*Reaffirms That Courts Cannot Sit On Appeal Over Arbitral Awards, Citing NNPC V. Fung Tai And NITEL V. Okeke
The Court of Appeal, Abuja Division, has dismissed an appeal filed by Kaduna Electricity Distribution Company Plc against the Transmission Company of Nigeria (TCN) Plc, holding that the mere charging of interest on a loan or deferred payment arrangement does not automatically make the lender a moneylender required to obtain a licence under the Moneylenders Act.
The appellate court also held that the misdescription of an application seeking enforcement of an arbitral award as a counterclaim does not invalidate the proceedings where the substance of the application is clear and no miscarriage of justice has been established.
In its judgment delivered on October 30, 2026, in Kaduna Electricity Distribution Company Plc v. Transmission Company of Nigeria Plc, Appeal No. CA/ABJ/CV/39/2026, the Court of Appeal affirmed the Federal High Court’s decision refusing to set aside an arbitral award made in favour of TCN.
The court held that Kaduna Electric failed to establish that the Deferred Payment Agreement underlying the award was an illegal moneylending transaction or that the application for enforcement was fundamentally defective.
The judgment was delivered by Justice Ibrahim W. Jauro, JCA, with Justices Mohammed Danjuma and Ntong Festus Ntong concurring.
The court consequently dismissed the appeal and awarded costs of ₦500,000 against Kaduna Electricity Distribution Company in favour of TCN.
The dispute arose from a Deferred Payment Agreement entered into by the parties on March 16, 2018, which subsequently resulted in arbitration and a final award delivered on November 22, 2021.
Dissatisfied with the award, Kaduna Electric approached the Federal High Court, Abuja, seeking to have it set aside on the ground that the underlying agreement was allegedly illegal and unenforceable.
The company argued that the agreement amounted to a moneylending transaction because it provided for payment of interest, yet TCN had not established that it possessed a valid moneylender’s licence.
TCN opposed the application and sought the enforcement of the arbitral award.
On October 14, 2025, the Federal High Court dismissed Kaduna Electric’s originating motion and granted TCN leave to enforce the award.
Kaduna Electric subsequently filed a notice of appeal on October 15, 2025, challenging the trial court’s findings.
The record of appeal was transmitted to the Court of Appeal on January 16, 2026, while the appeal was heard on September 3, 2026.
Before the appellate court, Kaduna Electric raised two principal issues concerning the alleged illegality of the Deferred Payment Agreement and the competence of TCN’s application to enforce the arbitral award.
On the first issue, counsel for Kaduna Electric argued that although contracts ordinarily enjoy a presumption of validity, an agreement founded on illegal consideration or performance must be declared void and unenforceable.
The appellant maintained that a dispute arising from an illegal agreement was not capable of lawful arbitration and that an arbitral award founded on such a transaction could not be enforced by a court.
Relying on provisions of the Arbitration and Conciliation Act and the Arbitration and Mediation Act 2023, Kaduna Electric submitted that the court had jurisdiction to refuse recognition and enforcement of an award arising from an unlawful transaction.
The appellant also relied on Sections 5 and 6 of the Moneylenders Act, arguing that the Deferred Payment Agreement amounted to an interest-bearing loan granted without the necessary statutory licence.
According to the company, the fact that the transaction was described as a Deferred Payment Agreement did not change its legal character.
It maintained that once interest was charged on the financial arrangement, the lender was required to establish compliance with the licensing provisions of the Moneylenders Act.
The company further argued that the Federal High Court had acknowledged the interest-bearing nature of the transaction but wrongly concluded that Kaduna Electric had failed to prove that TCN was engaged in the business of moneylending.
It described that finding as perverse and urged the Court of Appeal to declare the agreement unlawful and set aside the resulting arbitral award.
In response, TCN argued that Kaduna Electric had misconstrued the relevant statutory provisions and failed to establish any legally recognised ground for setting aside the award.
Its counsel submitted that the Deferred Payment Agreement was executed in 2018 and the arbitral award delivered in 2021, before the commencement of the Arbitration and Mediation Act 2023.
According to TCN, Section 89 of the 2023 Act preserved the application of the former Arbitration and Conciliation Act to the relevant agreement and proceedings.
TCN also maintained that the burden of proving the alleged illegality rested on Kaduna Electric.
The company explained that its principal business was electricity transmission and not moneylending, arguing that the transaction fell within the exception recognised under Section 2(c) of the Moneylenders Act.
It contended that a business does not automatically become a moneylender merely because it extends credit or charges interest in the course of its legitimate commercial operations.
