NDIC secures N556m judgment for depositors of defunct bank

The Nigeria Deposit Insurance Corporation (NDIC) has secured a landmark judgement to the tune of N556.49 million for the depositors of the defunct Lead Merchant Bank Limited.

The judgement, delivered by Justice Ibrahim N. Buba of Federal High Court, Lagos, was in a matter instituted by First Bank of Nigeria (FBN) Plc over a claim of indebtedness by Lead Merchant Bank (in-liquidation) to FBN, prior to the revocation of the closed bank’s licence in 2006 by the Central Bank of Nigeria (CBN).

In a statement signed by the NDIC’s Head of Communications and Public Affairs, Hadi Birchi, FBN had claimed in its suit before the court that the closed bank became indebted to it under a clearing and settlement banking transaction, and that as at March 2006, when the bank’s licence was withdrawn, the indebtedness stood at N556.49 million.

The Applicant further claimed that the transaction was secured by an unregistered legal mortgage over Lead Bank’s property at No. 1, Oladele Olashore Street, Victoria Island, Lagos, and that the property was covered by a registered Deed of Assignment the originals of which the defunct Lead Bank deposited with the Applicant as security for the transaction.

Following the revocation of Lead Bank’s licence, the Applicant claimed that it approached/notified the Respondent (NDIC) of the aforesaid indebtedness of the closed bank, but that the Respondent classified the Applicant’s claim (FBN) as creditor’s claim, which would only be considered after the claims of depositors had been fully paid/settled.

Not satisfied with the response, the Applicant approached the court, claiming among other reliefs, a declaration that FBN, being an equitable mortgagee of the said property, was entitled to an order of court to sell same and liquidate the outstanding indebtedness of the defunct bank in the sum of N556.49 million owed to the applicant.

However, the Respondent (NDIC) contended that it indeed recognised the Applicant’s claim of N556.49 million indebtedness by the defunct bank, but that such a claim constituted creditor’s claim, which could only be settled in strict compliance with the priority ranking of applicable laws.

NDIC also contended that having gone through its records, it confirmed that it was yet to meet the entire obligation as a deposit guarantor by fully paying the depositors of the defunct Lead Merchant Bank.

The Respondent further contended that out of a total of 3,925 depositors at closure of the bank, it had settled only 3,510 depositors as at December 31, 2016; leaving 415 depositors yet to be settled till date.

Similarly, the Respondent claimed that out of the sum of N10.15 billion, representing the total deposits at closure of the bank, it was yet to settle the sum of N13.76 million representing the outstanding insured claims and the sum of N1.58 billion, representing the outstanding uninsured claims as at December 31, 2016.

In its judgement, the court held that the Applicant’s claim bordered on the priority of payment where a bank suspended payment or was unable to meet its obligations; this the court stated was settled by Section 54 of the Bank and Other Financial Institutions Act (BOFIA) Cap B3 Laws of the Federation of Nigeria 2004.

The section provides thus: “Where a bank is unable to meet its obligations or suspends payment, the assets of the bank in the Federation 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 court further held that the above provision was crystal clear and that the path to follow in dealing with the assets of a bank in-liquidation was no more open to debate.

Similarly, the court affirmed that in line with Section 55 of the BOFIA, where any of the provisions of the Companies and Allied Matters Act (CAMA) are inconsistent with the provisions of BOFIA, such provisions shall prevail in so far as they relate to banks and winding up by the Federal High Court.

The court therefore dismissed the Applicant’s originating summons as lacking in merits, and awarded the cost of N250,000 in favour of the Respondent.

(The Guardian)