Nashtex International Ltd V. Habib Nig. Bank Ltd & Anor. (2007)

LawGlobal-Hub Lead Judgment Report

KUDIRAT MOTONMORI OLATOKUNBO KEKERE-EKUN, J.C.A.

By an ex-parte originating summons dated 26/10/04 the respondents herein as applicants applied to the High Court of Katsina State, Malumfashi Judicial Division for the following orders:

1. “AN ORDER confirming the appointment of Abbas A. Machika Esq., the 2nd Applicant herein, of the Law Firm of A.A. Machika & Co. of No. 33 Yahaya Madaki Way, Katsina, as the Receiver/Manager to manage the undertakings, goodwill, properties and assets of the Respondent pursuant to his appointment by Deed of Appointment dated 19th October, 2004, made under the Mortgage Debenture dated 3rd March, 1998, and duly registered at the Corporate Affairs Commission, and also registered in the Katsina State Lands Registry as Instrument No: KTR 107 at page 107 of Vol. 14 in the register of lands.
2. AN ORDER directing the Receiver to take such steps as may be necessary to realize the assets of the Respondent with a view to paying its indebtedness to the 1st Applicant.
3. AN ORDER of this Honourable Court directing the Commissioner of Police, Katsina State Police Command, his nominee or any police officer shall assist (sic) the 2nd Applicant in the exercise of his duties as Receiver/Manager of the Respondent.
4. AND for such further orders (sic) this Honourable Court may deem fit to make in the circumstances.”

The originating summons was supported by a 17-paragraph affidavit and a 16-paragraph affidavit of urgency. The court granted the orders sought on 29/10/04. The orders were executed on 30/10/04. It was on this date that the appellant became aware of the proceedings for the first time. On 5/11/04 the appellant filed a motion on notice seeking the following reliefs:

1. “An order setting aside the order of the lower court dated 29th day of October, 2004 granted the respondents.
2. An order setting aside the execution of the order of the lower court dated 29th day of October, 2004 carried out on the 30th October, 2004.
3. An order of the lower court re-opening the applicant’s factory closed based on the order of this Court dated 29th October, 2004.
4. Any other order or further orders as this Honourable Court may deem fit to make in the circumstances.”

The grounds for the application contained in the schedule thereto are as follows:

1. “This Honourable Court lacks requisite jurisdiction to grant the Court order dated the 29th day of October, 2004 in favour of the respondent.
2. This suit is an abuse of Court process in Suit No. K/340/2003 pending before Kano State High Court of Justice.”

The learned trial Judge heard submissions from learned counsel to the parties and in a considered ruling delivered on 9/12/04 dismissed the application. The appellants were dissatisfied with the ruling and appealed to this court by their notice of appeal dated 10/12/04 containing three grounds of appeal. The grounds of appeal are as follows:

1. The learned trial Judge erred in law when he held that

“This court is a court of competent jurisdiction to give the order of the court dated 29th October, 2004″.

PARTICULARS OF ERROR

a. By the combined effect of Sections 251(1) (e) of the 1999 Constitution, Section 7(1) (c) of the Federal High Court Act Cap. 134 1990 and Section 650 (1) of the Companies and Allied Matters Act, 1990, only the Federal High Court is vested with jurisdiction to give the order of the court dated 29th day of October, 2004.

b. The court order dated 29th October, 2004 does not only confirm the appointment of the 2nd respondent as receiver ‘manager but also clothed him with power to take such steps as may be necessary to realize the assets of the respondent with a view to paying its indebtedness to the 1st respondent.

2. The learned trial Judge erred in law when he held that the appellant has failed to establish an abuse of judicial process.

PARTICULARS OF ERROR

a. The appellant filed a 12 paragraphs affidavit to support its motion on notice dated 5th November, 2004 together with 4 Exhibits tagged Exhibits A to D.

b. The respondents did not file any counter affidavit to the said affidavit in opposition of the appellant’s said motion.

