|
Getting your Trinity Audio player ready...
|
Despite having received UGX578.4 billion (USD million) in capitalisation from the government of Uganda, part of which was to be used to settle his indebtedness with Equity Bank, controversial pharma-entrepreneur, Matthias Magoola is yet to repay Equity Bank and Equity Bank Kenya.
In a surprising plot twist, he has instead turned around to sue the two banks for a raft of accusations, top of which is a claim that the two banks, irregularly and unlawfully debited and or inflated the loans by UGX 47,652,951,120/= from the accounts of his two firms⏤ Dei Industries International Ltd And Dei Biopharma Ltd (formerly Dei Natural Products International).
In the suit, HCCS No. 929 of 2024, Dei Industries International Ltd and Dei Biopharma Ltd together with their proprietor, Dr. Mathias Magoola want the Commercial Court to order Equity Bank Uganda Ltd and Equity Bank Kenya Ltd to refund the alleged sums amongst many other requests.
Magoola also wants the court to declare that the money the two banks demand from him⏤ UGX82,243,081,835 by Equity Bank Uganda and USD43,230,937.65 by Equity Bank Kenya is “inflated, extortionate and unconscionable”.
Suing through Muwema & Co. Advocates and Solicitors and Joska Advocates, Magoola and his two firms, have also asked the court for an “order for an account, audit and reconciliation of the Plaintiffs’ loan and current accounts held with the Defendants to determine the actual debt due under the credit facilities, variation of terms, loan consolidations and restructures thereto”.
Background to the suit
Dei Industries International Ltd, a company largely dealing in wheat and maize flour processing and marketing variously between September 2016 and 2nd June 2021 took several facilities from Equity Bank Uganda that were subsequently restructured and consolidated into one term loan of UGX54,785,921,476 for 70 months with a 12 month grace period. On 2nd June the company also secured a letter of credit with a limit of USD3 million and UGX2,590,000 for the purchase and importation of wheat grain and working capital.
Dei Biopharma Ltd, is a medical research/industrial entity that when complete, expects to manufacture vaccines and treatment for HIV/HPV, malaria, cancer, and neurodegenerative disorders including Alzheimer’s, Parkinson’s, diabetes, etc. between 18th May 2020 and 23rd September 2021, took various term loans to the tune of Various facilities totalling to USD49,952,753 from Equity Bank Kenya. The money was majorly for completing the factory, located at Matugga, Wakiso District, on the outskirts of Kampala City.
Magoola also obtained another USD20 million (UGX74 billion) from the Uganda government-owned Uganda Development Bank and another specified amount from Tropical Bank.
Despite receiving over UGX289 billion in funding over this period, from Equity Bank Uganda and Equity Bank Kenya, Dei BioPharma had by the beginning of 2022 curiously run into liquidity problems and was unable to complete the factory nor meet its loan obligations.
By May 2022 the loans had become non-performing, forcing the banks to recall the entire loan and put up the collateral, including the under-construction plant on sale.
A desperate Magoola, run to President Yoweri Kaguta Museveni for rescue. Subsequently, the cabinet and later, the Parliament of Uganda approved a UGX578.4 billion equity investment into Dei BioPharma Ltd.
According to sources, the government is to acquire 9.1% in Dei BioPharma in exchange.
The investment was made on the premise that part of the money would be used to settle the bank’s indebtedness while the balance would be deployed towards completing the facility to a point where it would start generating some sales, so it could become self-sustaining.
We understand that while the negotiations were ongoing for the government investment, the government advanced Mr. Magoola USD 20 million, which Magoola used to offset the Equity Bank Kenya loan.
We understand that the UGX578.4 billion was eventually released by the government sometime in June and unknown to Equity Bank, Magoola instead chose to channel the payment through Citibank Uganda.
Upon receiving the money, Magoola on 21st June 2024 wrote to Equity Bank asking for a partial waiver of interest.
In the letter, Ref: DBPL/06/2024 addressed to Anthony Kituuka, the Equity Bank Uganda Managing Director and signed by Wakida Patrick (Chairman) and Matthias Magoola as the Managing Director, the duo offered to settle UGX38,375,506,322 in pending principle on the Equity Bank Uganda loan and USD26,026,516 in principal on the Equity Kenya loan. They also offered to pay UGX 6,670,756,190 and USD2,939,922 as interest on the Ugandan and Kenyan loans respectively.
“Accordingly, we are ready to pay Equity Bank a total of UGX 155,118,727,733 in full and final settlement of the Loan Facilities. This includes both principal and interest on the Loan Facilities,” the duo wrote, adding: “In case the above offer is acceptable to Equity Bank, we are happy and ready to pay the above sums of money immediately”.
