Kenya: DTB-Kenya Acted Within the Law in Extending Loan to Ham, Court Rules
The Supreme Court has ruled that there was no illegality committed when DTB-Kenya, a foreign bank offered credit facilities to Kampala businessman, Hamis Kiggundu of Ham Enterprises.
In the shs120 billion loan case, Commercial Court’s Justice Henry Peter Adonyo ruled that the act of DTB-Kenya which is licenced to carry out financial business in Kenya offering credit facilities in Uganda was illegal.
On Tuesday, the panel of five justices of the Supreme Court reversed this order noting that it is not true that DTB Kenya carried out financial services business in Uganda as alleged.
The justices explained that DTB- Kenya is not licenced or regulated to carry out financial institution business in Uganda and therefore could not appoint DTB Uganda as its banking agent within the provisions of the Financial Institutions Act, 2004, and the Agent Banking Regulations of 2017 but rather under a syndicated agency relationship.
“In the syndicated agency relationship created between the 1st and 2nd Respondents as banking institutions, the rights and duties conferred on the first Respondent(DTB-Uganda) as the agent bank in the relationship between the two banking institutions, makes the 1st Respondent a fiduciary to the 2nd Respondent. This is because the 1st Respondent is responsible for the disbursements of the funds from the 2nd Respondent to the Appellants, holds the mortgaged loan securities in trust for the 2nd Respondent, and follows up on the servicing of the loan by the Appellants for remittance to the 2nd Respondent.”
“I can’t see how this arrangement and the transactions that were carried out pursuant thereto could be construed to mean that the 2nd Respondent carried out financial institution business in Uganda within the meaning ascribed to the phrase “financial institution business” by the Financial Institutions Act, 2004, as amended, and the Financial Institutions (Agent Banking)10 Regulations, 2017, made thereunder.”
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In his lead judgment, the Chief Justice pointed out that no law was cited or brought to
the attention of the court which forbids the creation of the impugned syndicated agency relationship entered into by DTB-Kenya and DTB -Uganda.
“Similarly, no law was brought to this court’s attention that forbids foreign financial institutions from extending credit facilities to any financial institution or person in Uganda. If anything, in furtherance of international trade and investment, financial institutions the world over are known to engage in global financial business transactions by dealing with, or through, financial institutions based in other jurisdictions.”
” In the case of Uganda, such international financial business transactions are certainly neither governed by the Financial Institutions Act, 2004, as amended, nor the Financial Institutions (Agent Banking) Regulations, 2017, made pursuant thereto.”
