Vaccine company Dei Biopharma Limited and Dei Industries International have filed a lawsuit against a local bank, alleging that it inflated loans by as much as Shs39.2 billion.
Along with their owner, Mathias Magoola, the firms have requested the Commercial Division of the High Court to review the loan, interest rates, and repayment schedule in order to verify their claims.
The companies established a banking relationship with a bank linked to Kenyan ownership and secured a Shs400 million loan in 2016. They later acquired additional loans, all of which included a clause advising them to seek independent legal counsel to fully understand the terms and conditions outlined in the loan agreements.
However, court documents reveal that despite this clause, the bank exerted pressure on the companies to accept the loans, and due to their amicable relationship, the companies proceeded to sign the credit agreements without consulting external legal advisors.
The court documents state that Dei felt compelled to accept the loans, as well as the variations and restructurings, due to their urgent need for funds to support capital-intensive projects.
The companies argue that the COVID-19 pandemic and the Russia-Ukraine war adversely affected their wheat imports, leading to a closure of their factory for three years. Nonetheless, they managed to repay Shs150 billion in loans and interest.
Dei Industries specializes in the processing and marketing of wheat and maize flour.
According to the court filings, the bank allegedly engaged in predatory lending practices once they recognized the company’s vulnerable situation.
The predatory practices included the arbitrary transfer of a $9 million loan repayment from the bank’s Ugandan branch to its Kenyan counterpart, which hindered Dei’s ability to meet its principal and interest obligations in Uganda.
Documents indicate that these actions left Dei’s loan accounts without sufficient funds and resulted in substantial interest defaults exceeding Shs1 billion.
Dei further claims that the bank’s unilateral conversion of a $2.43 million dollar loan into shillings led to a foreign exchange loss of approximately Shs160.3 million.
The company notes that due to the public interest served by its operations, the government decided to acquire a stake in Dei Biopharma Limited’s medical manufacturing facility and allocated funds to help reduce the company’s debt with the bank.
However, according to the court documents, the bank is now attempting to seize all government funds by demanding inflated and excessive loan balances of Shs82.2 billion and $43.2 million from Dei Industries International and Dei Biopharma Limited, respectively.
Dei has found these demands unreasonable and requested a waiver on the interest, offering instead to settle the outstanding loan of Shs155.1 billion, which the bank rejected.
Subsequently, the company hired an auditing firm to review its credit facilities and loan statements, revealing that the bank had inflated the outstanding loan claim by Shs39.2 billion.
In their declarations, Dei seeks a court ruling stating that the bank’s demand for payment dated June 27, 2024, for Shs82.2 billion and $43.2 million is inflated, extortionate, and unconscionable.
The plaintiffs are also requesting the court to mandate an account, audit, and reconciliation of their loan and current accounts with the bank to establish the true debt amount under the credit facilities and associated terms.
Additionally, the companies are asking the court to instruct the bank and its Kenyan arm to credit their accounts with any amounts determined to have been unlawfully debited during the audit and reconciliation process.
