Justice Stephen Mubiru, the head of the Commercial Division of the High Court halted DFCU bank application to withdraw a multibillion case against Baker Mugaino, the Acting Commissioner Land Registration and New Master Electronics and MP Electronics Limited.

In their application, DFCU through their lawyers led by Ernest Sembatya confirmed to Court that they have entered into a consent judgment with the Registrar Land Registration who was a party in the lawsuit and agreed to withdraw the matter.

However, the respondents’ lawyers lead by Fred Muwema and Robert Friday Kagolo protested the move claiming that it prejudiced their client and he was not consulted when it was signed.

Muwema submitted that before the consent judgment was filed in court on 12^th April, 2023, the respondent’s directors had already protested against it and their notice of disagreement was served to the bank and Registrar Land Registration.

He further accuses the bank of being dishonest by misleading court to endorse a consent judgment with the aim of defeating a public hearing before Commissioner Land Registration.

Sembatya on the other hand rubbished Muwema’s submissions and explained to the court that he has no right to stop the bank from withdrawing their own case.

After carefully listening to both parties, Justice Mubiru declined to allow the withdrawal of the case and advised the respondent’s lawyers to amend their defence.

The Commissioner Land Registration told the Court that he entered a consent judgment basing on a legal opinion over the matter given to him by Kiryowa Kiwanuka the Attorney General.

The suit stemmed from loan facility agreements issued by Crane Bank dated 6^th May, 2014 where MP Electronics Limited borrowed a sum of USD3m plus Shs3bn and secured the loans with mortgages over the suit properties registered in the names of the New Master Electronics Limited.

The properties used as security are situated at LRV 4009 Folio 11 plot 88 South Street, LRV 330 Folio 11 Plot 56 Seventh Street, Industrial Area and LRV 301 Folio 21 plot 58 Seventh Street Industrial Area.

The lawyers told Court that the borrower defaulted in servicing of the said loan facilities resulting in the issuance by Crane Bank of several default notices dating back to 5^th June, 2015.

They added that when Bank of Uganda in January 2017 sold and assigned DFCU bank to takeover Crane Bank’s loans portfolio, they took over the mortgages and other securities held in this respect including those of the defendants.

In October 2016, Bank of Uganda took over the management of Crane Bank by reason of its insolvency and placed it under statutory management.

Subsequently in January 2017, Bank of Uganda placed Crane Bank under Receivership.

The lawyers explained that the defendants protested through filing legal suits against the plaintiff and Crane Bank contesting their indebtedness to Crane Bank, the validity and enforceability by the plaintiff (DFCU) of the mortgage securities over the said suit properties.

The defendants further raised the question as to whether those mortgaged securities were validly and lawfully assigned by Bank of Uganda as a Receiver of Crane Bank to the plaintiff and whether the said assignment was completed in light of the mortgages claimed by the plaintiff.

The lawyers added that the validity and enforceability of the mortgage securities by the plaintiff were upheld in all the various suits where it was resolved that the matter of validity and enforceability of the mortgage securities is accordingly Res Judicata.

Based on the above argument, the lawyers protested the letter written by Baker Mugaino, the Ag Commissioner Land Registration subjecting them to a public hearing over the ownership of the mortgaged securities.

In his letter, Mugaino revealed that Dr. Sam Mayanja, the State minister of Lands received a petition from the Directors of Master Electronics Limited as the registered proprietors of the contested properties.

He stated that the petitioner’s properties were threatened by DFCU bank yet the mortgages are not registered in their name and requested that the said mortgages be removed as they are maintained illegally on the Land Register.

“By a Memo dated 13th June, 2022, addressed to myself from the Minister of State (Lands), the Hon minister reiterated that Crane Bank was closed by Bank of Uganda in January 2017 and ceased to be a legal entity as a financial institution or bank. The above position was settled as a question of law and fact by the Supreme Court of Uganda in Misc Application No 39/2020 Sudhir Ruperalia Vs Crane Bank Uganda Limited (in receivership) and Bank of Uganda.”

“That position is binding on all authorities and persons under Article 132(4) of the Constitution of Uganda and under Article 128(3), all organs and agencies of the State are obliged to accord to the Courts such assistances as may be required to ensure effectiveness of the Courts,” Mugaino’s letter reads in part.

He added that the petitioners allege that despite the fact that mortgage deeds were drawn between them and Crane Bank, there were no funds actually credited on their bank accounts.

He availed photocopies of their bank statements to that effect.

He also added that they were not informed by the management of Crane Bank then that the bank was facing liquidity problems.

DFCU declined to attend the public hearing at the office of the Commissioner Land Registration but their lawyers told court that the Commissioner’s Notice is unlawful and does not amount to summons for a hearing because the notice as framed has predetermined the question as to validity and enforceability of the mortgage charges over the suit properties.

