KAMPALA, UGANDA: The High Court in Kampala has ruled in favour of Tirupati Development (U) Limited and ordered KCB Bank Uganda Limited to avail documents relating to a loan facility of US$7,000,000 (about 26 Billion Shillings).
Tirupati in Jan 2022 dragged to court the Central Bank of Uganda (1st defendant), KCB Bank Uganda (2nd defendant), KCB Bank Kenya (3rd defendant) and Financial Intelligence Authority (FIA) over a number of grievances including breach of contract, negligence, money laundering, fraud and conspiracy to defraud, among others.
In their suit filed by Counsel Robert Kirunda of Kirunda and Wasige Advocates, Tirupati Development asked the court to impose declarations including; breach of contract, fraud, conspiracy and failure to manage the Plaintiff’s accounts, among others against the Bank.
The applicant also sought for a court order to be availed documents from the Bank, which documents related to; the loan transaction and loan account origination, negotiation, approval, processing, key facts documents, management, and closure; the respondent’s policy on fraud detection, reporting, investigation, management, resolution, and closure, among others.
Tirupati further asked for documents relating to investment origination and management of current and loan accounts; all policies on information and computer technology, system authenticity, cyber security, and digital forensics, in hard copies and soft copies for both KCB Uganda Limited and KCB Kenya Limited; money laundering policies and suspicious transaction reports on both current and loan accounts since the Anti Money Laundering Act 2013 came into force.
However, KCB in a submission filed by their lawyers Counsel Dennis Wamala & Counsel Terrence Kavuma argued that the said documents would further compromise the Bank’s internal processes in relation to their competitors and may expose the respondent and their customers to insurmountable risk thereby causing irreparable harm to the respondents.
The lawyers further argued that disclosure of some information may breach confidentiality agreements or the privacy of persons who are not a party to the dispute or exposure of privileged documents between the bank and the lawyers.
However, in a ruling delivered Friday, May 05, the presiding High Court Judge Musa Ssekaana compelled the bank to avail Tirupati with the documents which he ruled to be crucial in relation to the final ruling of the case.
”This application partially succeeds to the extent that the respondents should avail the applicant the following documents,” said Ssekaana in his May 5, 2023 ruling, listing the documents below for KCB to avail Tirupati;
(a) The loan transaction and loan account origination, negotiation, approval, processing, key facts documents, management, and closure in respect of the following accounts; Loan accounts with the 2nd respondent and loan account number with the 1st respondent; US dollar current account in the applicant’s name opened by the 1st respondent; USD Account Number in the applicant’s name with the 1st respondent, and a Uganda shillings account number in the applicant’s name with the 1st respondent.
Justice Ssekaana also dismissed the question of privacy by the defendant and referred them to Article 12 of the Universal Declaration of Human Rights of 1948 and Article 41 of the Constitution of the Republic of Uganda which fully covers and protects the privacy of any parties involved in the case.
“Every citizen has a right of access to information in the possession of the State or any other organ or agency of the State except where the release of the information is likely to prejudice the security of the state or interfere with the right to the privacy of any other person,” Ssekaana quoted the clause in his ruling.
Case Background
Court documents seen by this website indicate that trouble between the two KCB Banks and Tirupati emanated from a loan deal that was reached on 17th July 2012 when the regional commercial bank agreed to advance a syndicated loan facility of US$ 7,000,000.
In their 2022 suit, Tirupati staked a series of certificates of title to its properties as collateral, however, while the defendants (KCB Bank) had agreed to disburse a total sum of USD 7,000,000, the total sum disbursed was, in fact, USD 6,990,000.
The bank charged US $35,000 as loan negotiation fee, a thing the plaintiff says was irregular because it was above the agreed amount and the bank refused to provide breakdowns of how the loan negotiation amount charged was arrived at.
Uncharacteristic of banking norms, Tirupati says that in August 2016, the two sister banks opened and operate the two separate US Dollar denominated loan accounts in their names without their knowledge or consent -these were account number 1059906732 with KCB Bank Kenya and account number 2150226057 with KCB Bank Uganda.
In a similar manner, in January 2017, KCB Bank Uganda opened and operated another new US dollar current account No. 2290351628 in the names of the Tirupati Development (U) Limited, the plaintiff, without the plaintiff’s authorization, consent or knowledge.
When Tirupati noticed the irregularities and the suspicious transactions on its current and loan accounts in 2018, the banks didn’t provide a coherent explanation when the plaintiff demanded. Even when the plaintiff demanded a reconciliation of accounts, clarity on the status of their loan repayments, and requested for the issuance of bank statements, none was honoured causing the plaintiff not to meet her loan obligations.
In an attempt to sort out the impasse, Tirupati, between 2018 and 2021, wrote a series of letters to the banks raising a number of observed irregularities on its bank accounts including committed fraud and conspiracy to defraud.
Among the fraudulent irregularities noted, KCB Bank Uganda refused to give the plaintiff records of bank statements of her current and loan accounts, something that inhibited Tirupati from understanding the true extent of her debt.
KCB Bank Uganda and KCB Bank Kenya also failed to provide coherent explanations for the inconsistent loan statements and balances observed by the plaintiff on her accounts.
Also, the lawyers argued that the two banks failed to explain the existence of an unknown US Dollar account 2290351628, numerous unauthorized transactions and failed to account for money fraudulently taken from the plaintiff’s accounts to pay the defendant’s employees.
Tirupati in its suit sought a decision of the court to declare that KCB Bank breached the contract, is a fraudulent bank, neglected its fiduciary duties, failed to manage plaintiff accounts, failed to manage risk of financial crime, cause the bank to return 20 certificates of title, account for all sums misappropriated with interest, declare that bank engaged in money laundering, pay fines and general damages and costs of the suit.
Justice Ssekaana also ordered that the costs of the preliminary hearing will be paid by the party that ultimately loses the case in this final ruling.
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