Through court documents (Civil Suit No. 15 of 2022), Tirupati Development (U) Limited (the plaintiff) says KCB Bank Uganda and KCB Bank Kenya (respondents) from whom it had acquired a US$ 7,000,000 loan in 2012 created illegal bank accounts without her consent and used it to launder money.
Tirupati through her lawyers Aegis Advocates and Kirunda & Wasige Advocates says that in August 2016, KCB Bank ‘opened and operate two separate US Dollar-denominated loan accounts the names of the Plaintiff without the Plaintiff’s knowledge or consent.’
These were account number 1059906732 with KCB Bank Kenya and account number 2150226057 with KCB Bank Uganda. Also, in January 2017, KCB Bank Uganda opened and operated another new US dollar current account No. 2290351628 in the name of the plaintiff without the plaintiff’s authorization, consent or knowledge.
Tirupati says they never received any ‘coherent explanation’ for opening these ‘illegal’ accounts and when they demanded a reconciliation of accounts, clarity on the status of their loan repayments, and bank statements, none was honoured causing the plaintiff not to meet her loan obligations.
KCB Bank fails to explain abnormally
Tirupati, between 2018 and 2021, wrote a series of letters to the banks raising several observed irregularities in its bank accounts including committed fraud and conspiracy to defraud. The bank failed to explain the inconsistent loan statements and balances observed by the plaintiff on her accounts.
Tirupati also believes that the banks were using bank accounts they created in their names to launder money thereby exposing the plaintiff and its directors to the potential prosecution for money laundering.
The plaintiff says KCB Bank failed to manage the risk of financial crime and IT fraud when they maintained separate ledgers for the plaintiff’s accounts. Similarly, Tirupati says, the bank utilized her accounts in a manner that made any audit trail difficult to avoid scrutiny by regulators and law enforcement in Uganda and Kenya.
Huge monies laundered?
In this claim of fraud and money laundering, KCB Bank facilitated the unauthorized use of the plaintiff’s accounts to transact in varying amounts between 2014 and 2021 totalling US Dollars 79,900,000 and 62 similar transactions totalling UGX. 315,992,747 which transactions bore no relationship to the plaintiff or its businesses for the period evaluated but appear in the names of the plaintiff.
"The plaintiff avers and contends that the 2nd and 3rd Defendant continues to this day to launder money through her named accounts. These actions did and continue to expose the plaintiff, its shareholders and directors to the legal and financial consequences and sanctions arising from the suspicion of engaging in illicit money laundering and probable terrorist financing, likely corruption, or payments procured through drug or child and sex trafficking through the illegal use of her accounts threatening her entire business enterprise."
With this suit, Tirupati wants the court to declare that KCB Bank breached the loan contract, is a fraudulent bank, neglected its fiduciary duties, failed to manage plaintiff accounts, failed to manage the risk of financial crime, cause the bank to return 20 certificates of title, account for all sums misappropriated with interest, declare that bank engaged in money laundering, pay fines and general damages and costs of the suit.
KCB Bank refuses to cooperate
In an attempt to solve the impasse, Tirupati demanded that the bank operating in most countries of the East African Community provide key documents relating to the transactions of the US$ 7,000,000 loan acquired in 2012 including repayments and penalties. KCB refused.
It is at this point that Tirupati filed a Miscellaneous Application No. 0707 OF 2022 In the High Court of Uganda at Kampala (Civil Division) against the bank.
Tirupati seeks court intervention
The application sought the court to order of discovery and production of all the documents listed herein, in possession of the respondents in support of their defenses.
The documents sought by the applicant include those related to the loan transaction and loan account origination, negotiation, approval, processing, key facts documents, management, and closure. Specifically, the applicant requested documents pertaining to the loan accounts, various bank accounts in the applicant’s name, fraud detection policies, investment origination and management, IT policies, cyber security, digital forensics, and money laundering policies since the enactment of the Anti Money Laundering Act in 2013.
The application was supported by an affidavit from Mrs Kruti Barot, the Managing Director of Tirupati Development (U) Ltd. Mrs Barot highlighted several causes of action alleged by the applicant against the respondents, including negligence, conversion, breach of fiduciary duty, breach of statutory duty, money laundering, and fraud. She emphasized the importance of the requested documents in determining the respondents’ authority to open and operate accounts in the applicant’s name and the legitimacy of the various transactions.
Court delivers ruling on the application
After considering the submissions from both parties, Justice Ssekaana Musa ruled in favour of the applicant. The court held that the requested documents were relevant to the main suit and necessary for a fair resolution of the dispute. However, the court also acknowledged that some of the requested documents lacked specificity and cautioned against engaging in a fishing expedition.
In the application Justice Ssekaana order that:-
(a) The loan transaction and loan account origination, negotiation, approval, processing, key facts documents, management, and closure in respect of the following accounts:
I. Loan accounts No. 1059906732 with the 2nd respondent and loan account number 215022605732 with the 1st respondent
II. US dollar current account No. 22900351628 in the applicant’s name opened by the 1st respondent.
III. USD Account Number 2201449317 in the applicant’s name with the 1st respondent
IV. Uganda shillings account number 2201449287 in the applicant’s name with the 1st respondent.
And the costs shall be in the cause.
The ruling underscores the principle that discovery should not be used as a tool for a broad inspection of an adversary’s records but should be specific and consistent with the applicant’s case as pleaded. The court balanced the right to privacy and confidentiality with the need for a fair determination of the case.
The order for discovery signifies a significant development in the legal proceedings, allowing the applicant to obtain crucial documents that may shed light on the alleged breach of fiduciary duty and other claims. The case will now proceed with the production and examination of the requested documents, bringing the parties closer to a resolution.