In a landmark ruling that reshapes the legal landscape of commercial banking in Nigeria, the Court of Appeal has put commercial banks on notice: blind compliance with law enforcement directives to freeze customer accounts is no longer a legal shield.
In NPG Event, Gardens & Parks Ltd v. Zenith Bank Plc, the appellate court held that a bank that freezes a customer’s account on the instruction of an investigative body—without verifying that the directive is backed by a valid court order—can be held jointly and severally liable with the agency for violating the customer’s fundamental rights.
The decision strips commercial financial institutions of their decades-long defense of acting as “mere conduits” for anti-graft agencies and security operations, re-establishing a core principle of property rights: An ongoing criminal investigation does not strip a citizen or corporation of their constitutional right to their property without judicial authorization.
┌─────────────────────────────────────────────────────────────────┐
│ OLD PRACTICE vs. NEW APPELLATE PRECEDENT │
├───────────────────────────────┬─────────────────────────────────┤
│ The "Conduit" Protocol │ The Judicial Order Standard │
├───────────────────────────────┼─────────────────────────────────┤
│ Law enforcement sends PND* │ Agency issues request │
│ Bank locks account on receipt │ Bank verifies active court order│
│ Customer left stranded │ No order? Bank refuses / limits │
│ Agency takes sole legal heat │ Joint liability for both │
└───────────────────────────────┴─────────────────────────────────┘
*Post No Debit
The Catalyst: Six Months in Financial Limbo
The dispute arose when Zenith Bank Plc placed a Post No Debit (PND) restriction on the account of NPG Event, Gardens & Parks Limited following a directive from the Economic and Financial Crimes Commission (EFCC). The restriction trapped the company’s funds for six months without a court order validating the freeze.
The Federal High Court originally dismissed the customer’s suit, accepting the bank’s argument that it was merely obeying a statutory investigative body. However, a three-member appellate panel comprising Justices Bola, Kwahar, and Onwosi overturned the lower court’s decision.
Counsel for the appellant successfully argued that as a regulated financial institution, a bank owes a fiduciary duty to understand the legal boundaries of a banker-customer relationship. It cannot blindly execute arbitrary requests that deprive customers of their proprietary rights.
[ Law Enforcement Agency / EFCC ]
│
▼
Issues Freeze/PND Request
│
├──────────────────────────────────────────┐
│ │
[ WITHOUT Court Order ] [ WITH Court Order ]
│ │
▼ ▼
Bank Executes Freezing Restriction Account Restricted Legally
│
▼
┌─────────────────────────────────────────┐
│ JOINT & SEVERAL LIABILITY APPLIED │
│ • Right to Property Violated (Sec 44) │
│ • Bank Liable for General Damages │
└─────────────────────────────────────────┘
The Court of Appeal rejected Zenith Bank’s defense of “presumed regularity,” ruling that banks are estopped from feigning ignorance of legal prerequisites. The court held that no bank or security agency possesses the authority to seize funds, place liens, or close accounts without a valid court order. Consequently, the court awarded ₦5,000,000 in general damages against Zenith Bank.
Critical judicial highlights
- The Death of “Passive Compliance”: Banks can no longer claim they are neutral parties following orders. They are legally expected to verify that law enforcement directives comply with the law before enforcing a PND.
- Restatement of Proprietary Rights: Grounded in Section 44 of the 1999 Constitution, the ruling affirms that an allegation of crime or an open investigation does not automatically suspend a customer’s right to enjoy their funds.
- Operational Overhaul for Risk & Compliance: Nigerian financial institutions must update their compliance workflows to mandate physical or legal proof of an active court order, alongside a strict tracking system for temporary freeze expiration dates.
By shifting financial risk directly onto the institutions holding the funds, the Court of Appeal has closed a long-standing loophole—ensuring that the constitutional right to property cannot be bypassed by an administrative memo.
