In Re: Winding Up Muddu Awulira Enterprises Ltd (Company Cause No. 14 of 2004) [2004] UGCommC 19 (13 July 2004)

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\fs24\lang2057\langfe2057\cgrid\langnp2057\langfenp2057 \sbasedon0 \snext16 \styrsid5638098 footer;}{\*\cs17 \additive \sbasedon10 \styrsid5638098 page number;}} {\*\latentstyles\lsdstimax156\lsdlockeddef0}{\*\pgptbl {\pgp\ipgp0\itap0\li0\ri0\sb0\sa0}}{\*\rsidtbl \rsid5638098\rsid8419745\rsid8989544\rsid9049527\rsid10227604\rsid11805828\rsid13247676\rsid16601300}{\*\generator Microsoft Word 11.0.5604;}{\info {\title THE REPUBLIC OF UGANDA }{\author Administrator}{\operator skivumbi}{\creatim\yr2001\mo1\dy5\hr1\min40}{\revtim\yr2001\mo1\dy5\hr1\min40}{\version2}{\edmins1}{\nofpages8}{\nofwords1931}{\nofchars11009}{\*\company JSI}{\nofcharsws12915}{\vern24689}} \paperw11906\paperh16838 \widowctrl\ftnbj\aenddoc\noxlattoyen\expshrtn\noultrlspc\dntblnsbdb\nospaceforul\formshade\horzdoc\dgmargin\dghspace180\dgvspace180\dghorigin1800\dgvorigin1440\dghshow1\dgvshow1 \jexpand\viewkind1\viewscale100\pgbrdrhead\pgbrdrfoot\splytwnine\ftnlytwnine\htmautsp\nolnhtadjtbl\useltbaln\alntblind\lytcalctblwd\lyttblrtgr\lnbrkrule\nobrkwrptbl\snaptogridincell\allowfieldendsel\wrppunct \asianbrkrule\rsidroot8989544\newtblstyruls\nogrowautofit \fet0{\*\ftnsep \pard\plain \ql \li0\ri0\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0 \fs24\lang2057\langfe2057\cgrid\langnp2057\langfenp2057 {\insrsid9049527 \chftnsep \par }}{\*\ftnsepc \pard\plain \ql \li0\ri0\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0 \fs24\lang2057\langfe2057\cgrid\langnp2057\langfenp2057 {\insrsid9049527 \chftnsepc \par }}{\*\aftnsep \pard\plain \ql \li0\ri0\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0 \fs24\lang2057\langfe2057\cgrid\langnp2057\langfenp2057 {\insrsid9049527 \chftnsep \par }}{\*\aftnsepc \pard\plain \ql \li0\ri0\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0 \fs24\lang2057\langfe2057\cgrid\langnp2057\langfenp2057 {\insrsid9049527 \chftnsepc \par }}\sectd \linex0\headery708\footery708\colsx708\endnhere\sectlinegrid360\sectdefaultcl\sectrsid13247676\sftnbj {\footer \pard\plain \s16\ql \li0\ri0\widctlpar \tqc\tx4153\tqr\tx8306\pvpara\phmrg\posxr\posy0\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid16601300 \fs24\lang2057\langfe2057\cgrid\langnp2057\langfenp2057 {\field{\*\fldinst {\cs17\insrsid9049527 PAGE }}{\fldrslt { \cs17\lang1024\langfe1024\noproof\insrsid9049527 1}}}{\cs17\insrsid9049527 \par }\pard \s16\ql \li0\ri360\widctlpar\tqc\tx4153\tqr\tx8306\aspalpha\aspnum\faauto\adjustright\rin360\lin0\itap0\pararsid5638098 {\insrsid9049527 \par }}{\*\pnseclvl1\pnucrm\pnstart1\pnindent720\pnhang {\pntxta .}}{\*\pnseclvl2\pnucltr\pnstart1\pnindent720\pnhang {\pntxta .}}{\*\pnseclvl3\pndec\pnstart1\pnindent720\pnhang {\pntxta .}}{\*\pnseclvl4\pnlcltr\pnstart1\pnindent720\pnhang {\pntxta )}} {\*\pnseclvl5\pndec\pnstart1\pnindent720\pnhang {\pntxtb (}{\pntxta )}}{\*\pnseclvl6\pnlcltr\pnstart1\pnindent720\pnhang {\pntxtb (}{\pntxta )}}{\*\pnseclvl7\pnlcrm\pnstart1\pnindent720\pnhang {\pntxtb (}{\pntxta )}}{\*\pnseclvl8 \pnlcltr\pnstart1\pnindent720\pnhang {\pntxtb (}{\pntxta )}}{\*\pnseclvl9\pnlcrm\pnstart1\pnindent720\pnhang {\pntxtb (}{\pntxta )}}\pard\plain \s15\qc \li0\ri0\sb100\sa240\sbauto1\sl360\slmult1 \widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\ipgp1\pararsid5638098 \fs24\lang2057\langfe2057\cgrid\langnp2057\langfenp2057 {\b\ul\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 THE REPUBLIC OF UGANDA }{ \b\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 \line IN THE HIGH COURT OF UGANDA AT }{\b\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid5638098 KAMPALA}{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 \line }{ \b\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 (COMMERCIAL DIVISION) \line }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 \line }{\b\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 THE COMPANIES ACT CAP 85 LAWS OF UGANDA \line }{\b\lang1033\langfe2057\langnp1033\insrsid5638098 \par }{\b\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 IN THE MATTER OF WINDING UP \line MUDDU AWULIRA ENTERPRISES LIMITED \line }{\b\lang1033\langfe2057\langnp1033\insrsid5638098 \par }{\b\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 COMPANIES CAUSE NO. 14 OF 2004 \line }{\lang1033\langfe2057\langnp1033\insrsid5638098 \par }\pard \s15\ql \li0\ri0\sb100\sa240\sbauto1\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\ipgp1\pararsid5638098 {\b\ul\lang1033\langfe2057\langnp1033\insrsid5638098\charrsid13247676 BEFORE:}{ \ul\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 }{\b\ul\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 THE HON. MR. JUSTICE GEOFFREY KIRYABWIRE. }{\b\ul\lang1033\langfe2057\langnp1033\insrsid5638098 \par }{\b\ul\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 RULING }{\b\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 \line }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 This ruling