City businessman Dr Mathias Magoola has defied payment of more than Shs 250 billion in accumulated loan to Equity bank Uganda and Kenya saying it was illegally advanced to him and calculated.
Dr Magoola, the proprietor of DEI Biopharma Limited, has now petitioned the court in the case seen as a move to hide and run away from meeting his loan obligation to the bank.
The proprietor of DEI Industries International Limited is challenging Shs82.2 billion and $43.2 million outstanding loan, saying it is inflated, extortionate and unconscionable.
It is alleged that Dr Magoola acquired the loans to finance his businesses among them a medical plant at Matugga, Wakiso District which was commissioned by President Museveni after getting famous on claims that the pharmaceutical company was about to manufacture an alleged cure for COVID 19 disease.
Before the Commercial Court, Dr Magoola sued Equity Bank Uganda Limited and its Kenyan counterpart, challenging the legality of Shs82.2 billion and $43.2 million outstanding loan.
Dr Magoola jointly with his DEI Industries International Limited, DEI Biopharma Limited (formerly DEI Natural Products International) are seeking for an order to account, audit and reconciliation of their loan and current accounts held with the bank to determine the actual debt due under the credit facilities, variation of terms, loan consolidations and restructures thereto.
“An order directing the defendants to credit the plaintiffs’ loan or current accounts with any amounts found to be unlawfully debited upon the taking of an account, audit and reconciliation,” reads the complaint seeking for another order to off the amounts unlawful debited from the plaintiffs’ account against any loan outstanding owed to the banks.
He also wants the court to order to direct the bank to refund to the businessman and his companies more than Shs47.6 billion established to have been unlawfully debited on their loan account accounts pursuant to their audit.
Through their lawyers, the investor contends that they were compelled to take the loans, variation of terms, consolidations and restructures as offered because they were in urgent need for money to finance their capital-intensive projects, a situation which was compounded by the banks’ real threats of default, foreclosure.
However, the banks deny any wrongdoing stating that Dr Magoola took out a number of credit facilities from the bank between September 2016 and December 2019 to finance completion of the construction of a factory at Kiryamuli, Wakiso District and wheat importation.
The banks contend that in June 2021, all the credit facilities were consolidated and restructured into one facility at an interest of 17 percent per annum with a 12 month moratorium.
It is alleged that by July 25, 2022 at the expiry of the 12 month moratorium, the outstanding amount was Shs64.7 and that DEI Industries International Limited was expected to begin payment of the monthly installments of Shs1.449 billion but only made payment of Shs129.6 billion on July 29,2022 and payment of Shs58,822.23 on October 10,2022 over the next 18 months.
“As a result of the first plaintiff’s default in making any full monthly installment payment, the first plaintiff’s above mentioned facility was in default from the end of the moratorium and kept accruing interest and default interest,” the banks allege.
Dr Magoola’s case was filed on August 2 this year; hardly two months after the government advanced Dr Magoola and his DEI Biopharma Limited Shs578.4 billion of taxpayers’ money to save the company plants and property from being auctioned by the bank.
In May 31 2024 letter, the office of the Solicitor General wrote that the Attorney General advised the Minister for Science, Technology and Innovation, Dr Monica Musenero to remit Shs578.4 billion to M/s Dei Biopharma to be used for the purposes which bit was appropriated by Parliament.
“The said monies should, in accordance with the Memorandum of Understanding concluded between the government of Uganda and M/s Dei Biopharma Limited concerning the acquisition by the government of Uganda of equity in Dei Biopharma Limited, be included in the valuation assessment of government’s equity acquisition in the company; the shareholder’s agreement as well as the share subscriptions and allotment agreement which drafts have been previously shared with your office,” reads the letter signed by Pius Perry Biribonwoha, the deputy Solicitor General.
In a September 28,2023 letter to the Managing Director of Equity Bank, Finance minister Matia Kasaija indicated the government’s intent to express commitment to Equity Bank and subsequently the Central Bank of Kenya and their external auditors, emphasizing the dedication to seeing the project through to its successful completion.
The bank’s defense shows that on May 24 this year, the Secretary to the Treasury in the finance ministry authorized additional expenditure of Shs578.4 billion for the government investment in Dei Biopharma and that part of the said money was to offset their loan obligations to the bank.
It is alleged that instead of depositing the funds owed to Equity bank, Dr Magoola and his companies deposited it in another bank.
“To date, despite the funds having received the funds and despite many oral and written requests by the defendants, the plaintiffs have refused to make any payment to the defendants to repay the outstanding loan amounts due and every day without payment being made the facilities accrue more interest and default interest,” read the court documents.
The government intervention to bailout Dr Magoola and his companies followed a series of correspondences regarding the default payment leading to advertising of his property for sale to recover the said loan.
According to the court documents, on June 17, 2024, Dr Magoola requested for lenience and a meeting to discuss their loan obligations.
“On June 19,2024, the plaintiffs and defendants held a meeting at which the plaintiffs stated that although they acknowledged the great support they had received from the defendants (banks) while they were still new greenfield organization, they were only willing to repay the principal loan amounts without any payment of interest or default interest owed to the defendants in full and final settlement of their obligations,” reads the court documents.
It is alleged that on June 20, Dr Magoola wrote reiterating their stated position that plaintiffs were only willing to pay the principal loan sums outstanding and not the interest or penalties and that on June 21, the complainant offered to pay banks Shs 155 billion which the bank refused.
Documents show that on September 14 2023, the bank through bailiffs advertised DEI properties and those owned by Dr Magoola including his Muyenga based residential home.
In May this year, Parliament approved a Shs578b bailout to private vaccine factory DEI Biopharma Limited amid disagreement between Parliamentarians.
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