This ruling means that court will have to first settle the legality of the transaction between Diamond Trust Bank-Kenya (DTB-K) and Kiggundu, where the former is accused of committing illegalities in conducting financial institution business (FIB) in Uganda without a license, which contravenes the Financial Institutions Act (FIA).
Kiggundu, through Muwema & Co Advocates and Kimara Advocates, jointly sued Diamond Trust Bank-Uganda (DTB-U) and DTB-K for unlawfully making deductions of Shs 120bn while servicing a loan from the duo. A counter by DTB to have him first pay 30 per cent of the loan was halted by court and now it is moving to clear the air on the lawfulness of the transaction.
After the ruling, Kiggundu said he is satisfied. “I am happy for this ruling because in the first issue, the bank demanded I pay 30 per cent when I challenged them on illegal deductions. Now, we need to find out how DTB-Kenya operated in Uganda without a licence or paying taxes,” he said.
On his part, Fred Muwema said it was not fair to make an audit when at the same time court is still hearing the case about the illegality of DTB dealings. “So, I’m happy court has realigned the cases to dispose of the most pertinent issue.”
BACKGROUND
On August 31, Justice Adonyo directed the Institute of Certified Public Accountants of Uganda (ICPAU) to appoint an independent auditor to carry out a full account reconciliation of the financial transactions which are based on the credit facilities between Kiggundu and DTB to determine the amounts due but afterwards, Kiggundu filed a fresh application raising serious questions of law regarding the legality of the credit facilities and contracts executed by DTB, which questions are still pending determination by the court.
The gist of the application is that the said audit exercise, if allowed to proceed, tends to validate and enforce the said impugned credit facilities in contradiction and negation of court’s investigation into the legality of the credit facilities and it thereby violates Kiggundu’s right to a fair hearing.
On the other hand, Mbabazi Emejeit, the DTB-Uganda head of Legal and company secretary, swore an affidavit in reply and averred that the order to appoint an ICPAU auditor was signed by both parties and, therefore, Kiggundu cannot turn around.
However, Justice Adoyo granted the stay of auditing on grounds that if this is not done, then the likelihood of the fact would be lost were the court to subsequently resolve the issues in Kiggundu’s favour then the proceedings in the main suit would be rendered unnecessary with the report of the auditors becoming purposeless.
“Consequently, from the arguments raised in this application and taking into account the seriousness of the matters raised in relation to the credit facilities, mortgages and other securities which go to the root of the cause of action in main suit, my considered consideration is that conducting the audit at this point before giving a chance for this court to make its investigations and findings would impact what would become of the decision in the pending application tremendously and thus would be prejudicial to all the parties,” he reasoned.
A legal analyst who spoke to The Observer on condition of anonymity says that should the court find DTB-K’s transactions in Uganda illegal, the whole case may fall flat, meaning the bank would have no locus to demand any money from Kiggundu.
“When you enter an illegal contract, you lose the capacity to sue when something goes wrong between the parties involved,” she said.