arises out of information that has}{\lang1033\langfe2057\langnp1033\insrsid5638098 been brought to the court\rquote s }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 knowledge when the case file was called. Originall}{ \lang1033\langfe2057\langnp1033\insrsid5638098 y two files had been fixed for }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 hearing involving by and large the same parties and subject matter. N amely Arbitration Cause No 04 of 2004 and Company Cause No. 14 of 2004. The last time the Arbitration Cause came up, Mr. Wakida for the Applicant told court that the parties were exploring a settlement of t}{\lang1033\langfe2057\langnp1033\insrsid5638098 his matter and hence the court}{\i\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 should adjourn the Arbitration Cause to today 13}{ \lang1033\langfe2057\super\langnp1033\insrsid8989544\charrsid5638098 th}{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 July 2004, when the Company Cause was to be heard so that the parties would brief court on the progress of the settlement talks. \line }{\lang1033\langfe2057\langnp1033\insrsid5638098 \par }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 When the file was called court was informed that }{\lang1033\langfe2057\langnp1033\insrsid11805828 M/s Stanbic Bank (U) Ltd. had }{ \lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 appointed a received under the debenture that they}{\lang1033\langfe2057\langnp1033\insrsid5638098 held. Mr. Odere Charles said }{ \lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 that this was a violation of my order/direction of the 25}{\lang1033\langfe2057\super\langnp1033\insrsid8989544\charrsid8419745 th}{ \lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 May 2004, for all the parties to maintain the status quo under sections 227 a}{\lang1033\langfe2057\langnp1033\insrsid11805828 nd 228 of the Companies Act. \line \par }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 As had happened before , court took judicial notice of Mr. Kasozi, Company/Bank Secretary of M/S Stanbic Bank, sitting in court. Stanbic Bank had not responded to the advert of petition formally but had chosen to have a watching brief in the audience during the earlier proceedi ngs. Clearly by their appointing a receiver they had shown interest in the affairs of the Respo}{\lang1033\langfe2057\langnp1033\insrsid11805828 ndent Company which was the }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 subject of the petition. Court then on its own motion requested Mr. Kasozi as an officer of Court to appear before it and explain the effect of what they had done. Mr. Kasozi sought leave to provide court with legal authority for their actions. Considering the history of this petition, I granted Mr. Kasozi about one}{\lang1033\langfe2057\langnp1033\insrsid11805828 and a half hours to do so. \line }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 \line I then decided to hear all parties on effect of the appointment of the receiver when court was handling the winding up proceedings. \line }{ \lang1033\langfe2057\langnp1033\insrsid11805828 \par }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 Mr. Charles Odere framed three}{\lang1033\langfe2057\langnp1033\insrsid11805828 issues to guide court namely -\line }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 \line 1. }{\lang1033\langfe2057\langnp1033\insrsid11805828 \tab }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 Whether the winding up proceedings had commenced \line }{\lang1033\langfe2057\langnp1033\insrsid11805828 \par }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 2. }{\lang1033\langfe2057\langnp1033\insrsid11805828 \tab }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 What was the effect of the appointment of t he private receiver by the bank \line }{\lang1033\langfe2057\langnp1033\insrsid11805828 \par }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 3. }{\lang1033\langfe2057\langnp1033\insrsid11805828 \tab }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 What remedies were available to the other creditors in light of this \line }{\i\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 }{\i\lang1033\langfe2057\langnp1033\insrsid11805828 \tab }{ \lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 appointment \line }{\lang1033\langfe2057\langnp1033\insrsid11805828 \par }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 On the first issue Mr. Odere stated that in my ruling of 25/05/2004 I did observe that winding up proceedings had commenced within the meaning of Section 229 of the Companies Act s}{ \lang1033\langfe2057\langnp1033\insrsid11805828 o that was not in issue. \line }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 \par On whether the bank could appoint a receiver to crystallize its debenture, he pointed out that the receiver was appointed not over the company but the company\rquote s assets and that this was tantamount to an attachment. He did not dispute the appointment but he had a problem