Wakilii

Tabaro & Another v Mohammed & 2 Others (Miscellaneous Cause 34 of 2020)

High Court · [2024] UGCOMMC 155 · 2024 Application Granted AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application by receiver for orders compelling directors to provide documents and assets under receivership, and to refrain from obstructing receivership proceedings
Decision
Application granted. The 1st and 2nd Respondents ordered to comply within 30 days with provision of documents, assets, and statutory verification, and to refrain from obstructing receivership. Bond required for compliance.

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The court held that the receiver's appointment was valid notwithstanding non-compliance with the notice requirement under Section 178(2) of the Insolvency Act, as Section 178(4) provides that such non-compliance does not invalidate the appointment. Receivership may continue until all sums due are recovered and has no statutory time limit. The 1st and 2nd Respondents were ordered to provide all documents, information, and charged assets to the receiver within thirty days and to verify their completeness by statutory declaration.

Outcome

Application granted. The 1st and 2nd Respondents ordered to comply within 30 days with provision of documents, assets, and statutory verification, and to refrain from obstructing receivership. Bond required for compliance.

Facts

Orient Bank Limited granted three credit facilities to Pan Afric Commodities Limited in November 2018 totalling USD 1,700,000, USD 600,000, and UGX 1,000,000,000, secured by floating charges over company stock and receivables registered under debentures dated September and October 2015. The borrower defaulted. Demand and default notices were served in September and October 2019. As of October 2019, the debt stood at UGX 946,017,562 and USD 2,369,348. Orient Bank appointed Edwin Tabaro as receiver on 20 March 2020. The 1st and 2nd Respondents, who are directors of Pan Afric Commodities Limited, refused to provide the receiver with documents, information, or charged assets necessary to conduct the receivership. The receiver brought this application seeking orders compelling compliance under Section 185 of the Insolvency Act.

Issues

  1. Whether the Applicants have locus standi to bring this application in light of assertions that the security is void or unregistered.
  2. Whether the debt secured by the debenture has been paid.
  3. Whether the 1st Applicant's appointment as receiver was invalidated by failure to provide statutory notice within fourteen days under Section 178(2) of the Insolvency Act.
  4. Whether the receivership has exceeded the statutory timeframe and should be terminated.
  5. Whether the 1st and 2nd Respondents should be compelled to provide documents, information, and charged assets to the receiver under Section 185 of the Insolvency Act.

Orders

  • An order directing the 1st and 2nd Respondents to make available to the Applicants all documents and all information relating to all the property under receivership to wit; all company stocks and receivables registered under Debenture Certificate No. 19827 dated 22 September 2015 and Certificate No. 18682 dated 16 October 2015, Hebei Huangpai Food Machine & ABC Hansen Flour Milling machines and Bakery Machine INO AYA Bakery (U) Ltd registered under certificate No. 19828 dated 22 September 2015 within thirty (30) days from the date of this judgment.
  • An order directing the 1st and 2nd Respondents to verify by statutory declaration that all documents and information made to the Applicant are complete and correct within thirty (30) days from the date of this judgment.
  • An order against the 1st and 2nd Respondents restraining them from obstructing and/or interfering with the lawful receivership of the 3rd Respondent.
  • An order requiring the 1st and 2nd Respondents, within thirty (30) days from the date of this judgment to issue a bond to comply with this judgment for a sum to be determined by the Registrar of Court which may be forfeited to the Applicants in the event of non-compliance with this judgment.
  • Costs be paid by the 1st and 2nd Respondent.

