NDIC Drags Wema Bank to Court Over N125bn Banana Island Property Linked to Defunct Lender

The Nigeria Deposit Insurance Corporation (NDIC) has instituted two separate actions at the federal high court in Lagos against Wema Bank over some assets in Banana Island and N401 million disputed payments.

The NDIC, acting as liquidator of the defunct Gulf Bank Plc, filed both suits against Wema Bank under the Failed Banks (Recovery of Debts and Financial Malpractices in Banks) Act.

The move was part of efforts to recover and liquidate outstanding assets of the defunct Gulf Bank Plc after 20 years of its collapse.

In January 2006, the Central Bank of Nigeria (CBN) revoked the licence of Gulf Bank Plc due to insolvency and failure to meet capitalisation requirements.

Subsequently, NDIC emerged as liquidator in a bid to recover the outstanding assets, following a court order.

THE FIRST SUIT

At the centre of the first suit instituted by NDIC are six properties in Banana Island purchased in the name of Euston Wenberg Engineering Company Limited, described as a shell company used by Gulf Bank Plc.

These plots, situated in Zones J, K, L and P, have a combined area of approximately 13,794.145 square metres.

At the current market rate of N4,500,000.00 per square metre, NDIC values these properties at N62,073,652,500.00.

NDIC alleges that Gulf Bank acquired six Banana Island plots between 1998 and 2003 using Euston Wenberg Engineering Company Limited as a vehicle.

NDIC argued that the assets remain beneficially owned by Gulf Bank plc despite the internal records of the defunct bank reportedly treating the acquisition as a loan account.

NDIC alleged that Wema Bank took custody of these properties purportedly to secure an interbank deposit of N771.79 million.

The agency said a joint CBN/NDIC special examination conducted in September 2005 found no record in Gulf Bank’s books confirming that any such deposit existed.

The agency said the report found the defunct bank’s explanations unsatisfactory with no supporting documentation produced.

NDIC said Wema Bank later presented two managers’ cheques from Access Bank and Intercontinental Bank, both dated September 2005, totalling N250 million in favour of Euston Wenberg Engineering Limited.

The agency said the cheques are instruments for a purchase rather than recovery of a deposit.

NDIC argued that the purported sale at N250 million was commercially implausible, given that a single property in Banana Island at the time was worth in excess of N500 million.

THE SECOND SUIT

The second suit was premised on a separate set of six properties in Banana Island acquired through Bacad Finance and Investment Limited (later renamed Supra Commercials Limited) — another entity in which the defunct bank held over 80 percent shareholding.

NDIC alleged that Gulf Bank injected N20 million into Bacad Finance and Investment Limited in 2001 to increase its share capital, and later invested N60 million in the company in 2003.

The defunct bank held over 80 percent of Bacad Finance’s shares and used the entity to acquire the second set of six Banana Island plots.

The defunct bank was said to have planned to develop the properties as a luxury residential estate of 72 flats, to be called Bacad Estate, in partnership with Shelter Afrique.

NDIC accused Wema Bank of claiming to have sold the assets for N524 million by way of managers’ cheques dated 2006 and 2007, without any valid mortgage, court order, or proprietary interest.

NDIC rejected the claimed sale price as grossly implausible given that each property was worth over N4 billion at the time.

In addition, NDIC said in June 2009, it wrote to Wema Bank approving payment of N1,635,616 as the full outstanding deposit due to the bank as of January 16, 2006 — the date Gulf Bank went into liquidation.

NDIC alleged that despite the approval, Wema Bank collected N401 million from UBA, NDIC’s agent bank, without lawful justification, and that the agency has no record showing Wema Bank was owed any sum beyond the approved N1.6 million.

NDIC is seeking court declarations that any purported sale of the properties was illegal, null, and void and that Wema Bank had no valid interest in any of the properties.

The agency is also seeking a court order to compel Wema Bank to return the land title documents or pay the current value of the disputed properties.

THE OBJECTIONS

Wema Bank, through its counsel, Oladapo Olanipekun, Kehinde Ogunwunmiju, Tunde Afe-Babalola, have filed a preliminary objection challenging the jurisdiction of the court.

The bank argued that NDIC’s claims do not arise from any loan, credit facility, guarantee or banking transaction between the parties as required under the Failed Banks Act.

The lender added that it was never a customer of the defunct Gulf Bank Plc in respect of any credit facility.

The bank further argued that the suits disclose no debtor-creditor relationship and that NDIC lacks locus standi because the disputed properties were allegedly owned by Bacad Finance and Investment Limited (now Supra Commercials Limited), a separate legal entity.

The bank said the issue is property ownership rather than banking debt recovery, adding it is outside the federal high court’s jurisdiction.

The bank argued that any course of action, if it existed at all, arose between 2006 and 2007 and is now statute-barred under the Limitation Law of Lagos state.

Wema Bank accused NDIC of abusing court process by attempting to circumvent limitation laws with a stale claim.

Wema Bank asked the court to strike out both suits.