The Uganda Court of Appeal has told a receiver to check and sell the Emerald Hotel in Kampala within six months with court supervision. They reversed an earlier decision that gave Emerald Hotel Limited big money despite breaking loan agreements with Barclays Bank of Uganda Ltd, which later became Absa.
This problem started when DFCU Bank, later bought by Barclays Bank, loaned more than Shs 4bn to Emerald Hotel Ltd. The loans had mortgages, debentures, and other properties as security. When the hotel missed payments, the bank hired Kabiito Karamagi as receiver and partnered with Shumuk Properties Ltd to run the place.
Emerald Hotel fought these actions, claiming bad procedures and fraud had happened. The bank said the borrowers played tricks by creating two companies with the same name to block loan recovery. The hotel and its directors claimed the receiver appointment wasn't legal and messed with their property rights.
They argued that the bank worked with Shumuk Properties to take over the hotel unfairly without proper notice. They said the receiver deal and Shumuk management contract aimed to steal their hotel, not recover money. The borrowers claimed they had already reached an agreement with the bank before these actions. They denied any sneaky plans about the twin-named companies.
Barclays Bank defended the loan papers and receiver process. They said the borrowers missed payments despite many restructuring attempts and extensions. The bank said they followed all legal steps and accused the borrowers of dodging responsibilities through technicalities and corporate shell games.
The bank pointed out how Emerald Hotel directors created confusion with two almost identical company names—"Emerald Hotel Ltd" and "Emerald Hotel (U) Ltd"—to block debt collection. Barclays argued this deception justified going after the actual people behind the companies.
Barclays defended appointing a receiver as legal under loan terms. They said the Shumuk management deal helped keep the hotel valuable during recovery. The Court of Appeal sided with the bank, finding Emerald Hotel had defaulted and the loan papers were valid and enforceable.
Justice Kiryabwire called the case a sad story about a company that borrowed from one bank, failed to repay, then borrowed from another bank, and failed again. He said the company made up a story blaming the bank for its loan problems. The judge added that not paying loans blocks business growth. After 18 years of missed payments, the hotel still stands but looks awful.
The court decided that creating two companies with identical names was clearly meant to trick the bank and avoid responsibilities. This justified looking past the corporate shield to the people behind it. They also found the receiver appointment and management agreement were legally done according to loan document powers.
The appeals court canceled all previous awards to Emerald Hotel and its partners. Instead, it gave Barclays Bank Shs 4.8 billion, plus Shs 30 million in basic damages, both of which earned interest. The court ordered the receiver to audit and sell the hotel within six months, with the court watching over the process.
This ruling clears the way to sell Emerald Hotel and shows the importance of business contracts and what happens when companies try to deceive banks. The six-month timeframe for the supervised sale should finally end this long-running fight.
This problem started when DFCU Bank, later bought by Barclays Bank, loaned more than Shs 4bn to Emerald Hotel Ltd. The loans had mortgages, debentures, and other properties as security. When the hotel missed payments, the bank hired Kabiito Karamagi as receiver and partnered with Shumuk Properties Ltd to run the place.
Emerald Hotel fought these actions, claiming bad procedures and fraud had happened. The bank said the borrowers played tricks by creating two companies with the same name to block loan recovery. The hotel and its directors claimed the receiver appointment wasn't legal and messed with their property rights.
They argued that the bank worked with Shumuk Properties to take over the hotel unfairly without proper notice. They said the receiver deal and Shumuk management contract aimed to steal their hotel, not recover money. The borrowers claimed they had already reached an agreement with the bank before these actions. They denied any sneaky plans about the twin-named companies.
Barclays Bank defended the loan papers and receiver process. They said the borrowers missed payments despite many restructuring attempts and extensions. The bank said they followed all legal steps and accused the borrowers of dodging responsibilities through technicalities and corporate shell games.
The bank pointed out how Emerald Hotel directors created confusion with two almost identical company names—"Emerald Hotel Ltd" and "Emerald Hotel (U) Ltd"—to block debt collection. Barclays argued this deception justified going after the actual people behind the companies.
Barclays defended appointing a receiver as legal under loan terms. They said the Shumuk management deal helped keep the hotel valuable during recovery. The Court of Appeal sided with the bank, finding Emerald Hotel had defaulted and the loan papers were valid and enforceable.
Justice Kiryabwire called the case a sad story about a company that borrowed from one bank, failed to repay, then borrowed from another bank, and failed again. He said the company made up a story blaming the bank for its loan problems. The judge added that not paying loans blocks business growth. After 18 years of missed payments, the hotel still stands but looks awful.
The court decided that creating two companies with identical names was clearly meant to trick the bank and avoid responsibilities. This justified looking past the corporate shield to the people behind it. They also found the receiver appointment and management agreement were legally done according to loan document powers.
The appeals court canceled all previous awards to Emerald Hotel and its partners. Instead, it gave Barclays Bank Shs 4.8 billion, plus Shs 30 million in basic damages, both of which earned interest. The court ordered the receiver to audit and sell the hotel within six months, with the court watching over the process.
This ruling clears the way to sell Emerald Hotel and shows the importance of business contracts and what happens when companies try to deceive banks. The six-month timeframe for the supervised sale should finally end this long-running fight.