w}{\lang1033\langfe2057\langnp1033\insrsid11805828 ith the procedure. He argued }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 the proper procedure would have been under Section 351 of the Companies Act, which }{\lang1033\langfe2057\langnp1033\insrsid11805828\charrsid13247676 states:}{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 -. \line }{ \lang1033\langfe2057\langnp1033\insrsid11805828 \par }\pard \s15\ql \li720\ri0\sb100\sa240\sbauto1\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin720\itap0\ipgp1\pararsid11805828 {\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 \'93Where an application is made to court to appoint a receiver on behalf of the debenture holders or other creditors of}{\lang1033\langfe2057\langnp1033\insrsid11805828 the company which is being }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 wound up by the court, the official receiver may be so appointed.\'94 \line }{\lang1033\langfe2057\langnp1033\insrsid11805828 \par }\pard \s15\ql \li0\ri0\sb100\sa240\sbauto1\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\ipgp1\pararsid11805828 {\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 He further argued that any such appointment would require a validation order from court. He argued that the appointment of the bank\rquote s receiver had put the cotton which is the Respondent\rquote s primary assets in }{ \lang1033\langfe2057\langnp1033\insrsid11805828 jeopardy, and therefore the }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 court should appoint }{\lang1033\langfe2057\langnp1033\insrsid8419745\charrsid13247676 an official receiver}{ \lang1033\langfe2057\langnp1033\insrsid8419745 .}{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 He also s}{\lang1033\langfe2057\langnp1033\insrsid8419745 aid that such a receiver could }{ \lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 be appointed by court at any time. He also ref}{\lang1033\langfe2057\langnp1033\insrsid8419745 erred me to the Judgment of my }{ \lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 brother Judge, Justice James Ogoola in }{\b\ul\lang1033\langfe2057\langnp1033\insrsid8419745 Tobacco Commodity Traders & }{ \b\ul\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 Another }{\b\ul\lang1033\langfe2057\langnp1033\insrsid8419745\charrsid13247676 vs.}{\b\ul\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 Mastermind Tobacco & Another }{ \lang1033\langfe2057\langnp1033\insrsid8419745 MA No. 660 of 2002. \line \par }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 In that case Justice Ogoola stated that the purpose of sections 227 and 228 were to maintain the status quo once proceedings for winding up had commenced. He held that section 227 was wide and }{\i\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 \'93therefore binds all and }{ \i\lang1033\langfe2057\langnp1033\insrsid8419745\charrsid13247676 sundry}{\i\lang1033\langfe2057\langnp1033\insrsid8419745 .\'94}{\i\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 \line }{\i\lang1033\langfe2057\langnp1033\insrsid8419745

\par }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 Mr. N. Byamugisha supported submissions of Mr. Odere and added that winding up proceedings cuts across all assets of the Respondent including those covered \line by the debenture instruments. He said that any receiver appointed under a debenture would have an opportunity to place his claim with a neutral person who woul}{\lang1033\langfe2057\langnp1033\insrsid8419745 d be The Official Receiver. \line \par }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 Mr. Mayanja also agreed with M}{\lang1033\langfe2057\langnp1033\insrsid8419745 r. Byamugisha and Mr. Odere. \line }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 \par }\pard \s15\ql \li0\ri0\sb100\sa240\sbauto1\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\ipgp1\pararsid5638098 {\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 Mr. Kasozi for the bank agreed that winding up had commenced. He however strongly argued that the commencement of winding up did not prevent the bank appointing receivers under their debentures. He referred me to }{ \b\ul\lang1033\langfe2057\langnp1033\insrsid8419745 Buchl}{\b\ul\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 er & Another }{\b\ul\lang1033\langfe2057\langnp1033\insrsid8419745\charrsid13247676 vs.