By BigEyeUg Team
The Commercial Division of the High Court has dismissed a longstanding legal challenge by Simbamanyo Estates Limited, bringing closure to a high-profile financial dispute involving Equity Bank Uganda, Equity Bank Kenya, and Mauritius-based Bank One.
In a 67-page ruling delivered on July 25, 2025, Justice Harriet Grace Magala affirmed that the $10 million post-import loan facility issued to Simbamanyo was lawfully executed, enforceable, and free of fraud or undue influence.
Background of the Case
The dispute stems from a syndicated $6 million loan Simbamanyo obtained in 2012 from Equity Bank Uganda and Equity Bank Kenya. In 2017, the company secured a $10 million bridge loan from Bank One, backed by a standby letter of credit issued by Equity Bank Kenya. After Simbamanyo defaulted, Equity Bank Kenya triggered the standby letter, repaid Bank One, and subsequently activated a post-import loan facility with Equity Bank Uganda.
Simbamanyo challenged the transaction, arguing that Equity Bank Uganda was not the designated lender and that a formal loan utilization request had not been issued. The company also claimed the loan breached Uganda’s Financial Institutions Act.
Key Court Findings
Justice Magala decisively rejected Simbamanyo’s arguments, stating:
- Loan Execution Was Legal: The court found no evidence of illegal banking activity or regulatory breach. “The syndicated loan arrangement was a permissible and commercial necessity,” the judge said.
- Utilization Request Was Optional: The court ruled that under the agreement, the loan could be executed without a formal utilization request. “The facility was self-executing upon default and encashment of the standby letter of credit,” Justice Magala noted.
- Foreign Lending Not Prohibited: Simbamanyo’s claim that Equity Bank Kenya and Bank One conducted unlicensed banking in Uganda was dismissed. The judge clarified that the Financial Institutions Act restricts deposit-taking, not borrowing from foreign entities.
- No Fraud or Undue Influence: The court found no evidence of fraud, misrepresentation, or breach of fiduciary duty. “There was no fraudulent misrepresentation, undue influence, or breach of fiduciary duty proved against the defendants,” the judgment stated.
- No Need for Written Demand: Simbamanyo’s claim that it wasn’t notified before the loan was enforced was also dismissed. The court emphasized that legal obligations under a standby letter of credit do not require borrower consent at the point of execution.
Implications and Outcome
The court ruling effectively upholds the sale of Simbamanyo’s mortgaged properties—Simbamanyo House and Afrique Suites Hotel—auctioned in 2020 to recover the loan. Simbamanyo House was acquired by Meera Investments, owned by businessman Sudhir Ruparelia, while Afrique Suites was taken over by Luwaluwa Investments.
These sales, which sparked intense public and legal debate, are now deemed valid and irreversible. The court’s decision ends years of litigation and sets a significant precedent for syndicated and cross-border lending arrangements in Uganda.
A Win for the Banking Sector
The ruling not only vindicates the actions of Equity Bank Uganda, Equity Bank Kenya, and Bank One Limited but also signals judicial support for cross-border syndicated lending under Uganda’s legal framework. It reinforces lender rights in enforcing loan agreements and underscores the legal integrity of complex financial instruments like standby letters of credit.
For the Ugandan banking and business communities, the verdict offers renewed confidence in the enforceability of financial contracts and the resilience of the legal system in upholding commercial obligations.
