Bank of India (U) Limited v NC Beverages Limited and Another (Civil Suit Originating Summons 9 of 2021)

Observed later treatment

No later-treatment classification is recorded for this judgment.

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 secured creditors and tax recovery actions, as the Tax Procedures Code Act is procedural and not a taxing Act. A secured creditor's floating charge crystallises upon filing of a winding-up petition, converting to a fixed charge. Section 97(1)(c) of the Insolvency Act prohibits distress against a company after commencement of liquidation. The warrant of distress issued after the winding-up petition was filed was illegal and void. The secured creditor is entitled to foreclosure, possession of charged assets, and recovery of proceeds from the void sale.

Outcome

Judgment entered for the plaintiff with orders for 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 21st April 2021, the 1st defendant filed a winding-up petition. On 25th May 2021, the 2nd defendant (Uganda Revenue Authority) issued a warrant of distress to recover unpaid taxes of shs. 457,360,192/= and seized the 1st defendant's assets on 26th May 2021. The plaintiff obtained an interim injunction on 14th June 2021 restraining the sale until 14th July 2021. The 2nd defendant proceeded with a public auction on 20th 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.
4. Whether the High Court has original jurisdiction over the matter in light of the 2nd defendant's actions undertaken in execution of a taxing decision.

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 (32)

• 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 Appeals Tribunal Act s.1(1)(k)
• The Tax Appeals Tribunal Act s.1(1)(l)
• The Tax Appeals Tribunal Act s.14(1)
• The Tax Appeals Tribunal Act s.27
• The Tax Procedures Code Act s.3
• The Tax Procedures Code Act s.21
• The Tax Procedures Code Act s.23
• The Tax Procedures Code Act s.24
• The Tax Procedures Code Act s.30
• The Tax Procedures Code Act s.32
• The Tax Procedures Code Act s.32(5)(a)
• The Insolvency Act s.2
• The Insolvency Act s.11(2)(a)
• The Insolvency Act s.11(3)
• The Insolvency Act s.12(2)(a)
• The Insolvency Act s.12(6)(a)
• The Insolvency Act s.13(1)
• The Insolvency Act s.13(2)
• The Insolvency Act s.93
• The Insolvency Act s.93(2)
• The Insolvency Act 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)

Cases cited (18)

• Commissioner General of Uganda Revenue Authority v Meera Investments Limited (Supreme Court Civil Appeal No. 22 of 2007)
• Uganda Revenue Authority v Rabbo Enterprises (U) Ltd and Another (Supreme Court 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 (Court of Appeal 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 (High Court Miscellaneous Cause No. 219 of 2020)
• African Textile Mill Ltd v Co-operative Bank Ltd (High Court 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

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