}{ \b\ul\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 Talbot & Another }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 [2004] 1 All E. R. 1289 as authority for the proposition that winding up of a company is}{ \lang1033\langfe2057\langnp1033\insrsid8419745 a form of collective execution }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 of all creditors and the assets which become a fund. Where a floating charge crystallise s it becomes a fixed charge and the company only has an equity of redemption which forms part of a separate fund held}{\lang1033\langfe2057\langnp1033\insrsid8419745 in trust for the company\rquote s }{ \lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 creditors which arises on a winding up i.e. there is }{\i\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 \'93the }{ \i\ul\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 debenture holders fund\rquote }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 and }{\i\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 \'93the }{ \i\ul\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 company\rquote s fund. }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 \'93He the argued that section 227 would not apply to the debenture holders as the assets have been removed from the winding up proceedings. He further argued that the assets of the company were not in jeopardy because the bank would see to their sale. }{ \lang1033\langfe2057\langnp1033\insrsid8419745 He said that the cotton had }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 to be converted into cash quickly because the market prices were falling and the exchange rate was not favourable. \line }{\lang1033\langfe2057\langnp1033\insrsid8419745 \par He referred me to -}{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 In }{\b\ul\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 Re: }{\b\ul\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid8419745 Clifton}{ \ul\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 }{\b\ul\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 Place Garage Ltd. }{\lang1033\langfe2057\langnp1033\insrsid8419745 [1970] 1 All E. R. 353 -}{ \lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 as authority for court to allow a disposition of property }{\lang1033\langfe2057\langnp1033\insrsid8419745 if it were in the interests }{ \lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 of all concerned and done in good faith. \line }{\lang1033\langfe2057\langnp1033\insrsid8419745 \par }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 Mr. Nangwala supported Mr. Kasozi and actually added that the Respondent supported the actions of the bank. He said the wording of section 355 (6) envisage both a private receivership and a receiver}{\lang1033\langfe2057\langnp1033\insrsid8419745 ship by court taking place. \line }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 \line I find the events of today to be most amazing at best. What was supposed to be \line a time to review a settlement has turned out to be a handing of positions by all \line the parties. This cannot mean well for the company. There is no doubt that the \line wind up proceedings have commenced and that has i}{\lang1033\langfe2057\langnp1033\insrsid8419745 ts clear legal consequences. \line }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 \par All concerned should take note of these legal consequences to allow for an orderly process to ensure. \line }{\lang1033\langfe2057\langnp1033\insrsid8419745 \par }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 As to the other issues, I agree with Mr. Kaso}{\lang1033\langfe2057\langnp1033\insrsid8419745 zi that the commencement of a }{ \lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 winding up proceedings in court does not pr}{\lang1033\langfe2057\langnp1033\insrsid8419745 eclude a debenture holder from }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 appointing a receiver. Indeed the learned scholar }{\i\ul\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 Kerr on Receivers and Administrators }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 7}{ \lang1033\langfe2057\super\langnp1033\insrsid8989544\charrsid8419745 th}{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 Edition at page 429 says that same would be true if a resolution for wind up by the company or a winding}{ \lang1033\langfe2057\langnp1033\insrsid8419745 up order by court is made. \line \par }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 This has to be the correct position as to the law. To my mind when a winding up proceeding has commenced it is not the appointment of a receiver under a debenture that is important, but rather the time at which the appointment is done and the action that follows therefrom. The learned author }{\i\ul\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 Hubert Picarda o}{ \i\ul\lang1033\langfe2057\langnp1033\insrsid8419745 n the Law relating to Receivers}{\i\ul\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 managers and Administrators }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 3}{ \lang1033\langfe2057\super\langnp1033\insrsid8989544\charrsid8419745 rd}{\lang1033\langfe2057\langnp1033\insrsid8419745 Edition at }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 pag}{\lang1033\langfe2057\langnp1033\insrsid8419745 e 32 wrote -}{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 \line }{\lang1033\langfe2057\langnp1033\insrsid8419745 \par }\pard \s15\ql \li720\ri0\sb100\sa240\sbauto1\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin720\itap0\ipgp1\pararsid8419745 {\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 \'93The mere presentatio n of a winding up petition does not cause a floating \line charge to crystallize, nor indeed does the appointment of}{\lang1033\langfe2057\langnp1033\insrsid8419745 a provisional liquidator.