The Federal High Court, Abuja, has granted an interim freezing order against several accounts in Fair Money Micro-finance Bank Ltd, Palm Pay Limited, and Opay Digital Services Limited, mandating the organizations to reverse N139,630,000 credited to some of their customers and account holders as a result of a “system glitch” at TAJ Bank Ltd.
The order was made following a motion ex parte filed by Taj Bank Ltd and six of its customers on July 23, 2024, in suit number FHC/ABJ/CS/1018/2024 against the three organizations.
The Nigerian Interbank Settlement System Plc was listed as the fourth respondent.
Applicants’ Case
In their originating summons and motion ex parte exclusively, TAJ Bank’s legal team urged the court to hold that based on the Central Bank of Nigeria’s Regulatory Framework for Banking Verification (BVN) Operations and Watchlist for the Nigerian Banking Industry, October 2017, any money that illegally enters the accounts linked to the Bank Verification Numbers (BVN) of any institution’s account holders through suspicious debits and credits should be immediately returned to where the money was originally domiciled.
In its affidavit in support, Muhideen Olujinmi, Unit Head of the Investigation and Fraud Management Unit, Taj Bank Limited, deposed that one of the aims of the said Central Bank of Nigeria Regulations is to, among other things, ensure the effectiveness of Know Your Customer (KYC) principles and the promotion of a reliable payment system, as well as the reduction of incidences of fraud and safeguarding depositors’ funds to boost public confidence in the banking industry.
According to him, following a system glitch in Taj Bank’s server, certain individuals took advantage of the said glitch and unlawfully initiated multiple successful debit transactions and withdrew and transferred amounts of money from the accounts of the 2nd to 7th Plaintiffs into several accounts domiciled with the 1st, 2nd, and 3rd Respondents.
He insisted that the said funds were unlawfully settled into several accounts domiciled with the 1st, 2nd, and 3rd Respondents.
He stated further, “That certain individuals took advantage of this glitch to carry out several transactions exposing TAJ Bank and its customers to a humongous liability to the tune of N139,630,000.00 received in several accounts domiciled with FairMoney, Opay, and PalmPay.
“That upon realizing this glitch, an immediate complaint was made to the 1st to 4th Respondents, and the said Respondents placed a post-no-debit instruction (debit freeze) on the subject accounts to avoid further dissipation of the Plaintiffs’ money.”
He explained that if all the accounts listed in its exhibits belonging to the perpetrators of the alleged fraud are not urgently blocked or placed on no debit restriction and the amount unlawfully obtained is reversed, they will continue on a spending spree and further dissipation of monies belonging to customers of TAJ Bank.
He stated that based on relevant financial regulations, the financial platforms are empowered to block, freeze, and place a post-no-debit on all the account numbers listed to ensure the safeguard and security of depositors’ funds.
“The Plaintiffs have been greatly affected by the resultant effect of the system glitch, and unless this application is granted, the Plaintiffs will be further subjected to untoward hardship and dire financial loss,” he added.
TAJ Bank subsequently asked the court to order FairMoney, Opay, and PalmPay to reverse and refund the sum of N139,630,000.00 wrongfully debited from six of its customers’ accounts due to its system glitch, adding that they are wrongful and illicit debits transferred into the 1st-3rd Defendants’ customers’ accounts.
In its motion ex parte, TAJ Bank’s legal team sought an order of interim mareva injunction (freezing order) mandating the 1st, 2nd, and 3rd Respondents to comply with the CBN’s guidelines by restricting and reversing the sum illegally received and transferred from the account of its customers to the accounts of the identified beneficiaries respectively (following the system glitch in the 1st Plaintiff/Applicant’s server), pending the hearing and determination of the substantive suit.
Court’s Order
Ruling on the motion ex parte on July 26, 2024, Justice Peter Lifu granted the interim request from TAJ Bank, stating that the freezing order would be pending the hearing and determination of the motion.
As requested by TAJ, the judge also directed the 1st, 2nd, and 3rd Respondents to disclose on oath to the Court within 7 days of service of the order the amounts standing in the credit of the identified account holders of their institution.
The court also ordered TAJ Bank to enter into a fresh undertaking to protect or insure FairMoney, Opay, and PalmPay against any loss in the event of any emerging facts as to the inappropriateness of the interim orders granted.
The court then adjourned to August 12, 2024, for a hearing.
What Transpired in Court
At the resumed hearing on Monday, FairMoney, Opay, and PalmPay had no legal representation in court.
TAJ Bank’s lawyer, Rilwan Idris, told the judge that in compliance with his order, his clients have filed an affidavit to insure the respondents from any damage.
“That affidavit was filed on the 29th of July, 2024, and I can confirm that all the respondents have been served with the originating processes as well as the orders,” he said.
He added, however, that he was yet to receive any affidavit of compliance from any of the three respondents.
The registrar confirmed to the judge that the respondents were served with hearing notices but are yet to file their processes in response to the originating summons and orders.
The plaintiffs’ lawyer then urged the court to extend the lifespan of the order for the next seven days.
The judge made it clear that since the respondents did not show up as earlier directed by the court, the interim order will continue to last till the next adjourned date.
“We will give them another chance, if they don’t come, you move your motion, if it is meritorious, I will give it to you,” Lifu responded.
The court subsequently adjourned the hearing to September 30, 2024.
He said, “Court, the first to third respondents have been served with the processes and they have not deemed it fit to file any process or enter a (legal) appearance in this suit, I will bend backwards in the interest of justice and fair hearing to accommodate them by granting them further adjournment.
“I hereby invoke order 26, rule 9(1) of the Federal High Court rules 2019, to extend the order ex parte made in this suit on July 26, 2024, pending the hearing and determination of the motion on notice.”
While the Federal High Court has powers to preside over issues related to banks, parties will have to prove their side of the argument before the conclusion of the matter.