Having read the article written by Abubakar D. Sani titled
‘Recovering Bank Debts: Is AMCON a Meddlesome
Interloper?’(Published at recovering-bank-debts-is-amcon-a-meddlesome-interloper-by-abubakar-d-sani-esq/[1] ) I
consider it instructive to address certain submissions made by the
learned commentator on the position of AMCON in relation to
recovering non-performing loans of banks.
The learned commentator had argued in his article under
reference that Section 33-35 of the Asset Management Corporation of
Nigeria Act 2010 constitutes a radical revision of the hallowed
doctrine of privity of contract and the presumption against
retrospectivity of legislation vis-à-vis vested rights. The crux of
his argument is that the said Sections depart from the established
principle of privity of contract by empowering AMCON to step into
the shoes of banks by assuming their rights vis-à-vis their
customers. He cited judicial authorities to the effect that a
statute does not retrospectively abrogate vested rights or take
away proprietary rights without making provision for compensation
and submitted that the AMCON Act to the extent that it purports to
abrogate or take away vested rights of bank customers already
existing before the commencement of the Act without providing
compensation is ultra vires and invalid. The learned commentator
finally submitted that the Act can only apply to transactions made
between Banks and their customers after the commencement of the
Act.
Respectfully, the above submissions of the learned commentator
are fundamentally wrong in law and borne out of shallow
appreciation of the doctrine of privity of contract, and the
practice of recovering non-performing loans of banks under the
AMCON Act.
Firstly, whilst it trite that by the doctrine of privity of
contract, a stranger cannot enquire into a contract or enforce
same, it is noteworthy that the doctrine is not without exceptions.
One of the notorious exceptions to the doctrine of privity of
contract which is relevant to this discuss is ‘Assignment of right
in a contract’. By assignment, a party to contract transfers all
their rights, interest and liability to another and by so doing
assigns to that other the right to sue. It is hornbook law that
where a valid loan is assigned to another, the assignee acquires
all the rights, title and interest of the assignor and may sue for,
collect and receive any lawful interest provided for in the loan
agreement. Please see Bateman v. Liggett (1979) 279 N.W 2d
137, Beloxxi & Co Ltd & Anor v. South Trust Bank & Ors
(2014) LPELR-223388(CA).
By and large, the relationship between the eligible financial
institutions (the banks) and AMCON is purely contractual whereby
the banks sell off the non-performing loans to AMCON and transfers
all their rights and interests under the loan agreement with the
customers to AMCON, thereby empowering AMCON to take all steps
necessary including instituting an action against the defaulting
debtor to recover the said debt. This clearly falls within the
aforementioned exception to the doctrine of privity of contract and
is not in any way an innovation of Section 35 of the AMCON Act. It
is noteworthy that AMCON purchases these loans from the Banks
thereby stepping into the position of the Bank in respect of the
said loan. See Section 25 and 26 of the Act. Usually a loan
purchase agreement is executed between the banks and AMCON
evidencing the sale of the loans to AMCON. See section 32 of the
Act.
Notably, Mr. Abubakar D. Sani wrongly applied the cases of
Ojokolobo v. Alamu (1987) 18 NSCC pt. II pg. 1003 and
Afolabi v. Governor of Oyo state (1985) 2 NSCC pt. II pg.
1151 in support of his argument on the invalidity of the
AMCON Act to the extent that it purports to apply retrospectively
to transactions made between the banks and their customers before
the commencement of the Act. Those cases were rather overstretched
by the learned commentator as they do not support his argument.
Further his argument on that point is fundamentally untenable. Any
person whether Juristic or natural can purchase non-performing
loans of banks and therefore acquire the rights and
liabilities of that party and proceed to recover the loan from the
debtor, even though they were not parties to the contract. This
agelong principle of law was only codified and given statutory
imprimatur for the purpose of enabling AMCON to efficiently resolve
non-performing loans of banks.
Finally, the AMCON Act does not take away any
‘vested/proprietary rights of bank customers’ as wrongly conceived
by the learned commentator. A customer of a bank who disputes a
loan sold to AMCON reserves the right institute an action either
against the Bank or AMCON challenging the said debt.
Written By Chimezie Onuzulike