R.L Jain Limited v Uganda (Criminal Miscellaneous Application 8 of 2024) [2025] UGHCACD 7 (11 April 2025)

Full Case Text

# THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA AT KAMPALA ANTI CORRUPTION DIVISION AT NAKASERO CRIMINAL MISCELLANEOUS APPLICATION NO 0008 of 2025 **ARISING FROM MISCELLENEOUS APPLICATION NO 0083/2024 ARISING FROM COURT CASE NO AA/0082/2024**

R. L JAIN LTD :::::::::::::::::::::::::::::::::::

#### **VERSUS**

<table>

UGANDA :::::::::::::::::::::::::::::::::::

### Before: Okuo Jane Kajuga, J

### **Ruling**

### **Introduction:**

This is an application brought by way of Notice of Motion under Articles 28(1) and 44(c) of the 1995 Constitution of the Republic of Uganda and Section 62 of the Anti-Corruption Act, Cap 116, seeking the review and setting aside of the restraining order issued by this Court on 27th November 2024 prohibiting the disposal of property comprised in Kyagwe Block 103 Plot 2132 at Mukono.

The grounds of the application as set out in the Notice of Motion and the affidavit in support deposed by Kongai Patricia, a Senior Legal Officer in the applicant company, are as follows:

**1.** That the restraining order was issued without notice to the applicant who had an interest in the property as a registered mortgagee.

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- 2. That the said order has fettered the applicant's right to recover the outstanding amount under the mortgage deed totalling Ushs 303,000,000/: 11',rough foreclosure and sale following the mortgager's default in the repayment of the loan. - 3. That the applicant's interest as a mortgagee ranks higher in priority over the respondent's interests, if any. - 4. That this Court has the jurisdiction and power to review and vacate the said order, and that it is just and fair that the application is granted.

The applicant also prayed for costs.

### Reoresentation:

The applicant was represented by Advocates Edgar Ayebazibwe, Patricia Ivy Muhumuza and Sonia Nahabwe of M/S Mwesigwa Rukutana & Co Advocates while the respondent was represented by Annette Namatovu Ddungu (Chief State Attorney) from the Office of the Director of Public Prosecutions (ODPP). Both parties filed written submissions which I have considered in the resolution of this matter.

# Backeround: +

Hon. Wamukuyu Mudimi Ignatius, a Member of Parliament for Elgon County and a Vice Chairperson of the Budget committee of Parliament during Financial Years 202U2022, 202212023, was indicted along with five others for corruption offenses vide HCT-00-AC-SC-0006-2024. It is alleged that he diverted Ushs 2,398,714,61'l.l- of public funds meant for war loss compensation by the Ministry of Trade, Industry and Cooperatives to Buyaka Growers Cooperation Society Limited. The prosecution contends he diverted these funds for purposes unrelated to that for which they were intended. In an alternative charge he is alleged to have received Ushs 85,000,000/: with knowledge that it had been feloniously stolen.

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The particulars of the two counts show that the offenses in question were committed between October 2021and June 2023.

The Office of the DPP successfully filed Criminal Miscellaneous Application No 083/2024 for the restraint of several properties belonging to the Hon. Wamukuyu, inciuding the mortgaged land which is now the subject of this application.

### The Issues for resolution:

I have framed the following as the issues for resolution in this application:

- 1. Whether this court erred in law in issuing a restraint order without giving notice to the applicant or other interested parties - 2. Whether this application satisfies the grounds for review or setting aside of the restraint order - 3. What remedies are available to the applicant?

### Resolution of Issue L:

this law in iss restraint order t notice to the applicant or other interested parties

Counsel for the applicant submitted that the restraint order was issued in error and in contravention of the provisions of Section 57 of the Anti-Corruption Act which requires that notice may be given to any interested parties before an order is issued. It is their contention that had this court looked into third party interests like those of the applicant it would have held otherwise.

The respondent did not address this issue in its submissions. They merely stated that the applicant has not proved any irregularity in the manner in which the order was obtained to warrant the review of the same.

In resolving this issue, it is imperative to consider the provisions of the Anti-Corruption Act in relation to restraint orders.

Section 53 provides:

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"Where fl personhasbeen charged or is about to be charged with an offinse under this Act, an authorised officer may make an application to the court for an order, in this Act refened to as a restraining Order, restraining the disposal of the property of, or in possession or under the control of that person, whereoer that property is situated".

The conditions to be satisfied for a grant are set out under Section 54 and include the grounds for the belief that the property is tainted in relation to the offense or that the person being investigated derived a benefit directly or indirectly from the commission of the offense. Section 34 of the same Act also allows restriction of disposal for ensuring payment of compensation to victims and preventing dissipation.