3. The ruling is against the weight of evidence placed before the court.”

In its brief of argument dated 15/11/05 and deemed filed on 13/2/06 the appellant formulated two issues for determination. They are:

1. Whether by the combined effects of Sections 251(1)(e) of the 1999 Constitution of the Federal Republic of Nigeria, Section 7 (1) (c) of the Federal High Court Act Cap. 134 Laws of the Federation 1990 and Section 650(1) of the Companies and Allied Matters Act, Laws of the Federation 1990 the learned trial Judge was right to have held that “This court is a court of competent jurisdiction to give the order of the court dated 29th October, 2004”. (Ground 1)
2. Whether having regard to the affidavit evidence placed before the lower court together with the exhibits attached the lower court was right to have held that the appellant failed to establish an abuse of judicial process by the respondents. (Grounds 2 & 3)

The respondents filed a joint brief of argument dated 30/3/06 and filed on 12/4/06. They adopted the issues formulated by the appellant.

At the hearing of the appeal on 27/2/07, Mr. Sunday Olowomoran learned counsel for the appellant adopted the appellant’s brief and urged us to allow the appeal. Mr. C.O. Enock-Lucky, learned counsel for the respondents adopted the respondents’ brief and urged us to dismiss the appeal with substantial costs.

With regard to the first issue, learned counsel for the appellant submitted that by the combined effect of Sections 251(1)(e) of the 1999 Constitution, Section 7 (1)(c) of the Federal High Court Act and Section 650 (1) of the Companies and Allied Matters Act (CAMA), the Federal High Court has exclusive jurisdiction to entertain issues in respect of causes and matters arising from the operation of CAMA and any other common law relating to the operation of companies. He submitted that the respondents’ ex-parte application before the trial court was brought pursuant to Sections 209, 390, 393(1), (3) and (4) of CAMA and Order 6 Rules 2 and 10 of the High Court of Katsina State (Civil Procedure) Rules. He relied on the case of:

Ceramic Manufacturing Nig. Plc. vs Nigeria Industrial Development Bank (1999) 11 NWLR (627) 383 at 390-396 and Hon. Minister for Works & Housing vs Tomas Nig. Ltd. & Ors . (2002) 2 NWLR (752) 740 at 776-777 H-B.

On the second issue for determination, learned counsel for the appellant enumerated the factors that would give rise to abuse of court process as laid down by the Ilorin Division of this court in the case of: Alhaji Ramoni Opekun vs Alhaji Alidu Afolabi Sadiq & Ors. (2003) 5 NWLR (814) 475 at 486 B-F. He also relied on: Saraki vs Kotoye (1992) 9 NWLR (264) 156 at 188. He submitted that annexed to the affidavit in support of its motion dated 5/10/04 seeking to set aside the orders made on 29/10/04 were four exhibits marked A-D respectively comprising the writ of summons in Suit no. K/340/2003: Nashtex International Nigeria Ltd. vs Habib Nigeria Bank Ltd., an order made on 30/5/03 in the said suit, a memorandum of appearance filed by the law firm of M.A. Bello & Co. on behalf of Habib Nigeria Bank Ltd. and an application for stay of proceedings filed by M.A. Bello & Co. He submitted that as the respondents did not file a counter affidavit to the motion the averments contained therein ought to have been accepted as the correct version of events. He relied on: Zest News Ltd. vs Senator Mahmud Waziri; (2003) FWLR (186) 656 at 666 0-1;. He submitted that the learned trial judge erred in law when he held that the appellant failed to establish abuse of process.

In response to the submissions made on behalf of the appellant, learned counsel for the respondents submitted that in making the order of 29/10/04 the lower court acted within its jurisdiction under Section 272 of the 1999 Constitution, as it was only giving effect to the legal mortgage debenture executed between the appellant and the 1st respondent. He submitted that the legal mortgage debenture is a contract agreement, which does not relate to the operations and/or management of a company to warrant the application of the provisions of Section 251(1)(e) of the Constitution, Section 7 (1) (c) of the Federal High Court Act or Section 650(1) of CAMA. He relied on: Tanarewa (Nig.) Ltd. vs Plastifarm Ltd. (2003) 14 NWLR (840) 355 at 379-380 G-A and De Lluch vs S.B.N. Ltd. (2003) 15 NWLR (842) 1 at 21- 23. He submitted that the cases of Ceramic Manufacturing Nig. Plc. vs. Nigeria Industrial Development Bank (supra) and Hon. Minister for Works & Housing vs Tomas Nig. Ltd. & Ors. (supra) relied on by learned counsel for the appellant are not applicable to the facts of the instant appeal.

