The Commercial Division of the High Court in Kampala on Thursday declared illegal, the loan that businessman Hamis Kiggundu of Ham Enterprises had acquired from Diamond Trust Bank (DTB).
Kiggundu, the proprietor of Ham Enterprises Limited and Kiggs International (U) limited dragged DTB -Uganda, and DTB-Kenya to Commercial Court for fraudulently siphoning over sh120billion from his accounts without his knowledge and consent.
According to court documents, Kiggundu provided security/mortgage comprised in Plot no.923, Block 9 located at Makerere Hill Road to support the credit facilities he had got from DTB but the businessman says when he carried out an audit and reconciliation of the loan accounts, he found out that the DTB had taken shs34 billion and $23 million from his account.
On Thursday, the head of the Commercial Court, Justice Henry Peter Adonyo ruled that DTB Kenya illegally carried out business in Uganda by lending to Hamis Kiggundu without obtaining a licence from Bank of Uganda as required by law.
“I would find that mortgage credit transaction was carried out illegally and that fact becomes a clear question of law and not fact,”Adonyo said.
In their defence, DTB said their Kenya counterparts (DTB Kenya) had appointed DTB Uganda which is licenced to carry out business in Uganda to act as their agent and thus they operated legally to collect funds for repayment of the said credit facility from Ham Enterprises.
However, the judge overruled the same explaining that such action of appointing DTB Uganda to act as an agent of DTB Kenya ought to have been done legally and the former gets licence from the Central Bank to do the job.
“These actions, in my view, are by their very nature the carrying out of financial institution business which are regulated under section 4 (1) of the Financial Institutions Act 2 of 2004 and for such actions requires valid licenses granted for that purpose by the Central Bank of Uganda,” he said.
“The fact of this matter shows syndicated financial institution business by the 1st and 2nd respondents (DTB Uganda and DTB Kenya) aimed at dodging the seeking of a licence from the relevant authority which actions are clearly illegal such as that I would remain with no option by the authority.”
The judge insisted that it was illegal for DTB Kenya to carry out business in Uganda through DTB Uganda without first getting a licence from BoU.
Justice Adonyo dismissed DTB Uganda and DTB Kenya’s defence and warned that the former is liable for penalties for taking part in the commission of an offence of providing financial services without a licence.
“I do declare that the appointment of the 1st defendant(DTB Uganda) by the 2nd defendant(DTB Kenya) as agent bank and security agent in respect of the 2nd defendant’s(DTB Kenya) loan was illegal, unethical, unlawful, in breach of trust, in breach of fiduciary duty and in breach of the Financial Institutions Act 2004 as well the Bank of Uganda Consumer Protection Guidelines 2011 and the Kenyan Banking Act.”
The judge directed the bank to return Ham Enteprises’ mortgaged property after cancelling the loan mortgages.