KUDA MICROFINANCE BANK LIMITED v. MRS. AMARACHI KENNETH BLESSING
COURT OF APPEAL
(EKITI DIVISION)
(AKEJU; LAMIDO; INYANG, JJ.CA)
FACTS
Mrs. Amarachi Kenneth Blessing (“the Respondent”) is a customer of Kuda Microfinance Bank Limited (“the Appellant”), a licensed financial institution operating within the regulatory framework of the Central Bank of Nigeria (CBN). On a particular day, the Respondent sought to access funds in her account by initiating a withdrawal transaction. To her dismay, she was unable to complete the transaction and subsequently discovered that the Appellant had placed a restriction on her account, effectively barring her from operating it. The Appellant justified its action by asserting that it had received a formal notification from Access Bank Plc indicating that the Respondent had been erroneously credited with the sum of ₦5,000,000.00. According to the Appellant, the notice from Access Bank was made in line with applicable CBN regulations and operational protocols for interbank rectification of erroneous credits. Acting upon this notification, the Appellant imposed a unilateral restriction on the Respondent’s account without first informing her or seeking judicial intervention.
Aggrieved by this action, the Respondent commenced an action against the Appellant by filing an originating motion at the Federal High Court sitting in Ado Ekiti. In her application, she contended that the restriction imposed by the Appellant was unlawful and constituted a violation of her fundamental right to own and enjoy property as guaranteed under Section 44 of the Constitution of the Federal Republic of Nigeria, 1999 (as amended). She further maintained that the Appellant lacked the legal authority to restrict access to her account absent a valid court order, especially in circumstances where no fraud or criminal conduct had been established against her. After considering the submissions of both parties and evaluating the legal issues presented, the trial court found in favour of the Respondent. The court held that the unilateral restriction of the Respondent’s account by the Appellant, without recourse to a court of competent jurisdiction, was unlawful and constituted an infringement of her constitutional rights.
Dissatisfied with the decision of the trial court, the Appellant filed an appeal at the Court of Appeal, seeking to overturn the judgment. One of the issues that was raised for determination was Whether the Appellant can place a restriction on the Respondent’s account without first obtaining a valid court order to the effect.
ARGUMENTS
Learned Counsel for the Appellant contended that the legal relationship between the Appellant and the Respondent is governed by a binding contract which sets out express terms and conditions regulating the operation of the Respondent’s account. Among these terms is a clause that empowers the Appellant to restrict or suspend access to a customer’s account upon the receipt of a complaint involving fraud or any suspicious activity. It was the Counsel’s argument that the activation of this contractual right, in the present case, cannot be construed as an infringement of the Respondent’s fundamental right to property under the Constitution. Rather, it was the lawful exercise of a power voluntarily agreed to by both parties at the time the account was opened. Counsel emphasised that once parties have willingly entered into a contract and consented to its terms, those terms become binding and enforceable. As such, the Appellant’s decision to restrict the account was in line with the operational safeguards contemplated in the contract and not an arbitrary act.
In addition, the Learned Counsel relied on the regulatory framework established by the Central Bank of Nigeria (CBN), particularly the guidelines and circulars issued pursuant to the Central Bank of Nigeria Act and the Banks and Other Financial Institutions Act, 2020. These regulations, according to Counsel, empower banks to place a no-debit restriction on any account where a credible fraud report has been made and do not require a court order as a precondition for such action. Counsel submitted that these regulations have the force of law and are binding on all banks operating within Nigeria. Moreover, the CBN guidelines are intended to protect the financial system from abuse and ensure swift response to fraudulent activities. Counsel argued that the trial court erred when it failed to address the validity and applicability of these contractual and regulatory provisions, despite the fact that they were central to the Appellant’s defence. By ignoring these material issues, the trial court, in Counsel’s view, arrived at an erroneous decision which ought to be set aside on appeal.
In response to the submissions made by the Appellant, Learned Counsel for the Respondent contended that neither the Central Bank of Nigeria (CBN) Regulations nor the Terms and Conditions cited by the Appellant confer upon it the unilateral authority to freeze or restrict the Respondent’s account in the absence of a valid court order. Counsel maintained that a careful examination of the CBN Regulations reveals no express provision authorising a financial institution to act solely on the basis of an unsubstantiated complaint from a third party. He further argued that, as contained in the Appellant’s counter-affidavit, Access Bank Plc merely lodged a complaint regarding an alleged erroneous transfer into the Respondent’s account without alleging that the transaction involved fraud or criminal conduct. Thus, the Appellant acted prematurely and without legal justification in placing a restriction on the Respondent’s account.
Learned Counsel emphasised that while the CBN Regulations made pursuant to the CBN Act indeed carry the force of law, such regulations also prescribe the proper procedures to be followed by financial institutions in handling suspected fraudulent transactions. He argued that where the law prescribes a particular mode for the exercise of power or performance of an act, any deviation from that prescribed mode is legally impermissible. In this instance, even if the Appellant’s internal Terms and Conditions address the issue of erroneous transactions, those provisions cannot override the binding and superior authority of the CBN Regulations. Moreover, the Respondent had provided a reasonable explanation regarding the origin of the funds in question—asserting that the money was derived from a legitimate business transaction. In view of this, Counsel submitted that the Appellant was duty-bound to exercise due diligence and independent verification rather than blindly acting on a third-party directive. Its failure to do so, and the subsequent restriction of the Respondent’s account, amounted to a clear infringement of her constitutionally guaranteed right to own and control property.
DECISION OF THE COURT
In resolving this issue, the Court of Appeal held that:
Banks and other financial institutions are permitted to place restrictions on a customer’s account in response to reports of fraud or suspicious activity without obtaining a court order, provided such powers are outlined in the terms and conditions agreed upon by the parties. This position is consistent with the provisions of the Central Bank of Nigeria’s Regulations and the Banks and Other Financial Institutions Act. The Court emphasized that these contractual and regulatory frameworks authorize precautionary restrictions in appropriate circumstances to ensure financial system integrity. The Court further clarified that the constitutional right to property is not absolute and may be temporarily limited, particularly in cases involving ongoing investigations. A temporary restriction placed on an account under suspicion of fraud does not amount to an unconstitutional deprivation of property.
Issue resolved in favour of the Appellant.
Ademola Adeshina, Esq., with M. O. Ishola, Esq. for the Appellant.
Ayodeji S. Aina, Esq., for the Respondent.
This summary is fully reported at (2025) 4 CLRN in association with ALP NG & Co.
See www.clrndirect.com ; www.alp.company.
