High court halts bank sale of Shumuk places in Nakawa, Lugogo 

A March 26 ruling by the High court has stopped the sale of two multi-billion properties owned by businessman Shukla Mukesh.

John Paul Eduko, the High court registrar, halted the sale of the Shumuk Aluminium Industries Ltd plant in Nakawa as well as another prime property in Lugogo UMA showgrounds until the disposal of a suit between Mukesh and Bank of Baroda.

RELIEF

The bank had given a 30-day ultimatum to Shumuk to clear an outstanding loan it is claiming from the group investments, or it proceeds to conduct the sale process. The bank also issued a similar notice to tenants of the other UMA-based building which sits a plot it wants to auction, to vacate “with immediate effect” or face forceful eviction at ‘their own costs and peril’.

However, Eduko overturned the process and warned the bank as well as all its agents to stay away from their planned actions and intentions, until the disposal of the final suit still pending with Shumuk.

“An interim Order doth issue to restrain the Respondent, its agents, servants or anyone claiming the title under it from selling, transferring and tampering with the property comprising in LRV 2909, Folio 9 Plot 24 Mukabya Road at Kampala (Shumuk plant factory) and sub-lease on LVR Volume 2566 Folio 23 No. M700 land at UMA Lugogo Naguru show grounds Kampala until the disposal of the main application,” the registrar noted.

LEGAL BATTLE

Mukesh sued Bank of Baroda contesting the bank’s claims for a loan it advanced to the Shumuk group in 2010 amounting to Shs 6.3bn as well as another $350,000 (1.3bn).

Mukesh swore an affidavit on oath where he said he had settled the bank and honoured all his loan obligations to them since the time of issuance of the said loan. He said his group investment borrowed the said loan as ‘working capital’ to run the factory which was advanced on grounds of the strong relationship they had built with the bank since 1994 when they started borrowing from the bank.

However, the bank claims the group still owes them money amounting to Shs 18.4bn arising out of bank interests and unpaid-up sums. It is against this background that the bank issued the ‘sale notice’ and had wanted to mortgage the entire Shumuk plant and factory alongside the said UMA-based land and property.

In his affidavit, Mukesh argued that after settling their loan with the bank, they were surprised to learn about the bank’s intentions of attempting to auction them off.

He said the bank recalled the loan back in 2018 yet in their records they owed no single penny to the bank, hence their (Shumuk’s) decision tosue the bank and open up a new suit against them in 2019. Mukesh further cried out in his affidavit that it was wrong for the bank to want to auction their two mortgages which had only acted as security for a loan they had in reality completed settling.

Reached out for a comment, both lawyers representing the two parties declined to comment on grounds that the matter is still before court and, therefore, prohibited from public discussion.

Established in 1992, Shumuk group is in the business of producing aluminium products and employs more than 1,000 workers. Shortly after the ruling, Dan Muhumuza, Shumuk’s general manager, said the impending closure or the takeover process would have grossly affected the hundreds of employees and labour force.

“We make a turnover of over $1.5m annually and over the years have been listed among the top 20 taxpayers,” he said. “The takeover would have had a negative ripple effect on the Uganda’s manufacturing industry and URA.”

WORRYING TREND

The ongoing saga between Bank of Baroda and Shumuk Group Ltd is just the latest in complex multi-billion cases. Early this year, Justice Patricia Mutesi issued an administrative order halting Bank of India Ltd from selling a disputed piece of land in Kampala city worth Shs 76.2 billion.

The bank had classified the land as a non-performing asset after claiming that two Indian investors had failed to pay a loan of Shs 4.9 billion. However, the investors maintained that they had already cleared the loan by December 2023.