Court orders businessman Shukla to deposit Shs 5bn in Bank of Baroda debt dispute

The Court of Appeal has ordered Mukesh Shukla, proprietor of Shumuk Aluminium Industries Limited, to deposit Shs 4.8 billion and $36,870.02 within 30 days as security for an outstanding debt owed to Bank of Baroda (Uganda) Limited.

In a ruling delivered by a single judge, justice Esta Nambayo, the court granted a conditional stay of execution of a High court judgment in favour of the bank, pending determination of an appeal by Shukla and his company.

The court also restrained the bank, its employees and agents from selling, transferring or otherwise disposing of two mortgaged properties in Kampala pending determination of Civil Appeal No. 398 of 2026.

Justice Nambayo warned that the orders would automatically lapse if the applicants failed to deposit the full amounts within 30 days.

The dispute stems from credit facilities advanced by Bank of Baroda to Shumuk Aluminium Industries Limited, secured by mortgages over properties at Plot 24, Mukabya Road, Kampala, and Plot M700, UMA Lugogo Showground. Shukla also executed a personal guarantee covering the company’s indebtedness.

In a judgment delivered on June 2, 2026, High court judge Patience Rubagumya dismissed the company’s suit challenging the bank’s demands and proposed enforcement of the mortgage securities. The court instead entered judgment for the bank on its counterclaim for the outstanding debt.

Shumuk Aluminium Industries was ordered to pay Shs 16.03 billion and $122,900.05, while Shukla was held liable under his personal guarantee for Shs 6.36 billion.

The court also awarded interest at 10 per cent per annum from the date of judgment until payment in full, together with costs.

Dissatisfied with the decision, Shukla and the company appealed and applied to the High Court for a stay of execution. The application was dismissed on August 28, 2026, prompting them to approach the Court of Appeal on September 10.

In their application, the applicants argued that their intended appeal raises substantial questions concerning the conversion of foreign currency, the computation and basis of interest, reconciliation of accounts, and the notices preceding the recall of the credit facilities and enforcement of the securities.

They also argued that selling the mortgaged properties before the appeal is determined could cause substantial loss, particularly because the Mukabya Road property houses the company’s only factory.

Their lawyers, Anthony Oloka and Ukasha Sekajja, submitted that transferring the properties to third parties could make it difficult to recover them even if the appeal succeeded. They also cited the potential disruption to manufacturing operations and the effect on the company’s workforce.

The bank opposed the application, arguing that the applicants had not established sufficient grounds to halt recovery of the debt. Its lawyers maintained that the dispute involved a secured commercial debt and that the bank could refund any amount subsequently found to have been overpaid.

The bank also rejected the applicants’ proposal to provide additional land as security, arguing that the properties belonged to third parties who were not involved in the proceedings.

Justice Nambayo found that the memorandum of appeal raised arguable questions deserving consideration by the appellate court, although this did not necessarily mean the appeal would succeed.

She also found that the applicants had demonstrated a sufficient threat of enforcement, citing evidence that persons acting on behalf of the bank had visited the factory premises to facilitate valuation and recovery.

The judge observed that although the bank was entitled to enforce its mortgage securities in accordance with the law, selling the properties before the appeal was determined could complicate their restoration and disrupt the company’s manufacturing operations.

She further found that the application had been filed without undue delay, noting that the applicants first sought relief from the High court nine days after the judgment and approached the Court of Appeal shortly after their initial application was dismissed.

However, the court declined to accept the additional land offered as security because it belonged to third parties. Instead, it ordered a monetary deposit equivalent to 30 per cent of the respective decretal principal sums.

Justice Nambayo clarified that Shukla’s liability under the personal guarantee formed part of the same underlying indebtedness. Requiring a separate deposit against the guarantee, she said, would duplicate security for the same debt.

The court said the conditional stay struck a balance between protecting the applicants’ right to appeal and safeguarding the bank’s interest in recovering the money owed to it.

The costs of the application will abide by the outcome of the appeal, which remains pending.

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