Up for sale. One of the Shumuk properties in the UMA Lugogo Showgrounds that Bank of Baroda has threatened to auction. PHOTO / COURTESY
Shumuk has been a household name for many years and continues to, irrespective of the current circumstances it finds itself in.
It is one of Uganda’s elite brands that, despite the many challenges it has faced in recent years, continues to stand tall.
It is a battle-hardened group of companies owned by businessman Mukesh Shukla.
About 14 years ago Shumuk and associated companies got entangled in a court battle that would later become an open confrontation with the late businessman Bonney Katatumba and later, by extension, his daughter, Angella Katatumba, over $5m (Shs19.2b).
The confrontation was so intense that it left both Shumuk and the Katatumba estate bruised in many ways.
To date, the two have continued to hold out, sometimes in public, and the numerous rulings spanning over 10 years, have not helped matters. Many Ugandans seem to have been lost in the rulings to have a definitive understanding.
However, outside the Katatumba drama, Shumuk has been facing much tougher challenges that are largely existential and a threat to the group’s operations.
In 2018, MMAKS Advocates, acting on instructions of a financial institution, put up at least seven properties under Shumuk for sale over failure to repay a debt obligation in the excess of Shs10b.
MMAKS said then its client had explored all options and was only left with selling the properties to recover the debt.
That has been about five years and not much has been heard about the case since. However, two properties under Shumuk were again advertised in 2019 over a loan dispute involving Shumuk and Bank of Baroda.
Shumuk challenged the matter in court and secured a temporary injunction that stopped an impending auction.
In an application filed in the Commercial Division of the High Court in 2019, Shumuk indicated it had had a solid financial relationship with Bank of Baroda spanning over 30 years, in which period it had operated a credit and overdraft account through which different facilities were transacted.
In 2017, court documents show, Bank of Baroda extended two facilities of Shs6.3b and $350,000 (Shs1.3b) to Shumuk Aluminum Industries that were guaranteed by Mukesh Shukla and secured by two properties one on Makubuya Road in the Nakawa Industrial Area and another in the UMA Lugogo Showgrounds in Kampala.
It is from here that the troubles started and Shumuk partly blamed Bank of Baroda then for weakening its ability to repay issued debt, which had never happened since 1992.
For instance, documents indicate that despite the long relationship, Bank of Baroda drastically reduced the value of overdraft facilities to Shumuk from $1.3m (Shs4.9b) to just $350,000 (Shs1.3b), “thereby leading to strangulation of its operations, which diminished its income returns and ability to remit loan repayments”.
Shumuk further accused Baroda of issuing a notice of sale “on the false ground of non-payment of loan facilities”, while at the same time, it was done “without prior demand nor warning”. It also disputed the amounts in default and questioned why a loan whose repayment period was 48 months (from January 2017) was recalled under two years in January 2019 when it still had over 20 months to run.
Shumuk also accused Bank of Baroda then of breach of terms, having adjusted the base lending rate upwards to above 26 percent, which was a contravention of fiduciary duty.
However, after over three year, in February this year, Bank of Baroda re-advertised the referenced properties, forcing Shumuk to seek an injunction, under which it sought to stop the impending sale until disposal of the main suit filed in 2019.
Thus, in an order issued on March 27, the Commercial Division of the High Court, presided over by His Worship John Paul Edoku issued a temporary injunction, halting the sale of the disputed properties until final disposal of the main application.
In an application filed to support the order on March 27, an affidavit sown by Mukesh Shukla indicated that Shumuk Aluminum Industries is not indebted to Bank of Baroda, noting that “it is not true at all that [Shumuk Aluminum Industries] is indebted to [Bank of Baroda] in the amounts claimed ... or at all since all the credit facilities were fully repaid”.
However, Bank of Baroda insists that Shumuk owes it Shs18.46b with interest accrued.
In a written statement of defense and a counterclaim, Bank of Baroda indicated it had acted lawfully when it instructed H&G Advocates to “proceed to sell … the property … unless Shumuk Aluminum Industries pays … all the outstanding loan balances [principal and interest and other charges within] 30 days from the date of publication”.
The advert was published on February 26.
Background
The relationship
Bank of Baroda and Shumuk have had a healthy business relationship since 1992, in which the bank has extended several credit facilities to the companies under Shumuk.
Court documents indicate that through this relationship, Shumuk has accessed more than $5m in loans and business financing over the years.
And in all the years it has dealt with Bank of Baroda, it claims it has dully serviced its loans.
However, the relationship soured in 2019, which resulted in a court battle that now threatens one of Uganda’s elite brands.
Reported by Anthony Wesaka, Precious Delilah & Deogratius Wamala