With regard to the second issue for determination, learned counsel for the respondents submitted that merely annexing court processes to the supporting affidavit is insufficient to satisfy the court of the existence of a pending suit. He submitted that the record of proceedings ought to have been exhibited. He relied on:

Ogbu vs Ani (1994) 7-8 SCNJ (Part II) 363 at 369 and Alibe vs Yaro (2002) 1 NWLR (747) 238 at 266 E-F.

He submitted further that assuming, without conceding, that there was a subsisting suit between the appellant and the 1st respondent before the Kana State High Court, the cause of action and reliefs sought in the two suits are different. He noted that while the suit before the Kano State High Court was for a declaration that the plaintiff’s accounts with the Kano and Malumfashi branches of the defendant had been illegally overcharged and wrongly debited, the suit before the Malumfashi division of the Katsina State High Court was for an order confirming the appointment of A.A. Machika & Co. as the receiver/manager of the appellant. He relied on: Fasheun Motors Ltd. vs U.B.A. Ltd. (2000) 1 NWLR (640) 190 at 198 B-D.

He observed that the order of the Kano State High Court made on 30/5/03 in Suit no. K/340/2003 (annexed to the appellant’s affidavit in support of the motion dated 5/11/04) was only to last till 30/6/03. He argued that the appellant failed to entertain a cause or matter the entire process would be an exercise in futility, for the proceedings are a nullity ab initio. See: Madukolu vs Nkemdilim (1962) 1 ALL NLR 587 at 594; Skenconsult (Nig.) Ltd. vs Ukey (1981) 1 S.C. 6 at 62; Inakolu vs. Adeleke (2007) 4 NWLR (1025) 427 at 588 F.

To determine whether or not the court has jurisdiction to entertain an action, the processes to be considered by the court are the processes filed by the plaintiff or applicant i.e, the writ of summons and statement of claim, or as in the present case the originating summons and its supporting affidavit. See: Inakoju vs Adeleke (supra); Elabanjo vs Dawodu (2006) 15 NWLR (1001) 76; Adeyemi vs Opeyori (1976) 9-10 SC 31; Tukur vs Governor Gongola State (1989) 4 NWLR (111) 517. The prayers sought on the originating summons have been reproduced earlier in this judgment. The relevant paragraphs of the affidavit in support are paragraphs 3-16 wherein it is averred as follows:

3. The 1st Applicant is limited liability company incorporated to carry out banking business in Nigeria with its head office at Kaduna, while the 2nd Applicant is the Principal Partner of A.A. MACHIKA & CO whose office is at No. 33 Yahaya Madaki Way Katsina.
4. The Respondent is a limited liability company registered under the laws of Nigeria, with its head office in Kano while its ginnery is at Malumfashi, Katsina State.
5. That in 1998 the 1st Applicant, with statutory Governor’s consent, advanced a sum of N50,000.00 as loan to the Respondent secured by a Deed of Mortgage Debenture dated 3rd March, 1998, which was duly registered at the CAC and at the State’s Land Registry, Katsina. The copy of the Certificate of Deed of Mortgage Debenture issued by the CAC are hereby annexed as Exhibits 1, 2 and 3 respectively.
6. That by the aforementioned Deed of Mortgage Debenture a charge was created over all the Respondent’s undertaking, fixed and floating assets, good will and properties in favour of the 1st Applicant.
7. That by clause 5 of Exhibit 2 herein the Respondent covenants to pay the principal sum or any part thereof together with accruing interests and bank charges outstanding on the loan.
8. That by clause 6 of Exhibit 2 herein it is provided that anytime after the credit facilities secured by floating and fixed assets of the Respondents becomes payable the 1st Applicant shall exercise its statutory power to appoint a Receiver/manager of the mortgaged assets.
9. The Respondent had so far utilized the credit facility and as at 30th September, 2004 the sum of N106,603,790 being the principal sum and interests is still outstanding against the Respondent.
10. That for so many years now the 1st Applicant had persistently and consistently demanded from the Respondent the settlement of the said outstanding liability to which the Respondent had not obliged.
11. That the Respondent had not only refused to honour its obligation under the said Exhibit 2 but now resorts to conduct that would dismantle its fixed assets thereby jeopardizing the investments of the 1st Applicant therein.
12. That it is in order to safe guard its interest as well as take steps to recover the outstanding debt the 1st Applicant by Deed of Appointment dated 19th October, 2004 appointed the 2nd Applicant as Receiver/Manager over the said assets, undertakings and goodwill of the Respondent. The said deed is hereby annexed as Exhibit 4.
13. That the Applicants are desirous of having the appointment of the Receiver/Manager confirmed by this Honourable Court, and that directions be given to the 2nd Applicant as to the performance of his duty as Receiver/Manager.
14. That I am apprehensive that while taking possession of the properties of the Respondent by the 2nd Applicant for the purpose of realizing the assets and liquidate the credit facilities which he is lawfully entitled to do may be resisted by force leading to a breakdown of law and order, breach of public peace, and valuable assets which the 1st Applicant looks upon for payment may be dissipated.
15. That I am apprehensive if this application is not urgently heard and determined several valuable documents and machineries relating to the affairs of the company which will be vital for the duties of the 2nd Applicant as Receiver/Manager may be carted away by the Respondent.
16. That it is in the interest of justice to grant this application. (Emphasis supplied)

