Judgement Debt Commission shocked at MDAs agreement with AAL
The Judgement Debt Commission has expressed shock as to how the compound interest on a debt of GH¢154,000 that 18 ministries, departments and agencies (MDAs) owed African Automobile Limited (AAL) in 1994 shot up to GH¢8 million in 2010.
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The Sole Commissioner, Mr Justice Yaw Apau, and the counsel for the commission, Mr Dometi Kofi Sokpor, were also at a loss as to why the MDAs signed the contract with AAL, an automobile company, using a compound interest component on the principal, instead of a simple interest.
Another difficulty that the commission had was how the total indebtedness to AAL, per the company’s financial statement in 2006, stood at GH¢96,000, but the amount owed by the MDAs alone was GH¢154,000 during the same period.
Justice Apau and Mr Sokpor expressed these sentiments when the Managing Director of AAL, Mr Mohammed Hijazi, appeared before the commission in respect of the GH¢8 million judgement debt that the state paid to the company in 2010.
The debt
Mr Hijazi told the commission that the GH¢154,000 was the cost of vehicle spare parts that the AAL supplied to the MDAs, as well as services that were rendered to them from 1994.
He said when the MDAs defaulted in making the payment, the AAL sued the Attorney General.
He said the court appointed a referee, Mr Ben Korley, to investigate the matter, noting that Mr Korley worked out the interest based on what was contained in the agreement with the MDAs, which was compound interest.
He said the court gave a judgement based on the report of the referee.
Terms of contract
Mr Hijazi said the agreement with the MDAs included four per cent monthly compound interest, five per cent opportunity loss and one per cent for administration.
However, he said, the GH¢8 million covered only the compound interest and indicated that AAL would consider whether to go to court for the other interest components.
Tax on interest
When counsel for the commission asked Mr Hijazi whether AAL had paid the GH¢6 million tax and penalty on the GH¢8 million as demanded by the Ghana Revenue Authority (GRA), Mr Hijazi answered in the negative.
He explained that interest was a loss that a creditor incurred and, therefore, he did not pay any tax to the GRA.
On why the total indebtedness of the 18 MDAs to AAL in 2006 stood at GH¢96,000 but the amount owed the government was GH¢154,000 during the same period, Mr Hijazi said the explanation was captured in the subsequent financial statement of the company.
He said he would make that information, together with the agreements with the 18 MDAs, available to the commission.
Explanation
Justice Apau told Mr Hijazi that AAL had the judgement because the state did not defend the case.
He said Mr Korley, the referee, worked with only AAL’s documents.
However, he said the judgement of the court was lawful until it was set aside.
