Battle for the soul of Arik Air

The March 31, 2023 judgment of the Federal High Court in Lagos which stopped the transfer of Arik Air assets by the Assets Management Corporation of Nigeria (AMCON) to another entity has further raised questions about the propriety of AMCON’s intervention six years ago. It was more than six years when the federal government, through […]

The March 31, 2023 judgment of the Federal High Court in Lagos which stopped the transfer of Arik Air assets by the Assets Management Corporation of Nigeria (AMCON) to another entity has further raised questions about the propriety of AMCON’s intervention six years ago.

It was more than six years when the federal government, through AMCON, took over the management of Nigeria’s largest airline in West and Central Africa, founded by Sir Johnson Arumemi-Ikhide.

In its heydays, the airline was seen as the flag carrier of Nigeria, opening more routes and expanding its fleet in a manner never imagined. Arik at the time was the elite airline of choice and it maintained a history of safe operations.

However, the takeover of the airline in 2017 by AMCON was hinged on its huge indebtedness to commercial banks and AMCON as the statutory debt recovery arm of the government intervened by sacking the management of the airline and appointing a receiver-manager to manage the day-to-day operations of the once flourishing airline.

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From February 2017 when AMCON took over the management of the airline, there have been mixed feelings by stakeholders even as Arik Air stakeholders at the time challenged the power of the government to take over the airline’s management.

However the current struggle was triggered by the attempt by AMCON to convert some of Arik Air’s aircraft to another entity, NG Eagle established by the commission.

The NG Eagle was a strategic divestment aviation entity floated by AMCON as part of the debt recovery measure. AMCON did this by converting at least three aircraft in the fleet of Arik Air into that of NG Eagles.

It would be recalled that NG Eagle, floated by AMCON, ought to have commenced operation before the Nigeria Civil Aviation Authority (NCAA) withheld the Air Operator’s Certificate (AOC) of the airline.

Daily Trust reports that the entity christened, ‘Nigeria Eagle’ was incorporated on July 11, 2019 with share capital of 1,000,000,000.

The shareholders are: AMCON with 499,999,999, while Omokhide Kamilu Alaba has one unit of share.

However in December 2021, the founder of Arik Air and his wife, Mary Arumemi Ikhide (plaintiffs) filed an originating motion and prayed the court that the duty imposed on the receiver-manager, Kamilu Omokhide (first defendant) by Section 553 of the CAMA 2020 to act in the best interest of Arik Air Limited as a whole, includes the duty to act in the best interest of the plaintiffs (Arumemi and Mary Ikhide) as members of Arik Air Limited.

The plaintiffs averred that the transfer of Arik Air Limited’s assets to NG Eagle (third defendant) and Super Bravo Limited (fifth defendant) “was done in bad faith and a violation of the Omokhide’s (first defendant) fiduciary duty to Arik Air Limited as imposed by Section 553 of the CAMA 2020”.

Other defendants in the suit are AMCON (second defendant); and Nigerian Civil Aviation Authority (4th defendant).

The plaintiffs further sought an order directing the 1st and 2nd defendants to allow the directors and shareholders of Arik Air Ltd “unfettered access to their offices, premises of the plaintiff, facilities and staff required for the discharge of their functions.”

Similarly, Arumemi-Ikhide prayed the court to direct the 1st and 2nd defendants to render accounts and/or deliver returns to the plaintiffs covering the entire period of the receivership over Arik Air Limited within 14 days of the making of the order.

Justice Ambrose Lewis-Allagoa in his ruling granted most of the prayers of Arik Air founder including “unfettered access” to the premises. The court also directed AMCON to render an account of its stewardship in the next 14 days.

But the judgment recognises the power of AMCON to appoint a receiver-manager in line with Section 34 (6) of the AMCON Act. “It is therefore clear that in the exercise of AMCON (2nd defendants) power under Section 48 (1) of the AMCON Act to appoint a receiver-manager 1st defendant, by the provisions of Section 34 (6) of the AMCON Act, the exercise of that power cannot be challenged.”