\'94 \par }\pard \s15\ql \li0\ri0\sb100\sa240\sbauto1\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\ipgp1\pararsid8419745 {\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 Clearly in my view much will depend of the wording of the debenture itself. \line }{\lang1033\langfe2057\langnp1033\insrsid8419745 \par }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 In this particular case the Receivers Kieran Day and David Ddamulira were appointed by the instrument dated 8}{\lang1033\langfe2057\super\langnp1033\insrsid8989544\charrsid8419745 th}{ \lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 July 2004 by }{\lang1033\langfe2057\langnp1033\insrsid8419745\charrsid8419745 M/}{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid8419745 S}{ \i\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 }{\lang1033\langfe2057\langnp1033\insrsid8419745 STANBIC BANK (U) LTD;}{\i\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 }{ \lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 well after the winding proceedings had commenced. The winding up was clearly under the supervision of court by the 8}{\lang1033\langfe2057\super\langnp1033\insrsid8419745\charrsid8419745 th}{ \lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 July 2004. I made that clear in my ruling of the 25}{\lang1033\langfe2057\super\langnp1033\insrsid8989544\charrsid8419745 th}{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 May 2004. I referred the parties to sections 227 and 228 of the Companies Act. Now in the words of my brother Judge, Justice J}{\lang1033\langfe2057\langnp1033\insrsid8419745 ames Ogoola, those sections \line \par }\pard \s15\ql \fi720\li0\ri0\sb100\sa240\sbauto1\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\ipgp1\pararsid8419745 {\lang1033\langfe2057\langnp1033\insrsid8419745 \'93bind all and sundry.\'94 \line }{ \lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 \par }\pard \s15\ql \li0\ri0\sb100\sa240\sbauto1\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\ipgp1\pararsid5638098 {\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 The }{ \lang1033\langfe2057\langnp1033\insrsid8419745\charrsid13247676 crystallization}{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 of a debenture and the taking possession of all the }{\lang1033\langfe2057\langnp1033\insrsid8419745 company \rquote s }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 assets both present and future during the currency of the winding up proceedings is an execution/attachment in violation of section 228 of the Companies Act. \line }{ \i\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 \line }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 To emphasize the supremacy of the court\rquote s supervision the learned author r (Supra) at page 429 writes \line }{ \lang1033\langfe2057\langnp1033\insrsid8419745 \par }\pard \s15\ql \li720\ri0\sb100\sa240\sbauto1\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin720\itap0\ipgp1\pararsid8419745 {\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 \'93 ...but after the making of a winding up order, }{\ul\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 the receiver must apply to }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 10 }{ \ul\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 the liquidator }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 or }{\ul\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 to the court }{ \lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 in the winding up for liberty to take possession of any property of which he is not then in possession.\'94 \line }{\lang1033\langfe2057\langnp1033\insrsid8419745 \par }\pard \s15\ql \li0\ri0\sb100\sa240\sbauto1\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\ipgp1\pararsid8419745 {\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 At the time of the commencement of the winding up the bank was not to the court\rquote s knowledge in possession of any property by wa}{\lang1033\langfe2057\langnp1033\insrsid8419745 y of crystallisation of any }{ \lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 debenture of any of the Respondents assets. If it were in possession of any assets it would have responded to the advert in support of the petition, but they chose to take a back seat in court of their own free will. That being the case, the assets that the new receivers are said to have possession of are part of the assets of the Respondents for wh ich a status quo ha}{\lang1033\langfe2057\langnp1033\insrsid8419745 d been maintained by court. }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 The bank\rquote s receivers therefore have no access to them without leave of court. The court will not declare the appointment of the receiver\rquote s void, but their taking possession of any of the Respondents assets is