Section 55 (a) provides:

"Where the court is satisfied that there flre reasonable grounds to belieae that there exists property in respect of ufuich a restraining order may be made under this Act, the court may make an order prohibiting any percon fro\* disposing of, or othennise dealingwith property specified in the order other than a manner specified in the order,

Section 57 provides:

Before making a restraining order, the court may require notice to be giaen to and may hear any person who, in the opinion of the court, appears to haae any interest in the property, unless the court is o the o nion t \*h o ntrl on zrtnrrl rl result in tho disflltttot tfl\*t ro ,li cmncnl dissipation or reduction in the aalue of the property.

I have understood the applicant's counsel to interpret S. 57 of the Anti-Corruption Act as a mandatory requirement that notice to interested parties must be issued in all such applications before a grant. That position suggests

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that a court faced with an application for a restraint order has no discretion to determine whether or not to first give notice to any persons with interest in the property, and accord them a hearing before issuing the same.

I disagree. The literal meaning of the words used in the provision including "may" and "unless" clearly leave room for the court to make a value judgement on whether or not there is a risk that the property may be disposed of or dissipated if notice is granted to interested parties at that point. That is the sole determinant of whether the court may proceed Ex parte or not. Of course the exercise of that discretion does not apply in a vacuum and the court must be sensitive to the purpose of the specific legislation that gives the latitude and circumstances surrounding a particular case. The exercise of that discretion must be judicious.

The question for the court will be whether sufficient information has been placed before it to enable it to properly evaluate the applicant's case and to determine whether or not to exercise its discretiory and if so, to what extent. Section 57 is a very important safeguard in the preservation of assets in corruption cases which are often syndicated, complex and volatile. Assets can be quickly dealt with to avoid seizure.

In llganda aersus Sundus Exchange and money transfer and 8 others, ACD Misc. Application 271201-8, a freeze order was issued in the interim until the application was disposed of inter parties in order to protect the exhibit, money, from disappearing at the click of a mouse. The court noted that money was volatile and can be moved in seconds. Though this was a money laundering investigation and involved money and not land, the principle behind the issuance of restraint orders is the same.

In the purview of corruption and money laundering, and other cases of acquisitive crime, the purpose of a restraining order is to Preserve property so that in the event of a conviction, it is still available for confiscation orders to be given effect. If the rewards or the benefits from crime are dissipated and beyond recall at the point of conviction and confiscation, then the

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purpose of the law would be defeated. Where a court is satisfied that a reasonable possibility exists that the properties over which a freeze order is sought may be sold off, disposed of or dissipated by an accused and others associated with him or her, it may handle the application without giving notice to interested parties.

In the instant case, it is clear from the summary of the evidence tendered at committal that the prosecution alleges that funds fraudulently diverted or received by Hon. Wamukuyu were used in the settlement of loan obligations to the applicant See pdragraphs 38 (g, h, I, i, k, l, m and n) thereof. These links were set out at page six (6) of the court's ruling dated 27th November 2024 and were the justification for the court's order. The applicant's case was that there was a possible collusion and criminal enterprise between the applicant and the mortgager, which would predispose the property to dissipation if notice was given.

I found merit in their arguments and therefore exercised my discretion to grant the application and wait for the interested party to contest the freeze. There is no illegality about it.

I also wish to emphasise that the standard required at the point of granting a freeze order under S 57 of the Anti-Corruption Act is whether the court believes there exists reasonable ground to believe the applicant's case justifying a freeze. In the Botswana case on asset recovery of DPP versus Daisy Loo (Pty) and others (2009) 1 BLR 24, their Court of Appeal considered this very standard. They held that in assessing whether the standard of proof had been met, the Judge had fallen into error by finding that credible evidence was required. Provided that there is evidence which could be reasonably accepted to justify the applicant's beliel in spite of the existence of contradictory evidence, the conditions for granting an order may be held to be satisfied.

I find that decision instructive and applicable to our own laws on asset recovery and restraint orders. Indeed this position was set out in the Sundus

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Exchange case, that the court must be satisfied that reasonable suspicion exists to warrant an investigation and the court is not required to satisfy itself if the suspicion is true or not. This standard of proof is a low one. It does not require proof beyond a reasonable doubt or the balance of probabilities. This was the standard the court applied at the point of issuance.

No prejudice is suffered by the court proceeding ex parte to grant the order, as any party claiming an interest in the property in respect of which a restraint order has been so issued, has a remedy under Section 62 (1) of the same Act which provides:

# "A person uho has an interest in property in respect of which a restraining order is made fiialr at any time, apply to the court for a reuiew"

The above provision provides for the rights of interested parties to be heard, and it is erroneous to submit that the applicant's fair trial rights had been infringed because the court exercised its rights to proceed ex parte in the first instance.

