•As court indicts financial institution
The Lagos division of the Court of Appeal has ordered Keystone Bank Limited and three of its subsidiaries; PHB Capital and Trust Limited, PHB Insurance Limited, PHB Asset Management Limited to pay the sum of N4 million to a Limited Liability Company, MTECH Communications Plc, and five others namely; Sheri Williams, Chuka Nwobi, Chris Ubosi, Lateef Bello Osagie, and Security and Exchange Commission (SEC).
The Appellate Court took the decision in a unanimous judgment delivered by Justice, Onyekachi Aja Otisi, sequel to an appeal instituted against the decision of the Investment Security Tribunal.
MTECH Communications Plc which embarked on a private placement of its shares, alleged that Keystone Bank Limited, which had acted as the Issuer, refused to render its statement of balance and transfer proceeds of its said private placement exercise.
MTECH Communications Plc had issued a guarantee for the loans but maintained that Keystone Bank failed to avail MTECH Communications Plc of the proceeds of the private placement exercise.
But the bank insisted that it had issued loans to Sheri Williams, Chuka Nwobi, Chris Ubosi and Lateef Bello Osagie to buy additional shares in MTECH Communications Plc's private placement exercise, in respect of the loans, which were not backed by actual cash.
The 1st - 5th appellants; MTECH Communications Plc, Sheri Williams, Chika Nwobi, Chris Ubosi and Lateef Bello Osagie sued the 2nd - 5th respondents; Keystone Bank Limited, PHB Capital and Trust Limited, PHB Capital Insurance Limited, PHB Asset management in the Federal and State High Courts to determine the legal existence of the alleged loans and availability of the MTECH Communications Plc's funds.
The first appellant, MTECH Communications Plc through its lawyers also issued a complaint to SEC, alleging that the 2nd - 5th Respondents failed to grant its access to its Private Placement Proceeds Account.
The Enforcement and Compliance Department of the SEC carried out a preliminary investigation into the matter and upon review of the documents involved in the transactions, the appellants and the 2nd - 5th respondents were alleged to have violated certain provisions of the Investments and Securities Act (ISA) 2007, the SEC Rules and Regulations 2000 (as amended) and the Code of Conduct for Capital Market Operators and their employees.
Upon these findings by the SEC the appellants and the 2nd - 5th respondents were invited to appear before the Administrative Proceedings Committee (APC) of the SEC to explain why sanctions should not be imposed on them for the alleged violations and infractions.
On May 4, 2011, the APC came out with its findings and decisions in which both the appellants and the 2nd - 5th respondents were found liable in different proportions to the allegations against them.
Dissatisfied with the decision of the APC, the appellants appealed to the Investments and Securities Tribunal (IST) on the grounds contained in their Notice of Appeal filed on June 6, 2011, at the Registry of the lower Tribunal.
The lower Tribunal considered the appellants' appeal, and on December 10, 2012, delivered its judgment in which the appeal succeeded in part.
Further dissatisfied with the findings and decision of the lower Tribunal, the appellants lodged the instant appeal before the court by Notice of Appeal filed on March 10, 2017.
The parties filed briefs of argument, according to the rules of the court.
The amended appellants' brief was settled by E.O. Etomi, while the SEC's brief was settled by Chief Philip Ndubuisi Umeh (SAN).
The 1st - 5th cross-respondents and the cross-appellants had appeared before the APC of SEC, following a complaint by the 1st - 5th cross-respondents to the SEC.
At the end of the APC proceedings, both the respondents to cross-appeal and cross-appellants were found liable in different proportions to the allegations against them.
The 1st - 5th cross-respondents were dissatisfied with the decision of the APC and appealed to the IST, the lower Tribunal.
The appeal succeeded in part. The lower Tribunal set aside a portion of the APC's judgment and made orders against the cross-appellants, adding that the SEC was wrong in not finding the PHB Capital and Trust Limited liable under allegation 7 for violating Rule 43 of the SEC Rules and Regulations 2000 (as amended) when it unlawfully withheld the MTECH Communications Plc share register.
The PHB Capital and Trust Limited was ordered to pay a penalty of NI00,000.00; and that it shall release forthwith to MTECH Communications its register of shareholders.
The relevant rule under Schedule IX is Rule 1(iii) which states that all operators in the capital market shall not engage in any act that would adversely affect the general investing public's image of and confidence in the capital market.
The reason given by PHB Capital and Trust Limited for not releasing the shareholders register to the MTECH Communication is that it was instructed by the SEC to keep the Register.
The capacity of the SEC to issue such an instruction to the cross-appellant was not in question since the respondents did not raise such an issue. What is in issue, according to the lower Tribunal, was whether, in fact, such instruction was given to PHB Capital and Trust Limited.
It was contended that the lower Tribunal, from the evidence established before it, had the power to order the refund of monies unlawfully collected by the cross-appellant, even if such relief was not sought.
The court was urged to hold that the decision of the lower Tribunal was justified in law and that its discretion to do so was judiciously exercised.
The court was consequently prayed to dismiss the cross-appeal in its entirety and affirm the decision of the lower Tribunal.
Justice Otisi, in his declaration, posited that, "The record of appeal reveals that an administrative cost of proceedings of N4 million was awarded only against the petitioners, who were the 1st - 5th cross-respondents.
Tribunals or courts of law, by their special place in the adjudicatory process, are expected to hold the balance in an egalitarian way so that the parties and persons present at the proceedings will not accuse the body of partiality in any form or bias.
"If the administrative cost for proceedings were to be paid by all the parties, then impartiality may be discerned by a bystander.
"But the order for the sum of N4 million to be paid as administrative cost for the proceedings of the APC on September 25, 2010, by the 1st - 5th cross-respondents alone was not justifiable.
"On this basis, I will stand with the lower Tribunal that the sum of N4 million as administrative costs of the proceedings on September 25, 2010, awarded against the 1st-5th cross-respondents ought to be refunded to them.
"Appellant was a direct loss suffered by MTECH Communications. To this extent, it would not be remiss to order compensation in their favour. On this score, I also see no reason to disturb the conclusion of the lower Tribunal on it
"The lower Tribunal found the conduct of PHB Capital and Trust Limited to be contrary to Regulation 43 of the SEC Rules and Regulations 2000 (as amended)".
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