Ecobank Plc has been ordered to make good its obligation under the Advance Payment Guarantee No ENG/PH/GO394A as security for the release of the sum N629 million to Skye Bank Plc.

This order was handed down by the Bankers Committee which told Ecobank that the terms of the APG “was binding while No. 2 APG was unilateral and not binding. Therefore, it was not enforceable.”

Skye Bank’s decision to call in the APG, the Bankers Committee noted “was called within its validity period, there is no provision in place for extension of the guarantee.”

Skye Bank had reported Ecobank to the Bankers Committee claiming that “Ecobank had blatantly refused to hounour its terms under the guarantee as their customer had delivered only 222 generating sets out of the total number leaving a short fall of 532 generating sets valued at N442, 317, 150. 00. It is therefore apparent that Ecobank Plc was in breach of its obligation and does not desire to remedy the situation.”

Skye Bank had argued that on November 25, 2010, on the application of its customer, Messrs Teasons Power Product Company Limited, it relied on an Ecobank APG No ENG/PH/GO394A as security for the release of the sum N629, 280, 000.00 to their customer, PA-Simons Fabrications Limited for a sub-contract to supply and install 754 generating sets with installation materials in various local government areas of the country.

However, Ecobank in its defence had argued that “prior to Skye Bank’s demand for payment, by a letter dated February 3, 2011, Teasons had discharged Ecobank of liabilities up to N200million based on utilisation on the work plan between Teasons and the customer. By the terms of the APG No. 1, “Ecobank’s liability reduced in proportion to the extent of work done.”

Skye Bank therefore, called on the sub-committee to compel Ecobank Ltd to make good its obligation under the guarantee and refund Skye Bank the sum of N442, 317, 150.00 .

Ecobank said: “The APG expired on May 24, 2011. “However, prior to the expiration of the APG, Skye bank vide it’s letter dated May 11, 2011 made a demand on Ecobank for payment of the guaranteed sum on the ground of failure of the customer to perform the contract. The customer thereafter formally requested that Ecobank should extend the validity of the APG to accommodate the competition of the contract.

“Five months after the issuance of the supplemental Guarantee APG No. 2 and silence from Skye Bank on its demand dated May 11, 2011 on APG No. 1 having received APG No. 2, Skye Bank mischievously sought to make a further demand on APG No. 1 by a letter dated November 16, 2011.”

In response, Ecobank issued its letter dated December 8, 2011 wherein it stated that it was not liable to Skye Bank on the said APG No. 1 as claimed by Skye Bank, as APG No.1 had been superseded by APG No. 2 which expired on June 26, 2011.

Ecobank argued that “it would appear that Skye Bank forgot to make a demand on APG No. 2 and decided to feign ignorance of APG 2 and sought to revert to APG No. 1 which had ceased to exist.”

The bank alleged that “Skye Bank’s contention that it did not receive the APG No. 2 since it did not affect and did not seek confirmation as baseless as lack of confirmation by Ecobank did not affect validity of the guarantee, it was just added comfort.”

Source: http://monitor9ja.com/2015/08/ecobank-ordered-to-pay-skye-bank-n629m-apg/

I believe this thread is for the bankers. Too many banking terms, a layman reading this will only be like 'wetin concern bank with generators?!'

Okay