Court halts liquidation of Jomayi property consultants

KAMPALA - Jomayi Property Consultant’s proprietor, Joseph Magandazi, has breathed a sigh of relief after the Court of Appeal temporarily halted the liquidation of the real estate company.

On April 27, 2024, Justice Michael Elubu of the Civil Division of the High Court declared Jomayi insolvent over a sh868m debt owed to NC Bank Uganda Limited.

However, the Court of Appeal Justice Christopher Gashirabake has stayed the execution of the lower court’s order, pending determination of Jomayi’s appeal.

“The application is hereby granted. Therefore, the court issues an order staying the winding-up proceedings and the appointment of a liquidator, arising from the High Court orders,” he ruled.

The Court of Appeal's Registrar, Hellen Rukundo Owembabazi, delivered the judges' ruling today, November 12, 2024, in the presence of Anthony Bazira, the lawyer representing Jomayi, and William Kasozi, representing the bank.

Gashirabake justified his decision, stating that Jomayi faces the threat of liquidation.

“Once the liquidator is appointed, then the existence of the applicant is threatened. This cannot be atoned for in damages. The winding up of a company has other implications that go beyond financial compensation. I, therefore, find that the applicant has demonstrated that it would suffer irreparable loss,” he noted.

The judge observed that since Jomayi is exceeding its unrestricted right of appeal and meets the conditions for the grant of stay of execution, it is the duty of the court to ensure that their appeal if successful is not rendered nugatory.

“The balance of convenience is in favour of the applicant. This court declines to make an order for security for due performance because the bank has not demonstrated how it will fail to enforce the judgement if it succeeds,” Gashirabake stated. 

Insolvency law

Citing section 3 of the Insolvency Act, 2011 and several persuasive holdings of court, Elubu said insolvency proceedings can well be resorted to as a mechanism for debt collection.

Insolvency means that the business or the company will cease trading and if it is a limited company, it goes into liquidation and the liquidator takes control of all the company’s unsecured assets, which are sold to repay the creditors, in this case, the bank.

Jomayi’s appeal

In his appeal, Magandazi appealed against a court decision to declare Jomayi bankrupt, arguing that the NC bank he dealt with no longer exists.

Through Byenkya, Kihika and Company Advocates, Magandazi is wondering why he was not informed about the changes in the name of the bank if it is still the same entity.

In September 2019, NC Bank Uganda and Commercial Bank of Africa (Uganda), both based in Kenya, received regulatory approval to merge their businesses, thereby merging their subsidiaries in Uganda to form NCBA Bank Uganda.

Magandazi states that the company was willing to settle the debt and he has a good cause to apply to court to set aside the high court decision.

Magandazi also said he has the ability to clear the company’s debt but was only being frustrated by people who have ganged up to place caveats on his estates.

Court documents indicate that in 2018, NC Bank sued Jomayi for the recovery of sh1.1b unpaid balance on the purchase price of a parcel of land in Busiro Block 410, Plot 20, at Sissa, Wakiso district, measuring 63 acres.

What did Jomayi do?

Court documents indicate that John Baptist Ssemwogerere was the proprietor of Block 410, Plot 20, at Ssisa in Wakiso district. He (Ssemwogerere) mortgaged the land to NC Bank to secure a loan for Value Trading Stores.

The borrower (Ssemwogerere) defaulted on payment of its obligations to NC Bank. After failing to service the loan, the bank foreclosed the loan on the mortgage and published a notice of sale of the mortgaged property in January 2017.

Jomayi expressed interest in purchasing the land. On July 13, 2017, NC Bank and Jomayi executed an agreement where it was agreed that Jomayi would purchase the land measuring 50.2 acres on Block 410, Plot 20 at sh1.5b.

The purchase price, according to the agreement, was supposed to be paid in six instalments of sh251m. The payments were supposed to run from July 30, 2017, to November 30, 2017.

In addition, it was agreed that any unpaid instalments would attract interest at the lending rate of 21.5% from the date when the amount became due.

However, between July 24-31, 2017, Jomayi paid sh132m, leaving the balance of sh119m. The company failed to pay the remaining six instalments, thereby breaching the agreement with the bank.

Furthermore, Jomayi, on August 1, 2017, made other deposits of sh209m, but also subdivided the land and sold off to various individuals.

This prompted the bank to lodge a suit against Jomayi to recover sh1.1b. On September 11, 2019, the two parties entered a consensus where it was agreed that Jomayi would pay sh952m within 10 months in an instalment of sh100m and that upon payment, the bank would hand over the duplicate certificate of title to Jomayi.

However, when Jomayi failed to pay the money, the bank issued a statutory demand. A statutory demand is the process of declaring a debtor bankrupt. 

The demand was made in accordance with Section 4 of the Insolvency Act, 2011, where the company was required to pay sh868m within 20 days of the notice.