Commercial Bank in Court Over Omo Farm Land

Bank sued for allegedly breaking pledge to sell foreclosed farm

The Commercial Bank of Ethiopia (CBE) has presented its defense statement to the first instance court over a lawsuit involving the transfer of a lease of the former Birale Farm, located in Southern Omo Zone to a private company, Sagla Trading Plc.

The defense was presented to sixth civil bench of the Lideta first instance on November 28.

The legal battle began when Sagla sued the bank over the cancellation of a bid process to transfer Birale Farm. The cotton farm was auctioned by the bank to collect the former owners’ unpaid loans. In July 2016 the bank announced the foreclosure of the 5, 490ha farm. Following the notice, Sagla listed the highest bid of eight million Br and won the auction. The bank wrote an award letter to the company on August 12, 2016 and notified the company to sign a contract.

According to the bid announcement, 4,000ha of the farm was already developed. It also includes a number of buildings used for offices, guest houses, clinics and warehouses. Moreover, it has a number of work and construction materials, generators and workshop materials, as well as its own gas station and runway.The farm was estimated to have a production capacity of 100,000qt of cotton a year.

The bid announcement stated that the winning company would secure a right to rent the farm for one year, although the Bank would be able to revise the contract period, in case of prolonging the contract.

A week after the letter of award was issued to Sagla, before any contract agreement was signed, the bank wrote another letter to the company announcing that it had cancelled the award.

The bank later revealed that the reason for the cancellation was that it has decided to transfer the farm to another party -the Southern Region Agriculture & Natural Resource Bureau. Three days after the letter of award was sent to Sagla, the Southern Agriculture Bureau sent a request to the bank asking that it be able to either buy or rent the land for harvesting improved seeds.The letter was signed by head of the Bureau, Tilahun Kebede. In a statement on November 28, the bank stated that it believed the request by the bureau was meant for the greater public interest. Further, the bank argued that there was no legal contract with the winning company in the first place.

Sagla brought an injunction order on September 7, 2016 to prevent the CBE from transferring the property to the Agriculture Bureau.

When Sagla brought its case to the court, it asked for an order to make the bank transfer the farm as per the award letter issued by the bank. CBE’s main defense was that the plaintiff has no legal ownership right over the farm.

The bank also demanded that the injunction order be lifted by the First Instance Court. The bank also asked for compensation of consequential damages of eight million Br.


Published on Dec 06,2016 [ Vol 17 ,No 866]



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