Principal Judge Flavian Zeija has blocked the payment process of UGX34b and $23.2m (UGX86b) which the Diamond Trust Bank (DTB) allegedly deducted from Ham Enterprises’ accounts.
The intrim injunction blocking the ruling of the Commercial Court will be in place until the main application for stay of the execution orders is determined.
“It is hereby ordered that an interim order for stay of execution of the decree in the High Court Civil Suit number 43/2020 doth issue pending the determination of the main application for stay of execution,” the interim order issued by PJ reads in part.
Bank of Uganda (BoU) has said that foreign financial institutions that do not use locally-raised deposits to lend to Ugandan entities do not require the authorisation of the Central Bank to be able to lend locally.
Prof Tumusiime Mutebile, the Governor at BoU, says the Institution does not regulate the extension of loans, the financing of commercial transactions that are funded using funds obtained from foreign banks that do not take deposits from the public in Uganda.
Ham Enterprises cannot commence the recovery process of the aforementioned money from the bank as earlier ordered by the head of the Commercial Court, Justice Henry Peter Adonyo.
Justice Adonyo last week ruled that a syndicated loan granted to a local company was illegal in a shock judgment that banks warned could lead to a spike in defaults on $1.5 billion of debt.
The case relates to a loan Diamond Trust Bank Kenya Ltd provided to a Kampala-based firm with interests spanning real estate to agriculture, using its Ugandan subsidiary as the agent.
Lenders were taken by surprise when Judge Adonyo said the transaction was illegal because the Kenyan bank didn’t have a domestic license to conduct such business in Uganda.