TCN further argued that Kaduna Electric had benefited from the agreement and participated fully in the arbitration without raising a timely objection.
It relied on Section 33 of the Arbitration and Conciliation Act in contending that the appellant had waived its right to challenge the proceedings on grounds that should have been raised earlier.
The respondent maintained that it would be unjust and inequitable for Kaduna Electric to benefit from the agreement and subsequently invoke the Moneylenders Act to avoid its contractual obligations.
Resolving the first issue, Justice Jauro held that the applicable arbitration legislation was the former Arbitration and Conciliation Act, having regard to the date of the agreement and the arbitral award.
The court explained that Section 89 of the Arbitration and Mediation Act 2023 contained saving provisions preserving rights and proceedings arising under the repealed legislation.
Consequently, the court held that the 2023 Act could not simply be applied retrospectively to determine the validity of proceedings governed by the former law.
Justice Jauro also examined the limited circumstances in which an arbitral award could be set aside or refused enforcement.
Referring to Section 48 of the Arbitration and Conciliation Act, the court identified recognised grounds involving incapacity, invalid arbitration agreements, lack of proper notice, decisions exceeding the scope of arbitration, improper composition of the tribunal, non-arbitrability and public policy.
The court relied on judicial authorities including Standard Alliance Insurance Plc v. Haidar (2026) LPELR-83735(SC) and Mekwunye v. Imoukhuede (2019) LPELR-48996(SC).
It further referred to the Supreme Court’s decision in NNPC v. Fung Tai Engineering Co. Ltd (2023) 15 NWLR 117, which recognised the independent nature of an arbitration agreement and the limited role of courts in proceedings concerning arbitral awards.
The appellate court emphasised that proceedings for the enforcement of an arbitral award should not be treated as an opportunity to reopen the substantive dispute already determined by the arbitral tribunal.
It also relied on Nitel Ltd v. Okeke (2019) 9 NWLR for the principle that “The court does not sit on appeal over an arbitral award.”
Justice Jauro explained that judicial intervention must be founded on a ground recognised by the applicable arbitration legislation.
“It is not open for the Court to inquire into the validity of the award or the subject matter of the dispute leading to the award,” he stated, adding that the lower court’s intervention must rest on a ground permitted by law.
On Kaduna Electric’s allegation of illegal moneylending, the Court of Appeal held that the existence of interest in an agreement was insufficient, by itself, to establish that the lender was operating as a moneylender.
According to the court, the determination of whether a person or company requires a moneylender’s licence depends on the statutory definition of a moneylender and the nature of the lender’s business.
“Contrary to the Appellant’s argument, the fact that the agreement provided for interest does not, by itself, establish that the Respondent was a moneylender,” Justice Jauro held.
The court relied on Uzoukwu v. Idika (2022) 3 NWLR (Pt. 1818) 403, in which the Supreme Court explained that the characterisation of a person as a moneylender depends on more than the mere existence of interest on a loan.
It also referred to Onaburekhan v. Denni-Fiberesima (2021) LPELR-56487(CA), which affirmed that the burden of establishing that moneylending was the primary object of the lender’s business rested on the party making the allegation.
Applying those principles, the Court of Appeal found that Kaduna Electric had established that the Deferred Payment Agreement provided for interest but had failed to prove that TCN was carrying on moneylending as its business or holding itself out as a moneylender.
“The Appellant has shown that the agreement provided for interest, but has not established that the Respondent carried on moneylending as its business or held itself out as doing so,” the court held.
The appellate court consequently agreed with the Federal High Court that Kaduna Electric had failed to establish that TCN required a moneylender’s licence for the transaction.
It therefore rejected the allegation that the agreement was illegal or unenforceable on that ground.
The court further held that a party which had benefited from a commercial agreement could not avoid its obligations by relying on an allegation of illegality that it had failed to establish.
“Having benefited from the agreement, the Appellant cannot rely on an unproved allegation of illegality to avoid its obligations under it,” the court stated.
In reaching that conclusion, the court referred to Fasel Services Ltd v. NPA (2003) 8 NWLR (Pt. 821) 73 and Major Concept Ltd v. Eze (2025) LPELR-80563(SC).
The first issue was accordingly resolved against Kaduna Electric.
On the second issue, the appellant challenged the competence of TCN’s application to enforce the arbitral award.
Kaduna Electric argued that the application was wrongly presented as a counterclaim in proceedings commenced by originating motion.
Its counsel submitted that Order 2 Rule 1 of the Third Schedule to the Arbitration and Mediation Act 2023 prescribed the appropriate procedure for commencing arbitration-related proceedings.