hereby declared void. \line }{ \lang1033\langfe2057\langnp1033\insrsid8419745 \par }\pard \s15\ql \li0\ri0\sb100\sa240\sbauto1\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\ipgp1\pararsid5638098 {\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 I do disagree with the submission of Mr. }{ \lang1033\langfe2057\langnp1033\insrsid8419745 Kasozi that the learned author}{\i\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 (Supra) at page 430 said that section 127 of the Insolvency }{\lang1033\langfe2057\langnp1033\insrsid8419745\charrsid13247676 Act,}{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 1986 of England (similar to our section 227) does not apply. The learned author was only referring to the original \'93disposition\'94 being the actual charge by which the receiver was appointed. This could have been done some time earlier before winding up commenced. There is good reason for this bec}{\lang1033\langfe2057\langnp1033\insrsid8419745 ause under section 318 }{ \lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 of the Companies act, certain floating charges cre}{\lang1033\langfe2057\langnp1033\insrsid8419745 ated within 12 months of the }{ \lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 commencement of the winding up are deemed invalid. The same is true for fixed charges done with 6 months before the commencement of the winding up are also deemed a fraudulent preference and are invalid. These charges whether floating or otherwise need close scrutiny an}{\lang1033\langfe2057\langnp1033\insrsid8419745 d indeed in this case one such}{\i\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 }{ \lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 instrument of debenture dated 18/8/2003 was created less than 12 months ago, and requires closer scrutiny. \line }{\lang1033\langfe2057\langnp1033\insrsid8419745 \par }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 At first I was of the view based on the evidence before me that the Respondent could trade normally. If there was any problem with }{\lang1033\langfe2057\langnp1033\insrsid8419745 the disposal of cotton, all }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 they had to do was to formally apply for orders to overcome any obstacle under section 227, along the lines of the }{ \i\ul\lang1033\langfe2057\langnp1033\insrsid10227604 Re Cli}{\i\ul\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 fton Place Garage Ltd. }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 case (Supra). \line }{ \lang1033\langfe2057\langnp1033\insrsid10227604 \par }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 However, I am no longer confident of this position given the strong intervention of Stanbic Bank limited, a clearly significant creditor}{\lang1033\langfe2057\langnp1033\insrsid10227604 . I accordingly appoint The }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 Official Receiver to be the provisional liquidator of the Respondent Company under }{\ul\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 Se ction 238 of the Companies Act. }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 It will be for the Official Receiver to determine which fund belongs to the debenture holders and that which remains for the creditors. I also make the following conseque}{\lang1033\langfe2057\langnp1033\insrsid10227604 ntial orders and directions \endash }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 }{\lang1033\langfe2057\langnp1033\insrsid10227604 \par }\pard \s15\ql \fi-720\li720\ri0\sb100\sa240\sbauto1\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin720\itap0\ipgp1\pararsid10227604 {\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 1. }{ \lang1033\langfe2057\langnp1033\insrsid10227604 \tab }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 That Mr. Kieran Day and David Ddamul}{\lang1033\langfe2057\langnp1033\insrsid10227604 ira, receivers for M/s Stanbic }{ \lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 Bank (U) Ltd. immediately hand over the control of the Respondent }{\lang1033\langfe2057\langnp1033\insrsid10227604\charrsid13247676 Company}{ \lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 to the Official Receiver. \line }{\lang1033\langfe2057\langnp1033\insrsid10227604 \par }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 2. }{\lang1033\langfe2057\langnp1033\insrsid10227604 \tab }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 That the Official Receiver is permitted to work with Mr. Kieran Day, Mr. Ddamulira and Mr. Godfrey Sent}{\lang1033\langfe2057\langnp1033\insrsid10227604 ongo Ddungu to source the best }{\i\lang1033\langfe2057\langnp1033\insrsid10227604\charrsid13247676 market}{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 for the cotton lint and have it sold immediately. \line }{\lang1033\langfe2057\langnp1033\insrsid10227604 \par }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 3. }{\lang1033\langfe2057\langnp1033\insrsid10227604 \tab }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 The