On the question of access to the promises, the judge said: “From the above cases, it is therefore clear that the powers of the first defendant do not extend to the refusal and interference with access into the premises of Arik Air Limited but management of Arik Air Limited particularly as it relates to its properties and other powers under the charge.”

Armed with the court verdict, Sir Arumemi-Ikhide arrived at the premises of Arik Air headquarters at the Murtala Muhammed Airport (MMA), Lagos on Tuesday, with the hope of gaining access to his office but he was stopped at the gate by the security guards who said they were acting on order from above.

In the ensuing conversation, the chief security officer, identified as Tom-West, said he was only answerable to the receiver-manager as one of his employees.

He said, “The receiver manager gave an instruction not to allow you in. I know there is a court order which I read in the news.

“We cannot give you access to get into the compound. This is the instruction from above.

I’m very sorry that I’m keeping you under the sun. We have the directive to deny you access.  I’m obliged to respect the directive from the receiver manager.”

Following the decision of the CSO not to grant access to him, the Arik Air founder proceeded to the MMA Domestic Airport Police Divisional Headquarters to make a formal report.

He said as a law-abiding citizen, he decided to toe the lawful path by quietly leaving the premises after he was denied access despite the court order.

He also said there was no evidence to show that the receiver-manager had appealed the judgment because the court was on vacation.

In his report to the police, he wrote: “The court having affirmed that notwithstanding the appointment of a receiver manager, that the organs of Arik Air remain intact and those organs such as the board and shareholders must be allowed to function. It is because of that, I, being chairman of the board, came to the office today.

“Being aware of the service of the order of court on the company and having met the management led by Capt. Roy Ilegbodu (CEO) on Wednesday 4th April 2023 with whom I discussed the orders made by the court and our intentions to adhere strictly to the orders of court to be given office spaces. We both agreed that the orders of the court must be obeyed.

“We agreed that I and my team will resume this morning, 11th April 2023. To my greatest surprise and shock, I was barred entry by the CSO, Mr Tom West, who claimed that he had strict instructions from the Receiver Manager, Mr Kamilu Omokhide, to deny me and my team access contrary to the orders of court…”

But the receiver manager on his part said he was not aware that the judgment granted the Arik Air founder access to the premises even as he insisted that an appeal had been filed in addition to a stay of execution on the verdict.

He said, “He (Arumemi-Ikhide) cannot take the laws into his hand. He’s not the executioner of the judgment. If he believes that we have infringed on his right, I think he can go to court, but I assure you that everything we have done was done lawfully and in the best interest of Arik Air and receivership.

“While it is not in my place to determine whether a judgment is right or wrong, I must tell you that many people in the insolvency practice in Nigeria are surprised at the judgment and that is why AMCON has also exercised its right to appeal and to file appropriate stay of execution.”

While both parties are expected to return to court, stakeholders called for a mutually agreeable solution to ensure the airline keeps running.

“The challenge with disputes is no one is ever sure how it may snowball and who it might consume. Hope the parties can find a mutually agreeable solution before it descends further and blows up in many faces,” said an aviation analyst, Babatunde Adeniji.

Mr Olumide Ohunayo, another aviation stakeholder said the struggle was due to the conflict in judicial interpretation.

“While Arik Air got an injunction, AMCON is holding on to appeal asking it for stay of execution. So if a man has filed a stay of execution, do you during that period continue to obey the judgment of the court or you wait for the appeal? This is where the lacuna is.

“Generally I am not impressed with the performance of AMCON since they took over Arik and there is a need to do an audit and we need a full report of what they have been able to achieve with the assets of Arik since they took over.

“The owner has been very patient. He has never stepped into the premises, he has complied with the law until this recent judgment,” he said.

As the parties return to the judiciary for further interpretation and adjudication of the matter, observers say the time is now for all and sundry to have a glimpse of the stewardship of AMCON in the airline and whether or not Arumemi-Ikhide would be able to restructure the outstanding indebtedness to the corporation in order to regain control of his airline.