The Nigeria Deposit Insurance Corporation (NDIC) has secured a landmark judgement to the tune of N556 million in favour of depositors of Lead Merchant Bank Limited (in-liquidation).
The judgment was recently delivered by Federal High Court, Lagos in a matter instituted by First Bank of Nigeria, over a claim of indebtedness by Lead Merchant Bank (in-liquidation) to the FBN prior to the revocation of the closed bank’s licence in 2006 by the Central Bank of Nigeria (CBN).
FBN had claimed in its suit before the court that the closed bank became indebted to it to the tune N556 million as at March 9, 2006 when the bank’s licence was withdrawn.
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.
In its judgement, however 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 was settled by Section 54 of the Bank and Other Financial Institutions Act (BOFIA) Cap B3 Laws of the Federation of Nigeria 2004 which states “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.
In the same vein, 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, the provisions of BOFIA 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 favor of the Respondent.