Breach of Contract: Investor Sues Diamond Bank

Written By Paul Ladi, Lagos

An aggrieved customer of Diamond Bank Plc, the News Engineering Nigeria Limited, has dragged the bank before a Lagos Federal High Court, over
alleged imposition of illegal charges and arbitrary penalty on its account with the bank, which it claimed were contrary to the Central Bank of
Nigeria Monetary, Credit, Foreign Trade and Exchange Policy and regulations

The company in the suit, also alleged that being a company involved in the
construction of sub-stations and transmission lines for electricity
generation in Nigeria, therefore the effort of the Federal Government of
Nigeria towards ensuring steady power supply of electricity to Nigerians,
may be further jeopardized if the bank is allowed to go ahead and frustrate
the company from completing its on going power projects.
The engineering firm in its statement of claim filed before the court by
its lawyer, Mr. Sylva Ogwemoh (SAN), alleged that being an electrical
engineering construction company, it won the National Integrated Power
Project, (NIPP)132/contract for the construction of sub-stations and
Transmission lines in Awka, Anambra State; Alausa in Lagos and Oke-Aro in
Ogun State. Because of the huge amount of money required to execute the
projects, and in view of the cordial relationship existing between it and
the bank which has spans for over seventeen years, it transferred the
project financial transactions to the bank when the company was required to
establish a standby Dollar facility to finance back- to-back letters of
credit for foreign suppliers of off-shore equipment for National Integrated
Power Project (NIPP) lot 7 project.
The company stated that the standby letters of credit were initially
established for $6.5 million USD and later upgraded to $9 million USD. The
company and the bank also entered into other facilities denominated in
Nigerian Naira for the execution of rural electrification projects awarded
to the company in Ebonyi and Sokoto States. By the letter of credit
facilities executed by the company and Diamond bank, repayment of the
facility under the letters of credit transaction was to be derived from the
proceeds of contracts and documentary letter of credit from the Niger Delta
Power Holding Co. Project.
The engineering firm further averred that upon executing the letters of
Offer of credit Facilities, the bank deliberately delayed the disbursement
of release of funds for the execution of the projects for which the
facilities were sought and thereby caused the company to incur additional
costs and looses. Adding that despite deliberate failure of the bank in
promptly releasing funds after fulfillment of condition precedent to
disbursement, it still fulfilled its obligation to repay the facilities
until such a time the bank manipulated and frustrated the process with
excess and illegal charges computed and debited to its account.
It also averred that it became convinced of the manipulations of the bank
despite consistently repaying the loan to the point when the wrongful and
illegal charges and repayment eroded its working capital, the outstanding
payment on the account as alleged by the bank never got reduced but instead
kept rising astronomically. While The accused the bank of operating the
company’s account in violation of the extant laws and CBN policies,
directives and guideline regulating credit facilities transaction, while
the bank deliberately failed to provide the company with periodic statement
of account in order to ensure that the company did not immediately become
aware of the illegal charges and interests debited into its account.
The bank was alleged to have taken advantage of the fact that the company
was in dire need of fund to execute its capital Intensive projects and
therefore incorporated non-existent and illegal fees into the transaction
in bad faith.
The company averred that it had meetings with the the bank in which request
was made for the reversal of the spurious debt after a reconciliation of
the account by team of auditors of both parties, but this request was
rebuffed by the bank, rather the bank has been putting serious pressure on
the company compelling it to pay the disputed spurious and illegal charges
in the sum of N1,876,810393.75 computed indiscriminately into its accounts.
The company also alleged that, in an effort to free itself from the bank’s
frustrating and illegal acts, it appointed a company, Panafrican Capital
Plc, as its financial consultant to advise and mediate between it and the
bank, but all effort made by the said Panafrican Capital Plc to get the
bank to reverse the interests wrongfully debited by the bank was frustrated
by the bank.
Rather than the bank performing its fiduciary duty to the company, the bank
is making plans to hurriedly appoint receiver/manager who will take over
all assets of the company and ground the company by selling off all its
assets to recover non-existent debt which the bank has refused to submit
for reconciliation.
The company affirmed that it has paid a total sum of N2.3 billion in
repayment of the credit facilities it obtained from the bank therefore is
not in any way indebted to the bank.
Consequently, the company averred that being one of the companies in
Nigeria involved in the construction of sub-stations and transmission lines
for electricity generation and distribution in Nigeria, the effort of the
Federal Government of Nigeria will be further jeopardize if the bank is
allowed to go ahead and frustrate the plaintiff from completing its project
over unfounded and disputed claim.
The company while claiming the sum of N50 million as general damages, is
also urging the court to declare that all interest, charges, fees, costs
and penalty arbitrarily computed into its accounts by the bank contravene
CBN regulations therefore null and void.
The company is also seeking an order of the court declaring that the bank
is in breach of its obligation and fiduciary duty to the company.

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Diamond bank has not filed any defence in this case.

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