Shumuk Ordered To Vacate Property, Pay Over Shs1Billion In Court Damages

City businessman, Mukesh Shukla popularly known as Shumuk, and others have been ordered by court to pay a sum of over Shs1billion to a one Juliana Nakityo and Abbey Mutebe.


Shumuk’s co-accused include; Barclays Bank of Uganda Ltd (1st defendant),  Kabiito Karamagi (2nd defendant) and Herbert Wamala (3rd defendant).


The plaintiffs filed this suit against the defendants; Barclays Bank of Uganda Ltd,  Kabiito Karamagi, Herbert Wamala, Shumuk Properties Ltd, and Mukesh Shukla seeking declarations including cancellation of the purported sale, removal of a Caveat lodged by the 5th, Defendant, Mukesh Shukla (Shumuk) and special damages amounting to Shs7,587,174,958.


Shukla Mukesh had lodged a Caveat on the suit property, registered in the names of the Juliana Nakityo and Abbey Mutebe, claiming to be the “registered proprietor”.


However, court found that after the advertisement of sale of the suit property, several offers from interested buyers were received. Among these was Hajji Kiyimba who offered USD. 1.500.000/= (approx shs.3bn/=) but withdrew his offer pending he conclusion of the Court cases.


Mo, a Chinese, who offered US $1,000,000 (about Shs3.5Billion) payable in installments spread over two months.  His offer was considered low though considered attractive by the Bank (Barclays Bank).


Shumuk Investments Ltd (4th Defendant, who offered Shs2,200,000,000).


The above testimony is corroborated by that of the 3rd Defendant.   The 2nd Defendant stated: “In the absence of any legal impediment, a sale agreement was executed between Mr. Wamala and Shumuk with respect for the immovable assets for a sum of shs2,200,000,000 out of which shs100,000,000 was paid a non-refundable deposit while the balance would be paid within 30 days.  It was expected that the movable assets would be sold under a different arrangement.”


But Justice Lameck N. Mukasa, who was in charge of the case found the testimony to be in contradiction with that of Shumuk who stated: “Land and development comprised in the land extends to furniture being development ‘as is’.  That is everything on the site.   Sofa sets are linked to business.  There was no separate agreement for movables like furniture.  There was no separate agreement for the purchase of business of good will.  The hotel business was part of the developments.”


Both counsel for the plaintiffs argued that the price sold at was unfairly arrived at. Valuation before the sale had put the face sale Value at Shs2,650,000,000.  The sale was as per the advert subject to a reserved price.  The defendants failed to adduce evidence of the reserved price.


“In absence thereof I consider the Forced Sale Value to be the reserved price and the sale had to be at or above that price yet the agreement shows a purchase price of Shs 2,200,0000,000,” observed Justice Mukasa.


In cross-examination Wamala stated: “Terms of sale were that it was subject to Reserved Price.  I did not have a Reserved Price.  Reserved Price means the base and it was Shs2,650,000,000……”


Justice Mukasa ruled that it was unreasonable for the defendants to have sold the suit land plus immovable business assets at a price far below the Forced Sale Value.


“This was against the duty owed in equity to obtain the best price. The advert provided for payment of a full price upon the acceptance of the offer but the Sale Agreement shows that the 4th Defendant paid a merger from sum of Shs1,100,000,000 against the total purchase price of Shs2,200,000,000.


“Though the law doesn’t prohibit payment by installments, the mode of payment agreed upon in the agreement was against the terms of payment as made open to the Mortgagors and the public in the advert.  In cross-examination the 4th Defendant (Shumuk) admitted that the Sale Agreement was not in conformity with the terms of sale in the advertisement because it was not payment in full. The amount paid of Shs100,000,000 as against the agreed sum of Shs2,200,000,000 was too small in the circumstances……. Thereby closing out all other would have been potential buyers.”


Furthermore, the money received was meant to liquidate Emerald Hotel’s indebtedness to Barclays Bank.  Surprisingly, the Shs100,000,000 cheque was received by the 2nd Defendant who banked it on his law firm account where funds remained for ten (10) months.


