The Court of Appeal will on Wednesday January 27 2021 begin the hearing of the appeal case between Diamond Trust Bank Uganda (DTB) and City business mogul Hamis Kiggundu.
DTB filed an appeal after the Commercial Court controversially ruled in favor of the businessman who had claimed that DTB Kenya was conducting business in Uganda illegally.
The appeal sought to halt the execution of the decision that was set by the commercial court regarding the payment of Shs120bn by Diamond Trust Bank to city businessman, Hamis Kiggundu which had earlier been ordered by the Commercial Court.
DTB on its part had argued that the businessman had procured loans procedurally through its Kenyan affiliate and that he has since defaulted on payments as agreed.
While ruling on DTB’s request to put a stay to the orders of the Commercial Court in November last year, Justice Zeija noted that it’s important for the court of appeal to first determine whether the transaction was illegal since it remains an issue of contention as far as the contract act of 2010 is concerned.
Justice Zeija also noted that the court of appeal needs to answer the question of Agency Banking and whether foreign banks trading in Uganda are required to obtain a license from Uganda to execute a contract following an issued statement from Bank of Uganda indicating that the license was not required in the transaction under dispute.
Zeija’s decision followed an appeal filed by DTB in the Court of Appeal challenging the Commercial Court ruling. The bank had lodged an application seeking to have the execution of the Commercial Court stayed.
“This decision has far-reaching implications on the banking industry as far as it declares syndicated loans illegal. This calls for maintenance of the status quo to enable the court of appeal to inquire into this illegality (syndicated loans) and either uphold the finding or reverse it,” Zeija said in his ruling then.
In October last year, Justice Zeija issued an order blocking the execution of Commercial Court orders in which DTB was ordered to refund Shs34 billion and $23.2m (about Shs86 billion) which they reportedly deducted from Ham Enterprises’ accounts.
Kiggundu, through his two companies, Kiggs International and Ham Enterprises, took six credit facilities worth about Sh40 billion over six years, from DTB Uganda and DTB Kenya in different tranches. As he continued paying, he decided to consolidate the credit facilities into one loan.
He later accused the banks of continuing to take out of his accounts more than what he owed them and also claimed that DTB Kenya was illegally operating in Uganda since it was not licensed by Bank of Uganda.