## Issue 2:

#### the the restraint order: li ti

Counsel for the applicant submitted that their client has a legal interest in the property as mortgagee vide instrument N0. MKO.001,59271entered on the certificate of title onl7th November 2023. The mortgagor's failure to fulfil the obligations of the mortgage even after issuance of the notices therefore gave the applicant the right to lawful possession. It was further submitted that the applicant is innocent of any crime, and that the business relations and transactions between the two were ordinary and not criminal.

Lastly, that since the Court order was registered vide Instrument No. MKO00526817 on the 29th day of November 2024 at 12:25 pm, the earlier registered mortgage takes priority over any interests that the Office of the

TlPage DPP may have in the same property resulting from the investigation and prosecution of the mortgager. They relied on Section 48(7) of the Registration of Titles Act, Cap 240, Mary Monica Tenywa Kiteme Versus Roseline Niutamanya Twesigye Cioil Suit No HCT-00-LD-CS-2212-2016, where Hon Justice Bernard Namanya held that where there are competing interests in the same parcel of land, the first of the legal interests to be registered or created takes priority over the second legal interest.

Counsel for the applicant finally prayed that court finds that the applicant has satisfied the requirements for a review or setting aside of the order, that the applicant owns the property, that the mortgagor no longer has any control or ownership over the property since he failed to fulfil his loan obligations to the applicant.

Counsel for the respondent on the other hand objected to the application on grounds that the applicant has not demonstrated existence of a valid interest in the property and therefore has no locus standi to bring this application.

They challenged the validity of the mortgage for offending Section 132 of the RTA and the legal principle espoused in Fredrick I. K. Zaabwe Vs Orient Bank Limited I 5 Others, Ciail Appeal No 0412006 that where the execution of the mortgage did not comply with the provisions of Sections 147 and L48 of the RTA, such irregularity renders the mortgage invalid.

More interesting was their submission that the mortgage was a sham intended to complicate the process of tracing the illicitly acquired funds or following the money trail. To support this proposition, they made the case that the period when the mortgagor allegedly received stolen funds, the applicant donated wide and unlimited powers of attorney to Mr. Rajnish Jian which left the applicant as a mere shell outfit intended to deceive people. They pointed out that Rajnish Jain received money for repayment of loans on his personal account as opposed to the applicant's accounts, an indicator that the applicant was merely used as a front to launder the fraudulently obtained funds as loans. Further that the continued act of dispensing loans

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to the defaulting mortgagor without any evidence of repayment on its bank accounts is not innocent conduct on the part of the applicant. They assert that the loans were fictitious, and it is no wonder the mortgagor never at any one point declared them as liabilities in the attached declaration forms.

DIP Mfitundinda Didas, an investigator and deponent of the affidavit in reply of the respondent tabulated the financial flows under paragraph a(xiii) demonstrating that the funds that were meant for compensation to the cooperatives were disbursed to the mortgagor's account after the applicant's agent Rajnish ]ain received deposits from Kirya and Co Advocates. That there was an economic benefit to the applicant since Ushs 98'1.,825,000 was received by the applicant's agent, yet only Ushs 568,000,000 was routed in the form of loans to the Mortgagee's account. That the conduct of the applicant in accepting alleged loan repayments on several occasions from a third party to the loan transactions, as deposed by the D/IP Didas in paragraph 4(viii), is not innocent. The dealings of the applicant and the mortgagor show an intention to defraud the Government of Uganda.

## Analvsis: +

Section 52 (6) of the Anti-Comrption Act provides as follows:

"An order under this section can be made only if the court is satisfied that the;

- (a)applicant is the lawful owner of the property, has a legal interest in or is entitled to lawful possession of the property, and appears to be innocent of any complicity in the commission of an offence or any collusion in relation to an offence; and - (b)the property willno longerbe requiredfor the purposes of any inaestigation or as ettidence in flny proceedings

It is apparent from Annexures "I" anld "J" to the affidavit in rejoinder of Rajnish ]ain that the mortgager borrowed Ushs 150,000,0001: on 8th

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Septemb er 2023 and executed a legal Mortgage on the same day. The certificate of title, Annexure 81 to the affidavit in support of Kongai Patricia registers the mortgage entered thereory but also shows that the same title had previously been similarly pledged and released.

A mortgage is a legal interest in land. I have considered the submissions of the respondent challenging the validity of the said mortgage in law. I will not delve into that as I am convinced that it is a matter for a different court process. On the face of 7t, the legal interest exists and has not been invalidated. I am unable to agree with the respondent's argument that the mortgage is a sham intended to defeat the cause of justice.

