DTB Vs Ham: Commercial banks join appeal case

Commercial banks under their umbrella body Uganda Bankers’ Association (UBA) have announced they will join Diamond Trust Bank’s appeal against a ruling favouring businessman Hamis Kiggundu.

On October 07, Justice Henry Peter Adonyo of the Commercial Division of the High Court in Kampala, ruled that Diamond Trust Bank (DTB) Kenya illegally extended loans to Kiggundu, popularly known as Ham, of Ham Enterprises.

Justice Adonyo ruled that there was no evidence that banking sector regulator Bank of Uganda (BoU) had licensed DTB Kenya to offer financial services in Uganda.

“The act of DTB-Kenya in conducting financial business is licensed in Kenya and it therefore illegally offered the facilities in Uganda,” the judge announced.

“The act contravenes regulation number five [of Financial Institutions Act, 2004) and therefore DTB Uganda is penalized for taking part in illegal business.”

THE GENESIS

Months ago, Ham sued DTB for illegally debiting about Shs120bn from his dollar and shilling accounts.

In his suit, Hama had also sought orders barring DTB from demanding $4,014,444 and $6,974,600 which extended to him by DTB Kenya, arguing that it was not licensed to offer such services in Uganda.

The businessman told court it was unlawful for DTB Uganda to appoint DTB Kenya as its agent bank and security agent.

He further sought unconditional discharge of mortgages on his properties particularized in Kyadondo Block 248, Plot 328 land at Kawuku, FRV 1533, Folio 3, plot 36-38, Victoria crescent II Kyadondo and LRV 3176 folio 10, plot 923, Block 9 located at Makerere Hill Road.

In February 2011 and August 2018, Kiggundu had secured $4,014,444 and $6,974,600 loans from DTB to erect commercial properties.

For these, he had mortgaged Kyadondo Block 248, Plot 328 land at Kawuku, FRV 1533, Folio 3, Plot 36-38, Victoria Crescent II Kyadondo and LRV 3176 Folio 10, Plot 923, and Block 9 located at Makerere Hill Road.

Through its head of debt recovery and company secretary Stephen Kodumbe, DTB Kenya denied ever running its operations in Uganda as suggested by Ham.

Kodumbe also told court that DTB Uganda had not acted as an agent of DTB Kenya. The Kampala office was only asked to collect payments from Ham Enterprises Limited on behalf of the Kenyan bank.

As far as DTB is concerned Ham Enterprises Limited is choking on debts amounting to $6,298,380 on term loan facility of $6,663,453 and sh2.8b on the demand overdraft facility of sh1.5b, temporary demand overdraft facility of sh1b; $3,662,241 on the term loan facility of $4,000,000 and $4458,604 on the term loan facility of $500,000.

APPEAL

On October 08, DTB confirmed it would appeal the ruling.

“DTB, in consultation with its legal advisers, has filed a notice of appeal against the judgment of Justice Henry Peter Adonyo. We look forward to the expeditious resolution of the matter in the Court of Appeal and are confident that the case will be determined on its merits,” the bank said.

“We wish to assure all our stakeholders that we remain in good standing and our operations continue uninterrupted.”

ENTER UGANDA BANKERS’ ASSOCIATION

The bankers noted that the judgement arising from an interlocutory application in H.C.C.S No 43 of 2020 involving one of our members, Diamond Trust Bank (U) Ltd and related parties came with consequences that had already “sent shockwaves across the entire industry and related stakeholders” even when “UBA is yet to receive a copy of the detailed judgement.”

In a statement issued October 08, UBA announced that “the Chief Executives of all the 35 member institutions of Uganda Bankers Association that includes all the tier I commercial Banks the Development Banks and Tier II & III (Micro Finance and Deposit taking institutions) supervised by Bank of Uganda this morning [of October 08] resolved to join DTB in its appeal at the higher court.”

The banks also agreed “to join Diamond Trust Bank (Uganda) Limited to file for a stay of execution of the orders the Hon Justice as ruled yesterday.”

They were also united in calling on relevant bodies to intervene and save the banking industry.

UBA members resolved  to call upon Central Bank of Uganda and the Executive Arm of Uganda Government through the Minister for Finance, planning and Economic Development and the Attorney General “to pronounce themselves on this matter, more so because they are accountable officers for syndicated facilities contracted by Government including where foregoing counter parties are involved and re-assure the financial sector, the international lending partners and entire country of the commitment to continue honoring all debt obligations in line with agreed protocols.”