Case Brief: BMK Uganda Limited v. Yako Bank

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Date of Judgment: 30th May 2024

Main Topic(s): Insolvency

Case Number: Miscellaneous Application Number 0202 of 2023

Judge: Lady Justice Cornelia Kakooza Sabiiti.

Summary Facts of the Case

BMK Uganda Limited (Applicant) filed a miscellaneous application against Yako Bank Limited (the respondent) asking the Court to dismiss a petition for liquidation initiated by Yako Bank Limited.

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The Applicant argued that the petition was fatally defective due to the alleged failure to serve a statutory demand properly and due to an unauthorized person swearing the affidavit in support of the petition.

The Applicant contested the authority of the Branch Manager of Yako Bank to swear the affidavit.

Legal Issues Before the Court

  1. Proper and Effective Service of the Statutory Demand: Whether the statutory demand was duly served on BMK Uganda Limited.
  2. Authority to Swear Affidavit: Whether the Branch Manager of Yako Bank had the authority to swear an affidavit on behalf of the Respondent as required by the Insolvency Regulations.

Decision of Court

Service of Statutory Demand: The court found that the statutory demand was properly served on the Applicant through both personal service at the Applicant’s head offices and registered mail.

The evidence presented by the Respondent demonstrated effective service as required by the Insolvency Regulations.

Authority to Swear Affidavit: The court held that the affidavit verifying the insolvency petition was defective. The Branch Manager, who swore the affidavit, did not provide sufficient evidence of authorization from the Respondent’s company at the time of filing the petition.

A valid authorization would be one by a board resolution or special resolution from the company, which was not provided.

Remedies: As the affidavit was deemed incurably defective, the court struck off the affidavit and dismissed the entire insolvency petition.

No orders as to costs were made.

The affidavit supporting the insolvency petition must comply with Regulation 87 of the Insolvency Regulations, which in the case of a Company requires that the affidavit be sworn by a director of the company or its secretary or a person with proper authorization from the company.

Liquidation proceedings are different from ordinary proceedings where an affidavit can be sworn by any other principal officer of the company with knowledge of the facts leading up to the dispute.

The lack of such authorization renders the affidavit and the subsequent petition void.

Key Quote: “ln my considered opinion, a petition for liquidation of any company by the Court is a rigorous process with strict procedures set out under the Act and its Regulations and the same must be adhered to. In my view, this is because, in the event that liquidation is ordered by Court against a company, it has far-reaching consequences of rendering the other company defunct or obsolete. The person swearing the affidavit verifying the petition on behalf of the petitioner Company must be that person legally permitted not a mere employee with given responsibilities.” Judge Cornelia Kakooza Sabiiti said.



Law Applied by the Court

  • Insolvency Act, 2011
  • Insolvency Regulations, 2013 (Regulation 5 and Regulation 87)

Counsel on Record

  • Applicant: Represented by M/s Kityo & Company Advocates
  • Respondent: Represented by Newmark Advocates

Conclusion

This decision highlights the importance of strict compliance with procedural requirements in insolvency proceedings, particularly regarding the proper service of statutory demands and the authority of individuals swearing affidavits on behalf of companies as non-compliance will result in termination of insolvency proceedings.



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