KAMPALA: Embattled Tropical Bank Uganda Limited and its client IT Office [U] Limited are confused, panicking, and shaming the local banking sector after failing to repay a loan of over Shs 6.840 billion to Prime Finance Company Limited even after court has ordered the two cunning and daring partners to do so. This money has now accumulated to over Shs 21 billion.
This is after on March 13, 2020, Prime Finance Company Limited extended a Shs 5.7 billion loan to IT Office [U] Limited at an interest of 5 percent per month for the agreed period of four months, with Tropical Bank Uganda accepting in writing that it would repay the loan should IT Office [U] Limited fail to do so. It is now over four years but no single coin has been paid hence the accumulation of the debt.
How Tropical Bank Uganda landed in trouble
In February 2020, IT Office [U] Limited requested the said loan from Prime Finance Company Limited, with Tropical Bank Uganda, the banker of the IT solutions company, accepting an irrevocable undertaking binding IT Office [U] and Tropical Bank Uganda Limited to repay the principal and the interest on the loan once it accrued. The total amount of over Shs 6.840 was supposed to be repaid by July 9, 2020.
According to an inside source within the bank, the purpose of the loan from Prime Finance Companies Limited was to clear off outstanding loan liabilities of over 5.7 billions which IT office (U) Limited owed to Tropical Bank (U) LTD in order to secure another huge loan.
However, what is funny is that the board of Tropical Bank Uganda Limited are not willing to repay Prime Finance Company Limited its money, or transfer the collateral properties of IT Office [U] Limited to the lender, claiming that the loan transaction was fraudulent, an allegation the bank’s senior staff who did the paperwork dismiss, saying internal procedures allowed them to sign on behalf of the bank, and that is what they did to benefit the bank, and not them as individuals.
The bank’s staff who dismissed the allegations are the Executive Director, Head of Credit, and Legal Manager [all names withheld]. After signing the irrevocable undertaking on behalf of the bank, the same officials sealed the same irrevocable undertaking with the official bank seal, meaning all was okay, and therefore the bank had to pay over Shs 6.840 loan to Prime Finance Company Limited.
Under the irrecoverable undertaking, Tropical Bank Uganda as the undertaker guaranteed that the debt was recoverable against them with 5 percent interest per month until full repayment, regardless if their client IT Office [U] Limited was able or unable to repay the debt.
Copy of irrevocable undertaking letter from Tropical Bank (U) LTD
Important to note, is that IT Office [U] Limited’s loan of Shs 5.7 billion from Prime Finance Company Ltd helped the bank to recapitalise as demanded of it by the Bank of Uganda [BoU], the regulator of the banking industry in the country. This money from Prime Finance Company Limited would enable IT Office [U] Limited to secure another Shs 10 billion from Tropical Bank Uganda since the bank still held the company’s collateral including various pieces of land, and a motor vehicle worth billions of shillings.
Indeed, staff of the bank confirm that IT Office [U] Limited started overdrawing its account after paying the Shs 5.7 billion debt to Tropical Bank Uganda, making the bank a beneficiary of Prime Finance Company Limited’s money.
However, despite several reminders that Tropical Bank Uganda pays the debt to Prime Finance Company Limited, the former has not been cooperative. The bank in a bizarre move shifted goal posts, running to BoU, claiming that the Shs 5.7 billion loan transaction was a result of fraud, but the response from Prime Finance Company made Bank of Uganda advise Prime Finance Company that it seeks remedies available to it under the Contract Act 2010, BoU having recognised that there was an irrecoverable undertaking on the side of Tropical Bank Uganda to repay the loan and interest at the time of signing the agreement.
A copy of the letter to Bank of Uganda (BoU) from IT Office (U) LTD
Following BoU advice, Prime Finance Company Limited, through its lawyer, would on December 4, 2022, file a suit against IT Office [U] and Tropical Bank Uganda, and on August 30, 2021, court ruled in favour of Prime Finance Company Limited for recovery of Shs 6.84 billion, repayable at interest rate of 5 percent per month on the decretal sum till payment in full and costs in the main suit and application be borne by the respondents. But since the ruling, no repayment has been made by Tropical Bank Uganda.
A copy letter from Bank of Uganda (BoU) advising Prime Finance (U) LTD
Yet in a meeting at Tropical Bank Uganda when the Shs 5.7 billion was being sought, its officials assured Prime Finance Company Limited that the bank would personally repay the money guaranteed by July 9, 2022, yet the bank officials also agreed to pay interest on principal sums in case the bank failed to pay the money on an agreed date.
From the documents in possession of this website, it appears Tropical Bank Uganda Board of Directors want to use the excuse of not authorising their senior staff to transact loan business to defraud Prime Finance Company Limited, especially under the influence of the current Executive Director, formally heading the Recovery Department of the bank at the time of this transaction.
Effect of gross mismanagement and conflict of interest
It should also be noted that there was fierce infighting within the bank at that time as top managers threatened to tear each other into pieces to rise to the top. It’s such internal strife and the bank’s financial struggles that became unbearable for Former ED, Head of Credit department, and of operations, prompting them to hand in their resignation letters.
The infighting, knowledgeable sources say sharply divided management into two rival gangs, with Managing Director Abdul Aziz Mansul, Head of Compliance Caroline B Ogwang and then Head of Recovery Joweria Mukalazi teaming up to throw out ED and his allies in the bank owned by Libyan government through the Libyan foreign bank. Ogwang and Joweria were cited as those who ruthlessly fought off former Executive Director so that they could take up his position. Indeed Joweria Mukalazi was elevated to the position of bank’s Executive Director in acting capacity.
It’s against this background that most of the bank’s sensitive transactions that were carried out under Former ED’s stewardship were allegedly queried as result of his rivals’ biased actions, something that affected both clients and general bank operations.
– dailypostug.com
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