Hostel, bank row over sh950m

By Andante Okanya

Lodging facilities company Yolanda Hostels Limited and Uganda Development Bank (UDB) are rowing over sh950m, with former accusing the latter of breach of contract.

On September 11, Yolanda filed a civil suit at the High Court in Kampala, contending that UDB’s unprofessional actions caused it loss. It was filed through Bwambale, Musede and Company Advocates.

Court documents show that in July 2011, the company managing director Piro Santos acting on its behalf, sought financing from UDB to refinance a loan from Centenary Bank.

The company also intended to finance the completion of two floors comprising 46 rooms at a hostel. After five months, the bank made an offer to finance the company’s projects.

Subsequently the parties struck a mortgage deed where the UDB advanced sh950m secured by land comprised as Kibuga Block 9 Plot 701, near Makerere University. The loan agreement was then executed on March 14, 2012.

But the company alleges that the bank delayed the transmission of the first installment, for “such unreasonably long period of time” which caused the project setbacks.

“The prices of the building materials escalated due to the inflation crisis making it hard for the plaintiff(Yolanda) to complete the proposed project within the specified period of time,” the plaint states.

The plaint does indicate neither  the amount of money, nor the period in which the funds would be disbursed.

Santos asserts that the entire project stalled, yet its completion was intended to service the loan.

The company accuses UDB of dishonesty, saying despite the central bank’s reduction of commercial bank’s lending rates, it has continuously charged a higher interest rate.

The company also cites a clause in the agreement “to vary the interest rates depending on the circumstances”.

Yolanda wants court to permanently restrain UDB from taking over its management, putting the company on receivership, and attaching its property for sale.

Court summons to file a defence within 15 days, dated September 13, 2013, have since been issued by registrar Tadeo Asiimwe. It has been cautioned to heed, lest judgement is delivered without its input. However, the bank is yet to file its defence.

The case  file has been allocated to Justice Yasin Nyanzi. However, a hearing date is yet to be fixed.