Section 251(1) (e) of the Constitution, Section 7 (1)(c) of the Federal High Court Act and Section 650 (1) of CAMA provide as follows:

Section 251 (1) (e) of the 1999 Constitution:

“251(1) Notwithstanding anything to the contrary contained in this Constitution and in addition to any other jurisdiction as may be conferred upon it by an Act of the National Assembly, the Federal High Court shall have and exercise jurisdiction to the exclusion of any other court in civil causes and matters –

(e) arising from the operation of the Companies and Allied Matters Act or any other enactment replacing that Act or regulating the operation of companies incorporated under the Companies and Allied Matters Act;”

Section 7(1) (c) of the Federal High Court Act 1990:

“7(1) The Court shall have and exercise jurisdiction in civil Causes and matters –

(c) arising from-

(i) the operation of the Companies and Allied Matters Act or any other enactment regulating the operation of companies incorporated under the Companies and Allied Matters Act.”

Section 650 (1) of the companies and Allied Matters Act:

“650 (1) “Court” or “the Court” used in relation to a company means the Federal High Court, and to the extent to which application may be made to it as court, includes the Court of Appeal and the Supreme Court of Nigeria,”

The common thread that runs through the various provisions reproduced above is that to invoke the exclusive jurisdiction conferred on the Federal High Court, the cause or matter must arise from the operation of the Companies and Allied Matters Act or any other enactment regulating the operation of companies incorporated under CAMA.

It is clear particularly from paragraphs 12, 13 and 14 of the affidavit in support that what the applicant is seeking is a confirmation of the appointment of A. A. Machika & Co. as receiver/manager of the respondent, which had previously been done by the applicant pursuant to the terms of the mortgage debenture agreement between the applicant and the 1st respondent. The issue that arises in this appeal is whether the High Court of Katsina State, Malumfashi Division, has jurisdiction to grant the prayers. In other words, does the confirmation of the appointment of a receiver/manager arise from the operation of the Companies and Allied Matters Act such as to confer jurisdiction on the Federal High Court?

The statutory powers to appoint a receiver and/or manager of a company incorporated under CAMA are contained in Sections 209 and 389 of the Act. A receiver may be appointed out of court pursuant to Section 209 (1) (a)-(d) of the Act or by the court pursuant to Section 389 (1) (a) & (b) thereof. In respect of debentures a receiver may be appointed out of court. Where the court makes the appointment it is more general and is intended to protect the interests of creditors and other persons interested in the security and property of the company. Where a receiver is appointed out of court he may, pursuant to Section 391 of CAMA, apply to the court for directions in relation to any particular matter arising in connection with the performance of his function. See: Company Law and Practice in Nigeria Vol. 1 by Han. Dr. J. Olakunle Oraio (Lexis-Nexis Butteworths) Chapter 25 at pages 414 and 418.

From the averments in paragraphs 5 and 12 of the affidavit in support and exhibits 1, 2 and 3 annexed thereto, the 2nd respondent was appointed receiver/manager pursuant to the provisions of Section 209(1) of CAMA.