Furthermore, the Hon. Wamukuyu's default on the loan, the notice for sale, the advertisement for the sale of the property in the newspaper and tendered evidence of the bidding process for the property have not been contested or demonstrated as a sham. The legal right of a mortgagee to sell the mortgaged property or possess it upon default is guaranteed under our country's land laws. See Stanbic Bank Uganda Ltd oersus Dahable Uganda Limited and another, Misc. ApplicationNo 0093 of 2023 and 5.79 (e) of the Mortgage Act Cap 239. It is not contested that this process has been initiated by the applicant.

I am satisfied that the applicant has demonstrated a valid legal interest in the restrained property, Kyagwe Block 103 Plot 2132, within the meaning of Section 62 (6) (a) of the Anti-Corruption Act.

I will now address the question of the applicant's complicity in the commission of the offenses with which the Hon. Wamukuyu is charged at this Court. Counsel for the applicant contends that their client has never taken part in any crimes, and never been summoned to court to answer any criminal charges. The respondent, on the other hand, supports its proposition of the applicant's complicity in crime by relying on the power of attorney donated by the applicant to Mr. Rajnish Jain and his receipt of money for loan repayments on his personal account. The applicant's

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affidavit in rejoinder in paragraph 9 shows that when he received the money on his account, he remitted the same to the company directors. He attached the bank statement marked E, where he highlighted the transactions that I have looked at and verified.

It is not in contention that the record of lending/ borrowing between the mortgagee and the mortgager goes way back to over L0 years. Annexure F, is a memorandum dated 2014 which references similar loan arrangements with the Mortgager between the years 2077 - 2019 against various pledged properties, including LRV 4462 Folio 15 Block 4 Plot 93 atBulambuli. Several applications for loans by the mortgagor, acknowledgement of receipt of money, and settlement arrangements are contained in Annexure F running till2023.

The applicant's evidence confirms that the arrangements referred to started way before the alleged fraudulent or corrupt transactions cited in the indictment and the summary of the criminal case against Hon Wamukuyu. Furthermore, it confirms that it was the ordinary course of business. For that reason, I am unable to place any credence to the respondent's claims that the loans were fictitious or that there was a deliberate, calculated, fraudulent pattern of criminality between the two.

The applicant and its agents are not charged with any criminal offence, not least the alleged money laundering. There is no proof that a separate criminal investigation is ongoing in respect of the applicant in relation to the transactions with the mortgager. The alleged use of fraudulently diverted or feloniously received funds by an accused person to settle any obligations, including loan repayments, does not itself impute guilty knowledge on the part of the end receivers or beneficiaries of the funds.

For the respondent to satisfy the court that the applicant was complicit in the commission of the offense within the meaning of S. 62 (6) (a) of the Anti-Corruption Act, he must tender satisfactory evidence that he or she was involved with others in a wrongful activity and knew of it.

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This issue is resolved in favour of the applicant.

## Issue 3: What remedies are available to the applicant?

It is trite law that for registered land, the priority of competing legal interests is determined by the date of registration, the first in time is given priority. See Mary Monica Tenywa Kiteme aersus Roseline Niwamanya Twesigye, Ciail Suit HCT-00-LD-CS-221-2-201-6, Viao Energy (U) Ltd z)ersus Shire Petroleum Company Ltd and others, High Court (Arua) Cioil Appeal No 8/20L6

There is no doubt that the applicant's mortgage registered under Instrument No MKO-00159271 on L7th November 2023 at 9.30 am, takes precedence over the order registered on 29th November 2024, arising from asset recovery proceedings before the Anti-Corruption Court.

In conclusion, I find that this is a case where an order for a restraining order ought to be reviewed.

Counsel for the respondent prayed that should the court be inclined to review the restraining order; it should exercise its power under Section 62(41 & (5) (a) of the Anti-Corruption Act to order the applicant to enter into a recognisance to pay the value of the property in the event that the mortgagor is ordered to refund the stolen funds upon conviction.

I decline to make such an order in view of the finding that the applicant is not charged along with the mortgager, is not under any investigation in respect of the allegations and theories of criminality presented by the respondent, and is not complicit in the crimes.

Such an order, in the circumstances of this case, would not meet the interests of justice and would extend the responsibility of criminal conduct to one who is innocent of the same. There is also need to protect financial institutions to enjoy their rights of recovery under mortgages.

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## **CONCLUSION:**

This application for review and setting aside of the order issued by this court on 29th November 2024 restraining the disposal of property comprised in Kyagwe Block 103 Plot 2132 succeeds.

The same is accordingly set aside.

The respondent's prayer for an order for the applicant to enter recognisance to pay the full value of the property in the event of a conviction is declined.

No costs are awarded.

hell.

Okuo Jane Kajuga, J $11/4/2025$