Before Equity could respond to this letter, they learnt of the fact that not only had Magoola received all the UGX578.4 billion from the government, but he had also gone ahead to channel it through another bank.
Equity Bank then went ahead to issue a demand notice on the 27th of June 2024 for payment of UGX 82,243,081,835/= as the outstanding loan for Equity Uganda and USD43,230,937.65 as the outstanding loan for Equity Bank Kenya. In Ugandan Shillings, the total outstanding is approximately UGX243,254,287,993.
Impliedly, Equity Bank rejected Magoola’s earlier offer to pay UGX 155,118,727,733 which would have meant accepting a UGX88.1 billion shaveoff.
Having failed to shake Equity Bank off, this time round, in a 28th July 2024 letter, Mrs. Kellen Kamurungi, an Executive Director of Dei BioPherma Ltd and also Magoola’s wife, wrote to Equity Bank this time claiming that an audit of both Dei companies’ affairs with the bank had revealed that the Bank had inflated the loan outstandings by a sum of UGX 39,241,743, 163/=.
Mrs. Kellen Kamurungi also proceeded to withdraw the earlier offer to pay UGX 155,118,727,733 and informed the bank that the matter had now been handed over to the companies’ lawyers and auditors for further handling.
Magoola drags Equity Bank to Court
Following the 28th July 2024 letter, Dei Industries International Ltd and Dei Biopharma Ltd proceeded to sue Equity Bank Uganda and Equity Bank Kenya to the Commercial Court for what they claim is predatory lending practices which include;
- Exerting Extortionate And Usury Interest Rates,
- Inflated Principal And Interest Balances And Deductions,
- Irregular/Inflated Loan Consolidations During Restructures
- Fraudulent False Accounting In Respect Of Loan Balances,
- Costly Loan Conversions From Us Dollar To Shillings,
- Needless Loan Processing Fees For Variation/Consolidation Of Existing Facilities Etc,
- vii)Overall Breach Of Fiduciary/Statutory Duties.
Some of the orders and declarations being sought by Magoola and his companies include:
- A declaration that the 1st Defendant’s (Equity Bank Uganda) demand dated 27th June 2024 for payment of UGX 82,243,081,835/= as the outstanding loan against the first Plaintiff (Dei Industries International Ltd), is inflated, extortionate and l unconscionable.
- A declaration that the l st Defendant’s (Equity Bank Uganda) demand dated 27th June 2024, for payment of USD 43,230,937.65 as the outstanding loan against the 2nd Plaintiff (Dei Biopharma Ltd) is inflated, extortionate and unconscionable.
- An order for an account, audit and reconciliation of the Plaintiffs’ loan and current accounts held with the Defendants to determine the actual debt due under the credit facilities, variation of terms, loan consolidations and restructures thereto.
- An order directing the Defendants (Equity Bank Uganda and Equity Bank Kenya) to credit the Plaintiffs’ loan or current accounts with any amounts found to be unlawfully debited upon the taking of an account, audit and reconciliation.
- Alternatively, an order to offset the amounts unlawfully debited from the Plaintiffs’ (Dei Industries International Ltd and Dei Biopharma Ltd )account against any loan outstanding owed to the Defendants (Equity Bank Uganda and Equity Bank Kenya).
- Subject to (iii} above, an order directing the Defendants to refund to the Plaintiffs the sum of UGX 47,652,951, 120/= established to have been unlawfully debited on the Plaintiff loan accounts pursuant to the Plaintiffs audit.
Magoola also wants the court to declare that the two banks’ predatory lending practices resulted in a breach of his fiduciary and statutory duties owed to the banks.
“A permanent injunction restraining the Defendants (Equity Bank Uganda and Equity Bank Kenya) its agents or servants from taking any enforcement or recovery measures against the Plaintiffs in respect of any of the impugned loans until hearing and final determination of the main suit,” reads part of the suit.
Magoola has also prayed for general damages for material distress loss and damage to his businesses caused by the acts and omissions of the banks as well as exemplary damages. He also wants interest on any pecuniary award from the date of the breach at the rate of 18%, till payment in full as well as costs of the suit.
The CEO East Africa Magazine reached out to Equity Bank for a comment on the matter, but the bank declined to comment saying they do not discuss client issues in public fora.
It is not yet clear when the court shall start hearing the case, but either way Mr. Magoola must make deposit of 30% of the contexted amount before the case can proceed.