Re: DIAMOND TRUST BANK (U) & DIAMOND TRUST BANK (K) LTD V HAM ENTERPRISES & 2 OTHERS – Civil Appeal No. 242 of 2020 (5th May 2021).
- Background of the matter:
In 2020 the Borrower, Ham Enterprises applied to the high court of Uganda for orders among others that the lending by Diamond Trust Bank Kenya (“DTBK”), a Kenyan bank to the borrower Ham Enterprises (a Ugandan entity) was illegal on the basis that the Kenyan Bank engaged in financial institution business without due authorization and permission from the Bank of Uganda (“BoU”).
The trial court ruled that the Financial Institutions Act (“FIA”) applies to foreign banks and it was illegal for money held on deposit, whether in Uganda or outside, to be lent without the approval of the BoU.
The trial court further ruled that the FIA required the local licensing of foreign banks doing business in Uganda. In consequence of its findings, the court declared the lending transactions by DTBK to Ham Enterprises to be illegal and void ab initio for violation of the FIA. The Borrower’s debt was declared settled by law. An immediate release of all the mortgaged property and a full refund of all monies allegedly debited from the Borrower’s account by DTBU was also declared.