Ham Enterprises U Ltd has asked the court to halt the auditing process pending the determination of another application in which it is seeking to strike out the defense statements filed by Diamond Trust Bank (DTB) Limited as they arise from illegalities.
On August 31, Justice Henry Peter Adonyo of the Commercial Court directed the Institution of Certified Public Accountants of Uganda to appoint an independent auditor to carry out account reconciliation of the financial transactions which are based on the credit facilities between Ham Enterprises and DTB.
The order came after high court allowed the hearing of the 120 Billion fraud case filled by Ham Enterprises against Diamond Trust Bank (Uganda and Kenya) to proceed.
However, Ham Enterprises U Limited contends that it has since filed an application seeking to throw out DTB’s written statements of defence for being founded on credit facilities which are illegal.
According to the complaint, the court directed the two worrying parties to file written submissions and reserved the ruling date for October 5 this year.
“That at the same time, however, an audit exercise determines the said impugned credit facilities has been commenced at the instance of the respondent’s pursuant to a court order issued on August 31,” reads the complaint, adding that the audit exercise is subordinate to the outcome of the application that is pending ruling.
Through their lawyers of Muwema & Advocates, Ham Enterprises alleges that the said challenged credit facilities are in contradiction and repudiation of court’s investigation into the legality of the credit facilities and thereby violates their right to a fair hearing.
The Genesis
The application arose out of a case in which Mr Hamis Kiggundu alongside his companies; Ham Enterprises and Kiggs International Uganda Limited sued DTB Uganda Limited and DTB Kenya Limited of among others fraudulently siphoning over Ugx.120 billion from his accounts without his knowledge and consent.
The Company claims that between February 2011 and September 2016 his aforementioned two companies sought various commercial construction, development and completion of commercial properties.
As security, Ham Enterprises went on to provide several properties at Kyaddondo, Kawuku, Victoria Crescent 11, Kyadondo and Makerere Hill Road.
Ham Enterprises is now seeking recovery of Ugx.34 billion and $23 million from the bank which was unlawfully debited from his accounts.
On the contrary, the banks only admit that the businessman and his two companies hold accounts with them and that the same on various dates took various credit facilities.
Through their lawyer, Mr Kiryowa Kiwanuka, the banks further list the credit facilities taken by Ham Enterprises $6,663,453, Shs1.5bn, Shs1bn, $4m and $500,000.
According to The Company however, they were servicing the credit facilities but were shocked when the company carried out an audit and reconciliation of the loan accounts and found out that they had already settled all their facilities and instead the banks had purportedly debited Ugx.34billion and $2,346,670 from the company account without their knowledge. Ham Enterprises then run to court for recovery of this money.
The company also thought a declaration that the bank’s demand for $4,014,444 and $6,974,600 which was advanced to him by DTB -Kenya is illegal and unenforceable on grounds that the Kenyan bank had no licence to carry out financial business in Uganda.
TECHNICAL DETAILS
The first question to be interrogated here is whether the DTB-Kenya conducted financial institution business in Uganda when it issued the credit facilities in the suit and if it did, whether it was done illegally.
The second question relates to whether the DTB-Uganda contravened the Financial Institutions Act when it facilitated the DTB-Kenya to conduct business in Uganda.
This question will also seek to establish whether DTB (U) was the appointed agent of DTB (K) for the lending.
So, the banks, in their written statement of defence, insist that the credit facilities obtained by the Company from the DTB-Kenya were lawfully obtained in Kenya and are recoverable and enforceable.
However, Ham Enterprises contends that the banks’ written statement of defence is a perpetration of illegalities committed by the respondents in conducting financial institution business (FIB) without a license, which contravenes the Financial Institutions Act (FIA).
“DTB-Kenya being a financial institution licensed to carry on banking business in Kenya could not conduct financial institution business in Uganda.
Therefore, the financial transactions it contracted with the Plaintiffs were entered into contrary to the Financial Institutions Act 2004 (As Amended) and as such are illegal and unenforceable,” reads the submission.
Financial Institutions Business Elucidation
Meanwhile, the strict definition of ‘financial institution business’ will be put to the test. In order to understand whether DTB-Kenya conducted FIB in Uganda, it is imperative to find out what the term FIB means in law.
In particular, there is need to find out if a loan obtained in Kenya can result in the conduct of FIB in Uganda when juxtaposed against the law in Uganda.
To this, Ham Enterprises says the FIA does not expect a foreign bank to lend money held on deposits in Uganda because it expressly forbids them to do so.
“The implication of this is that a foreign bank can only lend money held on deposits from its country of origin.
Therefore DTB (K) did not have to be a deposit taking institution in Uganda to be able to conduct FIB in Uganda, ” Ham Enterprises argues.
On that background, there arises
the question of whether DTB-Kenya conducted FIB illegally in Uganda
The defence filed by the DTB-Kenya did not attach evidence of any permission it obtained from the Bank of Uganda to conduct FIB.
It is on this premise that Ham Enterprises claims that “by having DTB-Uganda as its appointed agent for the lending, DTB-Kenya acquired a local representation in the transaction and thereby avoided the application and payment of statutory fees for a representative office this it was illegal for DTB Uganda to appoint DTB Kenya as the agent bank and with itself being the security agent in respect to its loan.
“In perpetuating the above acts and omissions, it denied the government of Uganda tax and non-tax revenue in addition to flouting the sovereign laws of the Country.
This amounted to an infringement on the public law and public rights which this court is enjoined to protect in the public interest.”
Meanwhile, the court is yet to set the hearing date for the application.
By: Uganda Times
Please reach us through [email protected] For Your Opinions, a hot story or scandal you would like us to publish
