Dei pharma sues bank over inflated loan

Vaccine company Dei Biopharma Limited and Dei Industries International have dragged a local bank to court over allegation of inflating loans by up to Shs39.2 billion.

The firms along with their proprietor Mathias Magoola have asked the Commercial Division of the High Court to review the loan, its interest and repayment schedule to ascertain the claims.

The company says after establishing a bank-customer relationship, it in 2016 acquired a Shs400 million loan from the bank that has a Kenyan ownership link.

The company says it subsequently acquired several other loans but all these credit facilities contained a clause that encouraged the two companies together with their proprietor, Magoola, to obtain an independent legal opinion from a legal counsel in order to understand all the terms and conditions in the facility letters.

However, court documents show despite the above clause, the bank was overbearing in its advice to the companies to take the loans and owing to the cordial relationship between the two, they took the advice and signed the credit letters without consulting external legal counsel.

“Dei were also compelled to take the loans, variation of terms, consolidations ,and restructures as offered because they were in urgent need of money to finance their capital intensive projects,” court documents say.

Dei companies say with the onset of the Covid pandemic and the outbreak of the Russia-Ukraine war, their wheat imports were affected and factory close for three years but they managed to pay Shs150 billion in loan and interests.

Dei Industries deals in wheat and maize flour processing and marketing

Court documents show that having realised this vulnerable situation, the bank took advantage and engaged in predatory lending practices.

“The predatory lending practices included the arbitrary transfer of a loan repayment of $9 million by the bank's Ugandan wing to its Kenyan arm, thereby denying Dei cash to service the principal and interest arrears on their loan account in Uganda,” the company says.

Documents indicate that these acts deliberately kept Dei’s loan accounts out of funds and put them in substantial interest default of over shs1bn.

Dei says the unilateral and arbitral conversion of Dei Industries International’s dollar loan of $2.43 million to Shilling caused a foreign exchange loss to Dei of $4,2750 - about Shs160.3 million.

The company avers that owing to the public interest served by its businesses, the government made a decision to acquire a stake in Dei Biopharma Limited’s medical manufacturing plant and released some funds to clear the company’s indebtedness with the bank.

However, according to court documents, the bank is now targeting to take all the funds released by government by demanding “inflated, extortionate and excessive loan balances of Shs82.2 billion and $43.2 million from Dei Industries International and Dei Biopharma Limited respectively.

Dei says having found the requests not reasonable, the company requested a waiver of the interest but also offered to settle the outstanding loan of shs155.1 billion but rejected.

The company says it later commissioned an audit firm to look into the credit facilities and loan statements to determine the correct loan outstanding but it was found out that the bank had inflated loan outstanding claimed by shs39.2 billion.

Declarations

Dei seeks court to declare that the bank's demand dated June, 27, 2024 for payment of shs82.2 billion and $43.2million as the outstanding loan against Dei Industries International Ltd and Dei Biopharma Ltd is inflated, extortionate and unconscionable

“The plaintiffs are seeking for court to issue an order for an account, audit and reconciliation of the Plaintiffs loan and current accounts held with the Defendants to determine the actual debt due under the credit facilities, variation of terms, loan consolidations and restructures thereto,” court documents read in part.

The companies also want court to issue an order directing the bank and its Kenyan arm to credit their loan or current accounts with any amounts found to be unlawfully debited upon the taking of an account, audit and reconciliation.