Vaccine company, Dei Biopharma Limited, together with Dei Industries International which deals in wheat and maize flour processing and marketing together with their proprietor, Dr.Mathias Magoola have dragged Equity Bank to court over inflating loans advanced to them for up to shs39.2 billion.
In the suit before the Commercial Division of the High Court in Kampala in which Dei has jointly sued Equity Bank Uganda Ltd and Equity Bank Kenya Ltd, the company says after establishing a bank- customer relationship, it in 2016 acquired a shs400 million loan from Equity Bank Uganda Ltd.
The company says it subsequently acquired several other loans but all these credit facilities contained a clause that encouraged the two companies together with their proprietor, Magoola to obtain an independent legal opinion from a legal counsel in order to understand all the terms and conditions in the facility letters.
However, court documents show despite the above clause, Equity Bank was overbearing in its advice to the companies to take the loans and owing to the cordial relationship between the two, they took the advice and signed the credit letters without consulting external legal counsel.
“The plaintiffs(Dei) were also compelled to take the loans,variation of terms, consolidations ,and restructures as offered because they were in urgent need of money to finance their capital intensive projects,” court documents say.
Documents say the situation was further compounded by Equity Bank’s real threats of default fore closure or liquidation of Dei’s businesses which left the companies with no option but cede to the demands.
Dei companies say with the onset of the Covid pandemic and the outbreak of the Russia/ Ukraine war, their wheat imports were affected and factory close for three years but they managed to pay shs150 billion in loan and interests .
Court documents show that having realized this vulnerable situation, Equity took advantage and engaged in predatory lending practices.
“The predatory lending practices included the arbitrary transfer of a loan repayment of $9 million by Equity Bank Uganda to Equity Bank Kenya’s suspense account in Kenya thereby denying the plaintiffs cash to service the principal and interest arrears on their loan account in Uganda.”
Documents indicate that these acts deliberately kept Dei’s loan accounts out of funds and put them in substantial interest default of over shs1bn which was unlawfully charged.
Dei says the unilateral and arbitral conversion of Dei Industries International’s dollar loan of $2.43 million to Uganda Shillings caused a foreign exchange loss to Dei of $4,2750 which is approximately shs160.3 million.
The company avers that owing to the public interest served by its businesses, the Ugandan government made a decision to acquire an equity stake in Dei Biopharma Limited’s medical manufacturing plant and released some funds to clear the company’s indebtness with Equity Bank.
However, according to court documents, Equity Bank is now targeting to take all the funds released by government by demanding “inflated, extortionate and excessive loan balances of shs82.2 billion and $43.2 million from Dei Industries International and Dei Biopharma Limited respectively.
Dei says having found the requests not reasonable, the company requested a waiver of the interest but also offered to settle the outstanding loan of shs155.1 billion but rejected.
The company says it later commissioned an audit firm to look into the credit facilities and loan statements to determine the correct loan outstandings but it was found out that Equity had inflated loan outstandings claimed by shs39.2 billion.
Dei says the inflation came about because of 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 and consolidation of existing facilities and overall breach of fiduciary duties.
Declarations
Dei seeks court to declare that Equity Bank Uganda’s demand dated June, 27, 2024 for payment of shs82.2 billion and $43.2million as the outstanding loan against Dei Industries International Ltd and Dei Biopharma Ltd is inflated, extortionate and unconscionable
“The plaintiffs are seeking for court to issue 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,” court documents read in part.
The companies also want court to issue an order directing Equity Bank Uganda and Equity Bank Kenya to credit their loan or current accounts with any amounts found to be unlawfully debited upon the taking of an account, audit and reconciliation.
Alternatively, Dei wants an order to offset the amounts unlawfully debited from the Dei Industries International Ltd and Dei Biopharma Ltd account against any loan outstanding owed to Equity Bank Uganda and Equity Bank Kenya.