DFCU lawyers asked court to issue a permanent injunction that the Commissioner Land Registration in execution of his quasi-judicial functions under Section 91 of the Land Act is not subject to the direction and control of the Minister of State for Lands.

They also want a court order that the Commissioner Land Registration removes the caveat lodged on the suit properties.

However, the defendants through their lawyers of Muwema and Company Advocates filed an application for dismissal of the entire suit on grounds of lack of jurisdiction.

In his affidavit in support of the application, Salim Pyarali Hirani, a director at the defendant’s companies insists that it is an abuse of court process for the plaintiff to challenge the powers of the Commissioner Land Registration to conduct a public hearing in respect of the defunct Crane Bank mortgage entries which appear on the land register.

He added that the impugned Crane Bank mortgages currently appearing on the land register are false and an illegal entry which lapsed by operation of law upon the defunct Crane Bank ceasing to be a legal entity as a financial institution.

He insisted that their mortgages were not part of the assets sold or purportedly assigned to DFCU under the PAAL agreement and deed of assignment respectively.

He accused DFCU of being a forum shopping with the Bank of Uganda, Attorney General to cajole the Commissioner Land Registration to enforce a position that it is the owner or lawful assignee of the Crane Bank mortgages which is not right.

In his opinion, the Attorney General Kiryowa Kiwanuka advised that the mortgages registered by Crane Bank and not sold, conveyed, assigned, transferred and delivered to DFCU, should not be cancelled as they are covered under section 16(1) of the Mortgage Act.

If the applicant’s application is allowed, DFCU is likely to lose mortgages resulting from 53 securities.

These include LRV 4410 Folio 13 plot 40 Lubas Road Jinja, LRV 4410 Folio 6 plot 55 Main Street Jinja, LRV 4412 Folio 10 plot 51 High Street, Mbarara, LRV HQT608 Folio 23 plot 4 Kennedy Square Soroti, LRV HQT608 Folio 22 plot 38 Soroti Block Gweri Road Soroti, LRV 4410 Folio 5 plot 80 and 82 Main Street Iganga, LVR HQT608 Folio 25 plot 143 Kabale, LRV HQT608 Folio 24 plot 145 Kabale, LRV 4410 Folio 8 plot 1 Adumi road Arua, LRV 4453 Folio 15 plot 11 Babiiha road Kabarole, LRV 4456 Folio 15 plot 4390 Block 208 Kyadondo Kawempe, LRV 4410 Folio 21 plot 20A Kyaggwe Mukono and LRV 4410 Folio 22 plot 18 Jinja road Mukono.

Others include; LRV 4412 Folio 12 plot 22 Kampala Entebbe road, LRV 4412 Folio 14 plot 2 Tanga road Malaba, Tororo, LRV 4412 Folio 15 plot 4 Tanga road Malaba Tororo, LRV 4412 plot 2A Broadway road Masaka, LRV 4494  Folio 10 plot 387 Block 18 Mengo Nateete, LRV 4411 Folio 18 plot 388 Block 18 Mengo Nateete, LRV 4411 Folio 16 plot 40 Main street Hoima, LRV 4411 Folio 25 plot 1B Ntinda road Ntinda, LRV 4410 Folio 9 plot 53 Nyabushozi block 68 Rushere, LRV 4420 Folio 15 plot 5 Block 76 Kabula Masaka, LRV 4410 Folio 15 plot 93 Kibuga Block 7 Mengo, LRV 4411 Folio 18 plot 1419 Kibuga Block 5 Mulago, LRV 4411 Folio 17 plot 1463 Kibuga Block 5 Mulago, LRV 4421 Folio 3 plot 44 and 46 Kamwengye road Ibanda, LRV 4410  Folio 19 plot 60 Block 333 Nabingo, LRV 4410 Folio 17 plot 817 Kibuga Block 10 Nakulabye, LRV 4410 Folio 11 plot 1 Fort portal road Bushenyi, LRV 4410 Folio 12 plot 52 Masindi, LRV 4567 Folio plot 54 Masindi Port road Masindi, LRV 4410 Folio 7 plot 103 Customs road Samia Bugwe Busia, LRV 4453 Folio 19 plot 101 Customs road Busia, LRV 4453 Folio 14 plot 18 Old Kabale road Ntungamo, LRV HQT688 Folio 1 plot 846 Block 652 Bulemezi, LRV 4410 Folio 16 plot 688 Busiro Block 438 Nkumba, LRV 4412 Folio 14 plot 893 Busiro Block 438 Nkumba, LRV 4412 Folio 11 plot 7 Luthuli Lane Bugolobi, Plot 106 Block 232 Kireka, LRV 2756 Folio 12 plot48 Lira Avenue Lira.

By Sengooba Alirabaki