proceeds of the sale shall be held by the Official Receiver. \line }{\lang1033\langfe2057\langnp1033\insrsid10227604 \par }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 4. }{\lang1033\langfe2057\langnp1033\insrsid10227604 \tab }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 That Cotton Development Organisation }{ \lang1033\langfe2057\langnp1033\insrsid10227604\charrsid13247676 and}{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 Uganda Ginners & Cotton Exporters Association endorse and release whatever export documentation that are required for th }{\lang1033\langfe2057\langnp1033\insrsid10227604 e sale to allow the conversion }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 of the cotton to cash and hence avoid wastage. It is in their interest to do so anyway. \line }{ \lang1033\langfe2057\langnp1033\insrsid10227604 \par }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 5. }{\lang1033\langfe2057\langnp1033\insrsid10227604 \tab }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 With regard to the assets of the Respondent, the Official Re ceiver is to take immediate charge of the as}{\lang1033\langfe2057\langnp1033\insrsid10227604 sets shown in the Management }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 Accounts up to 31St March, 2004 and the fixed asset list outlined in a letter dated 11th June 2004 from M/s Nangwala, Rezida & Co. Advocates to The Registrar Commercial Court within the meaning of rule 27(3) of SI 85-1. \line }{ \lang1033\langfe2057\langnp1033\insrsid10227604 \par }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 6. }{\lang1033\langfe2057\langnp1033\insrsid10227604 \tab }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 That the petitioners make a deposit jo}{ \lang1033\langfe2057\langnp1033\insrsid10227604 intly and severally of Shs. 10}{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 1,000,000/= to the Official Receiver within the meaning of Rule 28 of SI 85-1. }{ \lang1033\langfe2057\langnp1033\insrsid10227604 \par }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 7. }{\lang1033\langfe2057\langnp1033\insrsid10227604 \tab }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 That the Official receiver make a report back to court on the 1st September 2004 on the affairs of the Respondent Company, its creditors assets and the }{\lang1033\langfe2057\langnp1033\insrsid10227604 orders given by this court. \par }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 8. }{\lang1033\langfe2057\langnp1033\insrsid10227604 \tab }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 That this matter shall be adjourned to the 1}{ \lang1033\langfe2057\super\langnp1033\insrsid8989544\charrsid10227604 st}{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 Septembe}{\lang1033\langfe2057\langnp1033\insrsid10227604 r 2004 for further mention. \line \par }\pard \s15\ql \li0\ri0\sb100\sa240\sbauto1\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\ipgp1\pararsid10227604 {\b\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 G. KIRYABWIRE \line JUDGE \line 13/07/2004 \line }{\lang1033\langfe2057\langnp1033\insrsid10227604 \par }{\b\ul\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 14107/2004}{\ul\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 :- }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 Odere for the Petitioner \line Byamugisha and Mayanja supporting the petition \line Kemugisha h/b for Mr. Nangwala \line Mr. Kasozi}{\lang1033\langfe2057\langnp1033\insrsid10227604 in court but not appearing \line \par }{\b\ul\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 Court }{\ul\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 :- }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 I shall read th}{ \lang1033\langfe2057\langnp1033\insrsid10227604 e ruling. \line }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 \par }\pard \s15\ql \li0\ri0\sb100\sa240\sbauto1\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\ipgp1\pararsid5638098 {\b\ul\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 Ms Kemugisha}{ \ul\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 :- }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 I wish to apply for leave to appeal. I apply for the transcript and proceedings. \line }{ \lang1033\langfe2057\langnp1033\insrsid10227604 \par }{\b\ul\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 Court}{\ul\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 :- }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 You have not given court reasons for leave so leave is not granted. \line }{\i\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 \line }{\b\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 G. KIRYABWIRE \line JUDGE \line 14/7/2004. \line }{\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 \par }\pard\plain \ql \li0\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid5638098 \fs24\lang2057\langfe2057\cgrid\langnp2057\langfenp2057 {\lang1033\langfe2057\langnp1033\insrsid8989544\charrsid13247676 \par }}