1994 and other relevant legislations.
“Bank liquidation requires a specialized procedure when resolving a failed bank. The emphasis is on settlement of deposit liabilities above all other claims. On the priority of deposit liabilities over other liabilities of the bank, Section 55 of the Banks and Other Financial Institutions Act, 2020 provides as follows: “Where a bank is unable to meet its obligations or suspends payment or where its management and control has been taken over by the Bank [Central Bank of Nigeria] or where its license has been revoked under the provisions of this Act, the Assets of the bank shall be available to meet all the deposit liabilities of the bank and such deposit liabilities shall have priority over all other liabilities of the bank”.
“The above provision of BOFIA is very clear and unambiguous. Depositors of failed banks must as matter of law be settled first before any other claimants as depositors rank first in the order of priority of claim. In fact, sections 657 of CAMA and 55 of BOFIA jointly provide that claims in relation to the assets of a bank in liquidation would be applied in the following priority; Liquidation Expenses, Depositors Claims
Preferred Claims (as determined by CAMA), Equitable Charges General Creditors and
Return of capital to shareholders.
“For the purposes of clarity, please note the definition of the following terms, namely; deposit, depositor and creditor in relation to the business of banking.
Deposit: By virtue of section 59 of the NDIC Act, 2006, deposit “means monies lodged by depositors with any insured institution for safe keeping or for the purpose of earning interest, premium or dividend, whether or not re- payable on demand, upon a given period of time, or upon a fixed date, or at a time or in circumstances agreed by or on behalf of the depositor making the lodgment and the insured institution receiving it except as otherwise extended under this Act”. [Underlining ours for emphasis].
“The alleged Share/IPO Suspense account does not belong to the Claimant but was created by the defunct bank for its own use. The subscription fee does not therefore qualify as deposit as the Claimant did not open an account for any of the above purposes. As a matter fact, the Claimant has no account with the defunct bank. Put differently, the share/IPO subscription fee was not deposited into an account belonging to the Claimant.
“Depositor: “A depositor is a person who deposits money in a bank for safekeeping”. See The New International Webster Comprehensive Dictionary, [2013 edition], page 344. This presupposes that the person making the money deposit will have bank account with the bank.
“Creditor: A creditor according to The New International Webster Comprehensive Dictionary, [2013 edition] is “on [a person] to whom another is pecuniarily indebted.
From the above definitions, it is crystal clear that the share/IPO subscription fee which was paid by the Claimant to the defunct bank for the allotment of shares only qualifies the Claimant as a creditor to the defunct bank as the subscription fee would be treated as money had and received by the defunct bank.
“Noteworthy is the undisputed fact that the Claimant was not a customer to the defunct bank but a subscriber to its shares which unfortunately were not allotted to it before the bank went under.
It must be noted that the NDIC is not contending the indebtedness of the defunct bank to the Claimant in respect of the share/IPO subscription fee. Rather the position and contention of the NDIC is that the law on priority of claims must be strictly followed in the distribution of the assets of the defunct bank.
“In fact, to pay the Claimant herein as ordered by the Tribunal without following due process as prescribed by law would amount to illegality on the part of the liquidator [NDIC] as it would be a clear violation of the express provision of the laws quoted above.
” The Tribunal also erred when it ordered the NDIC in its corporate capacity to pay the Claimant the judgment sum. Any award of damages should be against the defunct bank as it is still a legal entity until dissolved and its name struck out of the register of companies at the CAC.
“In view of the decision of the Honourable Tribunal, which was given per incuriam the Corporation will instruct its solicitors to appeal the judgment to the Court of Appeal”.