Rules and key headnotes

Receivership — Validity of Appointment — Effect of Non-Compliance with Notice Requirements
A receiver's failure to provide statutory notice of appointment within fourteen days under Section 178(2) of the Insolvency Act does not invalidate the appointment. Section 178(4) expressly provides that non-compliance with the notice requirement does not affect the validity of the appointment or the receiver's exercise of powers.
Receivership — Duration — No Statutory Time Limit
Receivership arising from corporate borrowing has no statutory time limit and may continue until all sums due and owing under the debenture are recovered. The Insolvency Act Sections 189-197, which provide for termination of receivership by court, do not impose a time limit on the duration of receivership.
Receivership — Duty of Directors — Provision of Documents and Assets
Under Section 183 of the Insolvency Act, a company under administrative receivership and its directors must make available to the receiver all documents and information relating to the company and all property under receivership. The grantor must, if required, verify by statutory declaration that material provided is complete and correct. A receiver may apply to court under Section 185 for an order compelling compliance.
Receivership — Nature and Powers — Rights in Rem Over Charged Property
A receiver appointed by debenture holders has rights in rem in respect of charged property. The receiver's primary duty is to act bona fide to realise the company's assets in the interests of the debenture holder, while owing duties to the company akin to those of a mortgagee liquidating pledged assets. Legal control of the company shifts to the receiver who directs its operations.
Receivership — Authority to Instruct Counsel — Replacement of Directors
From the date of commencement of receivership, the receiver exercises the functions of the board of directors under Section 181(2)(b) of the Insolvency Act unless restricted by the debenture. No party, including the company's directors, may authorise a defence or instruct counsel on behalf of the company under receivership, as only the receiver holds such power.
Locus Standi — Enforcement of Security — Parallel Litigation
Separate litigation involving debtors and lenders does not per se preclude proceedings by lenders to enforce their rights under lending agreements. An in-depth consideration of the efficacy and validity of finance documents may be reserved for separate substantive proceedings, while enforcement applications may proceed simultaneously in the absence of a temporary injunction.
Burden of Proof — Detailed Testimony — Weight of Evidence
Courts base their decisions on evidence and not assumptions, abstractions, or innuendos. Where parties dispute factual matters such as handover of assets or documents, the party whose evidence is more detailed, explorative, and consistent with lived experience is more likely to be found credible than a party whose evidence merely contains bare denials.

Legislation cited (17)

Cases cited (31)

  • Board of Governors Nebbi Town SSS v Jakker Food Stores Ltd (HCMA No. 62 of 2016)
  • Industrial and Commercial Development Corporation v Daber Enterprises Ltd, [2000] 1 EA 75
  • Continental Butchery Ltd v Ndhiwa, [1989] KLR 573
  • King's College Budo Staff Savings Scheme Limited v Zaverio Samula & Ors (HCCS No. 26 of 2020)
  • Dima Dominic Poro v Inyani Godfrey & Anor (HCCA No. 16 of 2016)
  • Cwezi Properties v UDB (HCMA No. 1315 of 2022)
  • Stanbic Bank Uganda Limited v Kesacon Services Limited (HCMA No. 824 of 2023)
  • Bank of Rajasthan Limited v. VCK Shares & Stock Broking Services Limited CIVIL APPEAL NOS.8972-8973 OF 2014
  • Indian Bank vs Abs Marine Products Pvt. Ltd Appeal 10074-10075 of 2003
  • Centenary Bank v Federation Of Association Of Uganda Exporters Limited & Ors (HCCS No. 474 of 2016)
  • Luswata Mary Veronica v Exim Bank (HCMA No. 1118 of 2023)
  • Smile Communications Limited v ATC Uganda (HCMA No. 2314 of 2023)
  • Vantage Mezzanine Fund II Partnership & Anor v Commissioner Land Registration & Ors (HCMA No. 2484 of 2023)
  • Bank of Baroda v. Panessar [1986] BCLC 497
  • Re Joshua Shaw & Sons Ltd [1989] BCLC 362
  • Gomba Holdings UK Ltd and Others v. Homan and Bird [1986] 1 WLR 1301
  • Re B. Johnson & Co. (Builders) Ltd [1955] Ch 634
  • Downsview Nominees Ltd v First City Corporation [1993] AC 295
  • Medforth v. Blake [1999] 3 All ER 97
  • Silven Properties and Another v. The Royal Bank of Scotland plc [2003] BCC 1002
  • In the matter of Star Elm Frames Ltd [2019] IECA 231
  • Grant v Arena Alceon NZ Credit Partners LLC [2023] NZHC 3048
  • Harry Ssempa v Kambagambire David (HCCS No. 408 of 2014)
  • Iyamuleme David v Attorney General (SCCA No. 4 of 2013)
  • Kwizera Eddie v Attorney General (SCCA No. 1 of 2008)
  • Kinyera George v Victoria Seeds Limited (HCCS No. 604 of 2015)
  • Anglo-Cyprian Trade Agencies Ltd v. Paphos Wine Industries Ltd, [1951] 1 All ER 873
  • Green Meadow v Patrice Namisono (HCMA No. 1368 of 2022)
  • M/s TATU NAIGA & Co Emporium v Verjee Brothers Limited (SCCA No. 8 of 2002)
  • Soon Productions v Soon Yeon Hong Kim Dong Yun (HCMA No. 190 of 2008)
  • United Assurance v Attorney General (SCCA No. 1 of 1998)

Full judgment

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Tabaro & Another v Mohammed & 2 Others (Miscellaneous Cause 34 of 2020) [2024] UGCommC 155 (22 April 2024)
Source: this page presents Wakilii’s issue analysis and metadata for a publicly reported Ugandan judgment. Any AI-generated summary is marked as such. Judgment text is sourced from the Uganda Legal Information Institute (ulii.org). Wakilii is not affiliated with ULII.