The appellant also relied on the Federal High Court (Civil Procedure) Rules 2019, particularly Order 13 Rule 5 and Order 52 Rule 16, arguing that the applicable procedural rules did not permit a counterclaim in the circumstances.
According to Kaduna Electric, where legislation prescribes a mandatory procedure, parties must comply with that procedure, and the court cannot excuse non-compliance merely because the underlying relief may otherwise be available.
It maintained that the trial court was wrong to reject its preliminary objection after acknowledging that the process had been incorrectly described.
TCN, however, argued that the applicable provision was Section 31 of the former Arbitration and Conciliation Act rather than the procedural rules introduced under the 2023 legislation.
It submitted that its application was, in substance, a motion seeking judicial recognition and enforcement of the arbitral award.
According to the respondent, the use of the word “counterclaim” did not alter the nature of the relief sought or render the proceedings incompetent.
TCN argued that the court should examine the substance of the application, including its prayers, supporting affidavit and accompanying documents, rather than invalidate it because of an incorrect description.
Resolving the issue, Justice Jauro held that Section 31 of the former Arbitration and Conciliation Act permitted the enforcement of an arbitral award upon a written application supported by the relevant documents, including the award and arbitration agreement.
The court explained that where an identifiable motion on notice had been filed and served, an incorrect description of the process would not necessarily render it incompetent.
It held that courts must consider the substance of the proceedings and determine whether the alleged defect misled the opposing party or occasioned a miscarriage of justice.
The appellate court found that Kaduna Electric had not demonstrated that the description of TCN’s enforcement application as a counterclaim caused any prejudice or affected its ability to respond.
“It is not a fundamentally defective act to misstate the description,” the court held.
It consequently rejected the appellant’s contention that the misdescription was sufficient to invalidate the enforcement proceedings.
The second issue was also resolved against Kaduna Electric.
In his concurring judgment, Justice Mohammed Danjuma agreed with the reasoning and conclusion of Justice Jauro that the appeal lacked merit.
Justice Ntong Festus Ntong also concurred and made additional observations concerning the applicable arbitration law and the burden of proving illegality.
He emphasised that the legislation governing an arbitration agreement must be determined by reference to the relevant transitional provisions and the time at which the agreement and proceedings arose.
According to him, Section 89 of the Arbitration and Mediation Act 2023 prevented the retrospective application of the new legislation to the parties’ 2018 agreement in the circumstances of the case.
Justice Ntong also relied on Section 131 of the Evidence Act 2011 in holding that the burden of proving the alleged illegality rested on Kaduna Electric.
He maintained that the appellant failed to discharge that burden.
The justice further held that the transaction fell within the exception provided under Section 2(c) of the Moneylenders Act, which recognises certain lending activities undertaken in the course of a legitimate business whose primary object is not moneylending.
He explained that a person or business could advance money in the ordinary course of its commercial activities without necessarily becoming a statutory moneylender.
Justice Ntong also criticised Kaduna Electric’s attempt to challenge the agreement after benefiting from it.
He observed that the appellant had “benefitted humongously” from the transaction and could not subsequently discredit the arrangement on the basis of an unproved allegation of illegality.
He referred to Awojugbagbe Light Industries Ltd v. Chinukwe (1995) and Dalek Nigeria Ltd v. OMPADEC (2007) in support of his reasoning.
Having resolved the substantive and procedural issues against Kaduna Electricity Distribution Company, the Court of Appeal dismissed the appeal in its entirety.
The appellate court affirmed the Federal High Court’s judgment delivered on October 14, 2025, refusing to set aside the November 22, 2021 arbitral award and granting TCN leave to enforce it.
It also awarded ₦500,000 in costs against the appellant in favour of TCN.
At the hearing, Kaduna Electricity Distribution Company was represented by Abu Arome, Esq., and O. A. Ajonu, Esq., while Nkemakolam S. C. Okoro, Esq., represented the Transmission Company of Nigeria.
The judgment reinforces two important principles of Nigerian commercial and arbitration law: that charging interest does not automatically make a business a moneylender under the Moneylenders Act, and that a procedural misdescription will not necessarily defeat an otherwise competent application for enforcement of an arbitral award where no miscarriage of justice has occurred.
Appeal Court Upholds TCN’s Arbitral Award Against Kaduna Electric
It further affirms the limited supervisory role of courts over arbitral awards and the principle that parties cannot avoid contractual obligations by relying on allegations of illegality that they have failed to prove.
Post Title: “Charging Interest Does Not Automatically Make A Lender A Moneylender” — Court Of Appeal Upholds TCN’s Arbitral Award Against Kaduna Electric By Naijaonpoint.