Hajji Hamis Kiggundu with his lawyer Fred Muwema at commercial court on Wednesday Kampala High Court has ruled that DTB Kenya (DTBK) acted illegally in lending money to Ham Enterprises owned by businessman Hamis Kiggundu, a landmark ruling with major implications on syndicate lending in Uganda.
The Commercial Division Judge, Henry Peter Adonyo on Wednesday ruled that DTB Kenya didn’t have the license from Bank of Uganda as provided for under the Financial Institutions Act 2004.
DTB is battling flashy businessman Hammis Kiggundu over Shs 39.7bn which the businessman acquired to facilitate his businesses and defaulted on payment. Ham later dragged DTB to court, saying the money was deducted from his accounts.
Ham had acquired the money in four tranches: $6.2m, $3.2m, $458,604 and Sh2.8b from both DTB Uganda and DTB Kenya between February 2011 and September 2016.
The loans were consolidated later in 2018 and were to run for five years, ending August 23, 2023.
In a letter dated April 11, 2019 to DTB, Kiggundu admitted the debts and promised to repay them by selling off his complexes at Makerere.
He, however, later went to court to secure an injunction against DTB from selling off his interest in the land and properties comprised at Kawuku, Victoria Crescent and Makerere Hill Road until determination of the main suit.
Kiggundu, through his lawyer, Fred Muwema, argued that DTBK, was carrying out illegal banking business in Uganda by lending money to the first Plaintiff, Ham Enterprises.
Kiggundu further stated that Diamond Trust Bank Uganda was “facilitating and abetting the illegal conduct” of Financial Banking Business in Uganda contrary to the Financial Institutions Act.
Ruling
During today’s court session, Justice Adonyo faulted DTB Kenya for appointing its counterpart in Uganda to collect the loan facility from Ham Enterprises without fulfilling the set legal requirements.The judge described the appointment of agents as “illegal, unethical and breach of trust.”Justice Adonyo further said the “The Act contravened Financial Institutions Regulation number 5 and the first respondent (DTB Uganda) is culpable of breaking the law and is penalized for taking part in an unauthorized transaction.”DTB Bank was also ordered to refund all the money it collected from Ham’s accounts to pay for the loans on top of returning to him all the titles which he had surrendered to the financial institution in form of collateral security. Impact The ruling, which DTB Uganda lawyers have vowed to challenge, sets a risky precedent for Uganda’s banking […]