NIB Bank Appeals Order Not to Auction

Addis Fortune (Addis Ababa)

By Eden Sahle

2 May 2011

Nib International Bank (NIB) appealed against the decision of the Federal Supreme Court preventing it from auctioning a building to recover outstanding debt, on April 21, 2011.

NIB was ordered by the court on April 6, 2011, not to auction the nine-storey building located near Tourist Hotel on Adwa Street in Arat Kilo, Arada District, owned by Meketa Real Estate Plc.

Kebede Tesera, a prominent businessman serving a 20-year prison sentence, and Almaz Chaka, his wife, are the only shareholders in the company. He is the majority shareholder with shares worth 19.5 million Br in Meketa, which was established with a capital of 20 million Br in 2007.

Kebede had been found guilty by the Federal High Court, 11th Criminal Bench, on five counts of illegal banking, tax evasion, and money laundering. Along with the prison sentence, he was fined 165,000 Br.

Prosecutors of the Ethiopian Revenues and Customs Authority (ERCA) appealed against the sentence as they had wanted a heavier penalty. They requested a 25-year sentence and the confiscation of Kebede’s properties that had allegedly been amassed illegally.

On March 20, 2011, while the appeal hearing was pending at the Supreme Court, NIB announced a public auction to reclaim 55 million Br it had loaned Meketa for the construction of the building.

Meketa did not service the loan it took in December 2008/09, and interest on the owed amount increased the sum to 58.8 million Br.

The announcement of the auction that was to be held on April 19, was made before the court’s ruling on the appeal of the ERCA against Kebede’s sentence, which is expected on May 2. The ERCA appealed against the seizure of the building by the bank.

If the verdict is in favour of the tax authority, continuing the auction would deprive the government of its rightful money, the ERCA argued in its written appeal, submitted on April 1.

The appeal from the ERCA was heard by Supreme Court justices Belachew Ansheisso, Brehanu Amenew, and Kidir Aleye who froze the auction until the appeal case involving the major shareholder of the company owning the building was given by the court.

However NIB argued that the loan was granted prior to the criminal charges being instituted and the building was put up as collateral.

NIB is trying to recover the loan from the real estate company, not from Kebede who was not a debtor and had not put up any of his property as collateral for the loan, argued Getahun Worku, lawyer for NIB. The foreclosure does not concern Kebede, but Meketa, he argued in opposing the seizure.

The building was constructed with funds loaned from the bank, proving that the capital was obtained through legal means and unrelated to Kebede’s case, NIB claimed. Getahun argued in favour of the Federal High Court’s ruling that third parties’ rights must be respected before the ERCA could seize the building.

The bank, which has listed the building as collateral, claimed that, as a third party, it had the first right to reclaim the loan.

Meketa Real Estate should be allowed to participate in the litigation, argued Tagel Getahun, the company’s lawyer, in a written appeal on April 19.

Meketa is neither a part of the litigation nor has it been sued which does not raise the issue of seizure on the property, he claimed. The building is not the property of Kebede, the argued.

Tagel supported the high court’s ruling for the interest of third parties to be respected.

The tax authority was ordered by the judges to submit a written response.

Meketa’s request to be a part of the litigation was contested by the ERCA in its written response submitted on Friday, April 29, 2011. It should not be allowed to participate on the appeal stage, it argued.

The Federal Supreme Court is to rule on these matters before giving its final verdict on the case.

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