Absa Bank Uganda cleared to sell Boss Beverages assets over $5.5 million debt

Absa Bank Uganda Limited, a Kampala-based commercial bank operating as a subsidiary of the South African financial conglomerate, Absa Group Limited, has secured court approval to proceed with the sale of assets belonging to Boss Beverages International Limited, following a ruling that ends an eight-year dispute over a contested loan facility exceeding Ksh710.2 million ($5.5 million).

In a judgment delivered via the Judiciary’s Electronic Court Case Management Information System (ECCMIS), Acting Judge Ginamia Melody Ngwatu dismissed the suit filed by Boss Beverages, ordered the company to pay legal costs, and authorized the bank to recover the outstanding debt through the sale of mortgaged properties.

Court backs Absa’s recovery claim

The court ruled that the debt, amounting to Ksh710.18 million ($5.49 million), will continue to accrue interest at a rate of 20% per annum from the date the case was filed until it is fully settled.

“The defendant shall proceed with the sale of the mortgaged property according to the law to recover the outstanding sum of Ksh710,176,404 and interest accrued at 20% from the date of filing this suit until payment in full,” Justice Ngwatu stated in her ruling.

The assets earmarked for recovery include properties located on Block 232, Plots 2619 and 2406 in Banda-Kireka, which had been pledged as collateral for loan facilities extended to the company.

Eight-year dispute over loan terms

The dispute dates back to 2018 when Boss Beverages filed suit against Barclays Bank Uganda Limited, now Absa Bank Uganda, alleging the application of unlawful interest rates and excessive penalties.

Boss Beverages argued that it had substantially repaid a Ksh400 million ($3.09 million) term loan obtained in 2015 to refinance an earlier facility from DFCU Bank. The company contested the bank’s claim that the outstanding balance had risen to over Ksh710 million ($5.5 million).

To support its position, the company relied on an audit report by Izimba & Co. Certified Public Accountants, which estimated the debt at approximately Ksh288 million ($2.22 million) and questioned elements of the bank’s interest calculations.

However, Absa maintained that the borrower defaulted on both the Ksh400 million ($3.09 million) term loan and a separate short-term facility of up to Ksh600 million ($4.64 million). According to the bank, the facilities were later consolidated at the company’s request, and continued default led to the accumulation of contractual interest and penalties, pushing the debt to Ksh710.2 million ($5.49 million) by August 2017.

Court finds no illegality in interest charges

During proceedings, the court heard testimony from company representative David Kyeera, who challenged the bank’s figures. Under cross-examination, he acknowledged lacking formal accounting qualifications.

Justice Ngwatu ruled that while Kyeera was competent to testify as a company employee familiar with its transactions, his analysis had notable weaknesses, particularly his failure to account for accrued interest and default penalties.

The court also noted procedural shortcomings on the part of Boss Beverages, including its failure to file written submissions despite being granted time to do so, and the collapse of efforts to jointly appoint an independent auditor, a process that had stalled since 2021.

After reviewing loan agreements, repayment records, and correspondence between the parties, the court concluded that Boss Beverages failed to prove that Absa Bank applied unlawful or unconscionable interest rates.

Justice Ngwatu held that the contractual interest rates, ranging between 19.8% and 23.5%, were valid and enforceable under the loan agreements, and could not be set aside in the absence of illegality.

The court consequently dismissed all claims against Absa Bank and upheld the lender’s right to recover the full outstanding amount through the sale of the secured properties.