Learned counsel for the respondents at pages 4-5 paragraph 3.5 of his brief argued that the Deed of Mortgage Debenture was a contract agreement between the appellant and the 1st respondent, which does not relate to the operations and/or management of the company and that in making the order of 29/10/04 the court below was merely giving effect to the contract between the parties. This position in my respectful view is not tenable.

Section 209 (1) of CAMA provides:

“209(1) At any time after a debenture holder or a class of debenture holders becomes entitled to realise his of their security, a receiver of any assets subject to a mortgage, charge or security in favour of the class of debenture holders or the trustee of the covering debenture trust deed or any other person may be appointed by –

(a) that trustee:

(b) the debenture holders of the same class containing power to appoint, or

(c) debenture holders having more than one-half of the total amount owing in respect of all the debentures of the same class; or

(d) the court on the application of the trustee,”

Section 209 of the Act relates to an aspect of the operations and management of a company by providing for the appointment of a receiver, which allows a debenture holder to realise his security or preserve the assets of the company.

Section 393 (1) and (2) of the Act provides for the duties and powers of receivers and managers as follows:

“393 (1) A person appointed a receiver of any property of the company shall, subject to the rights of prior encumbrances take possession of and protect the property, receive the rents and profits and discharge all outgoings in respect of it and realise the security for the benefit of those on whose behalf he is appointed, but unless appointed manager he shall not have power to carry out any business or undertaking.

(2) A person appointed manager of the whole or any part of the undertaking of a company shall manage the same with a view to the beneficial realisation of the security of those on whose behalf he is appointed.”

The appointment of a receiver on application before the court to confirm the appointment of a receiver clearly arises from the operation of CAMA. It therefore comes within the purview of Section 251(1) (e) of the 1999 Constitution and Section 7(1) (c) of the Federal High Court Act. In the circumstance the Federal High Court has exclusive jurisdiction to make such orders. Once appointed however, it is not every act emanating from the exercise of the receiver’s powers or every matter affecting the company under receivership that would fall within the exclusive jurisdiction of the Federal High Court. This is the purport of the decision in: Tanarewa (Nig.) Ltd. vs Plastifarm Ltd. (supra), which was relied on heavily by learned counsel for the respondents. Indeed Salami JCA at pages 375-376 E-C (supra) succinctly stated the legal position thus:

“The implication of Section 251(1) (e) of CAMA is that in an action involving regulating, running or management or control of companies the-Federal High Court would be vested with jurisdiction,

.. an action could be maintained and entertained in matters affecting formation or winding-up of a company, memorandum and articles of association; shares and share holding; appointment, removal or change or alteration of director-s It also includes appointment of receiver and his various obligations such as giving notice of his appointment, filing statements of accounts with the Corporate Affairs Commission. These are contained in the various provisions of the Companies Act Cap. 59, particularly Sections 393, 396, 398 and 399. These provisions control the conduct of a receiver and any claim arising from a breach thereof or enforcing right thereunder will qualify as an action arising from the operation of the said Act or regulation.” (Words in brackets and emphasis supplied)

In Tanarewa’s case (supra) the cause of action arose from a contract of supply. It was held that it did not translate into a matter arising from the operation of the Companies and Allied Matters Act merely because the company in breach of the contract was a company in receivership,

Having carefully examined the originating summons and the affidavit in support it is my respectful view that pursuant to section 251(1) (e) of the 1999 Constitution and Section 7 (1) (c) of the Federal High Court Act 1990 and Section 650(1) of CAMA the Federal High Court has exclusive jurisdiction to entertain the matter. Accordingly the High Court of Katsina-State, Malumfashi division lacked jurisdiction to entertain the suit. The first issue is therefore resolved in favour of the appellant against the respondents.

Having resolved the first issue in favour of the appellant, it is unnecessary to consider the second issue for determination. It is hereby struck out.

In conclusion, the appeal succeeds and is hereby allowed.The ruling of the High Court of Katsina State, Malumfashi division in Suit No. KTH/MF/15M/04 delivered on 9/12/04 is hereby set aside. The entire suit NO.KTH/MF/15M/04 is hereby struck out for lack of jurisdiction.

Costs of N5,000.00 are awarded in favour of the appellant against the respondents.

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Other Citations: (2007)LCN/2394(CA)