“The Caveat was placed by Mukesh Shukla in his own name, claiming an interest as registered proprietor of the land.  As a requirement under section 139 of the Registration of Titles Act the caveator must claim an “estate or interest” in order to be entitled to lodge a caveat.  It is an undisputed fact that the registered proprietors, of the suit at all material times, were Juliana Nakityo and Abbey Mutebe.


“It was therefore an obvious falsehood for Mukesh Shukla to claim interest in the land as Registered Proprietor whereas not.  In the circumstances the Registrar should not have proceeded to register the caveat.”


On such grounds,  Justice Mukasa ruled that it was because of the Defendants’ actions that the plaintiffs were wrongfully deprived of their property rights.


“The 1st Plaintiff was put out of business. The 2nd Defendant is a lawyer who acted in disregard of the law.  There was unjustified enrichment of the 4th Defendant (Shumuk) on property and business it had no claim.


“In all their conduct the 2nd and 3rd Defendants were acting as agents of the 1st Defendant.  The advertisement of the 2nd Plaintiff as a loan defaulter in absence of any loan liability must have negatively affected its business, reputation and good will.  The 2nd  Plaintiff was tarnished as loan defaulter.  In the circumstances, counsel for the 1st Plaintiff prayed for an award of Shs2,000,000,0000 in general damages. Considering all the above I find the following proportionate awards of general damages appropriate: The 1st Plaintiff – Shs982,725,501; 2nd Plaintiff – Shs100,000,000; The 3rd and 4th Plaintiff – Shs60,000,000.”


In the final result, he made the following Orders: The 1st Plaintiff is awarded the following special damages: Shs6,537,503,408 for the period from 23/06/08 to 23/06/2016. Shs68,098,994 per month from 23/06/2016 until the defendants vacate the suit premises. They were also awarded general damages of; Shs982,725,510; 2nd Plaintiff – Shs100,000,000; 3rd & 4th Plaintiff – Shs60,000,000 (jointly).”


The Plaintiffs are respectively awarded interest on the general damages at the court rate from the date of judgment till payment in full. On the counter-claim judgment is entered against the 1st Plaintiff, in favour of the 1st Defendant (Barclays Bank) – Claimant in the sum of Shs4,800,000,000 the same to be set-off from the 1st Plaintiff’s decretal sums awarded.


Background The Case

The Plaintiff embarked on construction of a hotel, Emerald Hotel, on land comprised in LRV 2383, folio 17, Plot 3, Semiliki Walk Kampala (hereinafter referred as the suit land).  In September 2005, Emerald Hotel sought to access Apex funds from Bank of Uganda, which funds were attracting an interest rate of about 10% per annum.


Barclays Bank, however, asked the 1st Plaintiff to channel its application for funds through it.  Even though the Barclays Bank received the Emerald Hotel’s application, its officers neglected to process the same and instead advanced a Commercial loan attracting interest at the rate of 21% per annum. The 1st loan of Shs2,700,000,000 was set out in the facility letter dated 4th November 2005.


Subsequently in early 2006 the 1st Plaintiff agreed with the 1st Defendant to raise the loan limit for Phase 1 of the project to Shs3,600,000,000.  However, Barclays Bank failed to operationalise the revised arrangement until in February 2007 by way of a facility letter which the 1st Defendant bank dated to 30th November 2006, which letter on execution constituted the loan contract and stipulated that the facility was for a period of 7 years with a one year grace period.


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Despite the execution of the above agreement raising the loan limit no fresh funds were actually advanced to the 1st Plaintiff and in August 2007, after Phase 1 had been completed by funds raised by other means, the 1st Defendant’s officers informed the 1st  Plaintiff that the interest accruing on the initial disbursement of shs2,700,000,000 had brought the 1st Plaintiff indebtedness to the 1st Defendant to the limit of shs3,600,000,000 without any fresh funds being advanced.


The alleged indebtedness led to loss of property that had been kept with Barclays Bank as security.