Bank of India (U) Limited v NC Beverages Limited and Another (Civil Suit No. 9 of 2021)

Observed later treatment

Citator coverage is limited to judgments in the Wakilii corpus and source-matched treatment records. Absence of a signal is not an assertion that the case remains good law.

Holding

Held that the High Court has original jurisdiction over disputes concerning priority between a secured creditor's foreclosure rights and tax recovery by distress, as the matter does not involve a taxation decision under a taxing Act. The filing of a winding-up petition crystallised the plaintiff's floating charge and constituted default, entitling the plaintiff to foreclosure. The Uganda Revenue Authority's warrant of distress issued after the winding-up petition was filed violated section 97(1)(c) of the Insolvency Act and was void. Secured creditors stand outside winding-up proceedings and may realise their security. The sale proceeds obtained by URA must be applied to satisfy the plaintiff's secured debt.

Outcome

Judgment entered for the plaintiff with orders for delivery of possession of mortgaged property and recovery of proceeds from void sale

Facts

The plaintiff bank advanced two credit facilities totalling shs. 6,400,000,000/= to the 1st defendant in March and November 2019, secured by debenture and charge over the 1st defendant's fixed and floating assets. By September 2021, the 1st defendant defaulted with outstanding debt of shs. 4,236,039,316/=. On 21 April 2021, the 1st defendant filed a winding-up petition. On 25 May 2021, the Uganda Revenue Authority (2nd defendant) issued a warrant of distress to recover unpaid taxes of shs. 457,360,192/= and seized the 1st defendant's assets on 26 May 2021. The plaintiff obtained an interim injunction on 14 June 2021 restraining the sale until 14 July 2021. The 2nd defendant proceeded with a public auction on 20 November 2021, realising shs. 1,020,000,000/=. The plaintiff sought foreclosure and possession of the charged assets.

Issues

1. Whether the plaintiff is entitled to foreclosure and sale of the mortgaged assets.
2. Whether the plaintiff is entitled to take possession of the charged assets.
3. Whether the defendants should pay the costs of the suit.

Orders

• An order directing the defendants to forthwith deliver to the plaintiff or as the plaintiff directs, possession of the mortgaged property or of such part of it as is in the possession of the defendants.
• Recovery of the shs. 1,020,000,000/= received by the 2nd defendant as proceeds of the void sale, to be applied towards satisfaction of the plaintiff's debt.
• The defendants jointly and severally meet the costs of the suit.

Rules and key headnotes

Legislation cited (39)

• The Constitution of the Republic of Uganda, 1995 art.139(1)
• The Constitution of the Republic of Uganda, 1995 art.152(3)
• The Judicature Act s.14(1)
• The Civil Procedure Rules Order 37 rule 4
• The Tax Procedures Code Act, 2014 s.1(1)(k)
• The Tax Procedures Code Act, 2014 s.1(1)(l)
• The Tax Procedures Code Act, 2014 s.3
• The Tax Procedures Code Act, 2014 s.21
• The Tax Procedures Code Act, 2014 s.23
• The Tax Procedures Code Act, 2014 s.24
• The Tax Procedures Code Act, 2014 s.30
• The Tax Procedures Code Act, 2014 s.32
• The Tax Procedures Code Act, 2014 s.32(5)
• The Tax Procedures Code Act, 2014 s.32(5)(a)
• The Tax Appeals Tribunal Act s.1(k)
• The Tax Appeals Tribunal Act s.1(l)
• The Tax Appeals Tribunal Act s.14
• The Tax Appeals Tribunal Act s.14(1)
• The Tax Appeals Tribunal Act s.27
• The Insolvency Act, 2011 s.2
• The Insolvency Act, 2011 s.11(2)
• The Insolvency Act, 2011 s.11(2)(a)
• The Insolvency Act, 2011 s.11(3)
• The Insolvency Act, 2011 s.12(2)(a)
• The Insolvency Act, 2011 s.12(6)
• The Insolvency Act, 2011 s.12(6)(a)
• The Insolvency Act, 2011 s.13(1)
• The Insolvency Act, 2011 s.13(2)
• The Insolvency Act, 2011 s.93
• The Insolvency Act, 2011 s.93(2)
• The Insolvency Act, 2011 s.97(1)(c)
• The Security Interest in Movable Property Act, 2019 s.44(1)
• The Security Interest in Movable Property Act, 2019 s.47(1)
• The Security Interest in Movable Property Act, 2019 s.47(2)(c)
• The Security Interest in Movable Property Act, 2019 s.48
• The Security Interest in Movable Property Act, 2019 s.48(2)
• The Security Interest in Movable Property Act, 2019 s.54
• The Civil Procedure Act s.27(2)
• The Worker's Compensation Act

Cases cited (18)

• Commissioner General of Uganda Revenue Authority v Meera Investments Limited (Civil Appeal No. 22 of 2007)
• Uganda Revenue Authority v Rabbo Enterprises (U) Ltd and Another (Civil Appeal No. 12 of 2004)
• Robson v. Smith [1895] Ch D 118
• National Westminster Bank Plc v. Spectrum Plus Ltd [2005] 2 All ER 1000
• Agnew and Kevin James Bearsley v. The Commissioner of Inland Revenue, and Official Assignee for the Estate In Bankruptcy of Bruce William Birtwhistle and Mark Leslie Birtwhistle [2001] 2 AC 710; [2001] Lloyd's Rep Bank 251, [2001] 3 WLR 454
• Illingworth v. Houldsworth [1904] AC 355
• In Re Portbase Clothing Ltd; Mould v. Taylor [1993] Ch 388
• Buchler and another (as joint liquidators of Leyland DAF Limited) v. Talbot and another (as joint administrative receivers of Leyland DAF Limited) and Stichting Ofasec and others, [2004] 2 WLR 582; [2004] AC 298
• Governments Stock and other Securities Investment Company v. Manila Railway Company [1897] A.C. 81
• Environmental Action Network Ltd v Joseph Eyau (Civil Application No. 98 of 2015)
• Ayerst (Inspector of Taxes) v. C & K (Construction) Ltd [1976] AC 167
• In re Calgary and Edmonton Land Co Ltd (In liquidation) [1975] 1 WLR 355
• Food Controller v. Cork, [1923] AC 647
• Kenya National Capital Corporation Ltd v. Albert Mario Cordeiro & another [2014] eKLR (Civil Appeal 274 of 2003)
• Siraje Ndugga v Kabito Karamagi and Another (Miscellaneous Cause No. 219 of 2020)
• African Textile Mill Ltd v Co-operative Bank Ltd (Civil Suit No. 20 of 2005)
• Accord Iraqi Min. of Defence v. Arcepey Shipping Co., S.A. [1980] 1 All E.R. 480
• Polly Peck Intern., P.l.c. v. Nadir (No. 2) [1992] 4 All E.R. 769

Cases citing this judgment (1)

How later Ugandan judgments in the Wakilii corpus have cited this case. Treatment labels come from Sequitur — Uganda’s citator — each backed by a verbatim span from the citing judgment, and are not an assertion that this case is, or is not, good law.

• Okwi and Anothers v Ouka and Others (Miscellaneous Application 170 of 2023)

The original judgment as reported. Read the original PDF before relying on any passage.