UBA Executive Director, Wilbrod Humphreys Owor
Commercial banks under their umbrella body, Uganda Bankers’ Association (UBA) have protested High Court ruling in which Judge Henry Peter Adonyo ordered Diamond Trust Bank to pay Ham Enterprises Ltd Shs120bn reportedly illegally debited from the company’s accounts.
The judge also ordered the bank to pay the company owned by businessman Hamis Kiggundu aka Ham 8% interest rate (Shs9.6bn) as penalty for illegalities carried out on Ham Enterprises Accounts, return all titles previously secured by the bank and release all the personal guarantees. The case arose from interlocutory application in H.C.C.S NO 43 of 2020 involving Diamond Trust Bank (U) Ltd, Ham Enterprises and related parties.
However, in a statement dated October8, 2020, Uganda Bankers’ Association says although the association is yet to receive a copy of the detailed judgment, the ramifications of the judgment have sent shockwaves across the entire industry and related stakeholders.
“As a result of the judgment and its implications, the syndication portfolio currently seated with commercial banks that is now at risk is over Shs5.7 Trillion (1.53b USD) of running facilities across various sectors including real estate, road construction, energy covering hydro electric power, oil & gas and manufacturing among others,” the statement signed off by UBA Chairman, Mathias Katamba and UBA Executive Director, Wilbrod Humphreys Owor, reads in part.
It adds: “The above figure does not include pipeline transactions that were still being processed or undrawn yet that have all been halted since the judgment came out yesterday.”
UBA adds that the above figures exclude syndicated lending to Government of Uganda, who is the largest beneficiary of syndicated lending for various development programmes in the country.
UBA is also worried about what it termed as wide sweeping nature and sheer weight of shockwaves the judgment has sent to our international partner agencies and lenders and the implications for the country as an investment destination.
UBA’s fears are also premised on “the message this judgment is sending to other borrowers with foul intention who can now anchor their default on this judgment that declared syndication is illegal.” They added that the judgment has a huge impact on the economy.
The statement adds that the Chief Executives of all the 35 member institutions of Uganda Bankers’ Association that includes all the Tier 1 Commercial Banks, Development Banks and Tier II & III (Micro Finance & Deposit taking Institutions) supervised by Bank of Uganda \ this morning resolved “to join Diamond Trust Bank (Uganda) Limited as an interested party in its appeal at the Higher Court to determine the case on its merits.”
They also resolved to join Diamond Trust Bank (Uganda Limited) to file for a stay of execution of the orders of the Hon Justice as ruled yesterday.
They also resolved to call upon the Central Bank of Uganda to pronounce itself on the matter.
UBA members also resolved “To call upon the Executive Arm of Uganda Government through the Minister of Finance, Planning & Economic Development and the Attorney General to pronounce themselves on this matter, more so because they are the accountable officers for syndicated facilities contracted by Government including where foreign 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.”
They also resolved “To call upon all our friends and stakeholders including Uganda Insurers Association, PSFU, UMA, KACITA, Telecom Sector players, ULS, Members of Parliament, Civil Society, Uganda Revenue Authority, Financial Intelligence Authority, Professional Bodies among others as well as the Judiciary itself to join us in addressing the implications of this judgment and assist in avoiding the adverse effects this judgment could lead the country & economy into.”
Origin of the case
In January 2020, Ham Enterprises dragged Diamond Trust Bank Uganda and Kenya to Court for allegedly fraudulently debiting over Shs120bn from their Shillings and Dollar accounts over a period of about 10 years.
The Bank, having failed to refund the reported unlawfully debited monies from the company’s accounts, Ham Enterprises instituted legal action against the Bank for recovery of the same. DTB responded by demanding Shs39bn and asking Court to impose regulation 13 of the Mortgage Act which requires that anyone challenging a bank must pay 30% of the disputed amount.
This was however ruled out of the case by court and Ham Enterprises petitioned the constitutional court challenging its constitutionality.