[2025] UGCommC 123

# 5 **THE REPUBLIC OF UGANDA**

## **IN THE HIGH COURT OF UGANDA AT KAMPALA**

#### **COMMERCIAL DIVISION**

#### **COMMERCIAL CAUSE NO. 0002 OF 2023**

# **1. DHARAMPAL SINGH BHAMBRA**

# 10 **2. JASPAL SINGH BHAMBRA**

- **3. GURKIRPAL SINGH BHAMBRA** - **4. DEV-INDER SINGH BHAMBRA** - **5. SANJEEVAN SINGH BHAMBRA ::::::::::::::::::::::::::::::::::: PETITIONERS**

### 15 **VERSUS**

#### **1. ZAHUR'S FURNISHING GALLERY LIMITED**

# **2. KALWANT S. BHAMBRA :::::::::::::::::::::::::::::::: RESPONDENTS**

Before Hon. Lady Justice Harriet Grace Magala

#### Judgment

### 20 **Background**

The Petition was brought against the Respondents for the first Respondent's mismanagement and the second Respondent's derivation of benefits from the first Respondent to the exclusion of and without the Petitioners' consent.

That the second Respondent fraudulently appointed himself a director of the 25 first Respondent, as evidenced by a search made at the Uganda Registration Services Bureau (URSB) on the 23rd March 2023 and company Form 8 filed with the URSB on the 13th December 2016.

The Petitioners averred that the second Respondent changed the known business bank account from Bank of Baroda Uganda Limited to Guaranty

30 Trust Bank Limited(GTB), where he is a sole signatory. The company funds

5 have been transferred from Bank of Baroda Uganda Limited to GTB, denying the Petitioner access to the said funds.

The 2nd Respondent has frustrated the Petitioners' efforts because they are minority shareholders, and as such, the Resolution dated 1st April 2023 was of no consequence. All payments should be made to the 1st Respondent per the

10 Lease Agreement, not M/s AKN Advocates.

As a result of the conflict between the Parties, the Petitioners have been denied their portion of the rent for seven (7) years. The second Respondent has frustrated all efforts to resolve the dispute. The Petitioners prayed for the following orders from the court:

- 15 a) That the rent arrears owed by the tenant of the company be paid following the duly registered shareholders' resolution; - b) That the second Respondent duly account for all monies received on behalf of the first Respondent; - c) That the bank accounts be duly returned to Bank of Baroda Uganda - 20 Limited and the lawfully appointed directors of the company be granted access to them; - d) A declaration that the actions of the Respondents have been oppressive and prejudiced the Petitioners' rights; and - e) Costs of the suit. - 25 The first and second petitioners deposed the affidavits in support of the petition.

# **Representation and Hearing**

M/s AKN Advocates represented the Petitioners. The Respondents did not reply to the petition despite being made aware of the petition through substituted 30 service. This court issued the order to serve the Respondents through substituted service on the 29th of November, 2023. The Petitioners filed written submissions, which have been duly taken into consideration. Because the

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- 5 Respondents were made aware of the Petition but decided not to participate in the court proceedings, this court proceeded to hear the Petition as stipulated under **Order 17 rule 4 of the Civil Procedure Rules as amended,** which states that: - "*Where any party to a suit to whom time has been granted fails to produce* 10 *his or her evidence, or to cause the attendance of his or her witnesses, or to perform any other act necessary to the further progress of the suit, for which time has been allowed, the court may, notwithstanding that default proceed to decide the suit immediately."*

# **Determination**

- 15 **Issue No. 1: Whether the 2nd Respondent's acts are prejudicial to the interests of the Petitioners and the 1st Respondent.** - **(i) The 2nd Respondent has mismanaged and derived benefits from the assets of the 1st Respondent to the exclusion of and without the knowledge/consent of the Petitioners** - 20 I have carefully perused the Petition and the affidavits in support thereof. The court record does not provide direct proof that the second Respondent mismanaged the company's affairs and derived benefit from its assets.

Fortunately, the property is not in a sorry state or gone to waste because following a very long silence from the 1st Respondent, the Tenant invoked a

25 clause in the lease agreement and carried out some renovations, the cost of which shall be off set from the rent.

What is however clear from the e-mail communications between the 2nd Respondent and the Tenant at Plot 63/67 5th Street Industrial area is that the latter last made contact with the late father of the 2nd Respondent who had 30 powers of attorney to manage the property in 2012 or thereabout (**see the email communication dated 12th February 2015 from Julius Mukiza to the**

**2nd Respondent).** Before Gian Singh Bhambra passed away, he appointed the

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- 5 2nd Respondent as a director in his stead. To the 2nd Respondent, in his mind, he was under the honest but mistaken impression that he automatically obtained powers of attorney to manage the property. Had the 2nd Respondent been appointed as an alternate director, that would have been a different matter altogether. Based on this assumption, he has been asking the tenant to - 10 pay rent. The Tenant has insisted that rent be paid to known account as per the initial lease agreement (**see the e-mail communication dated 24th February 2015 from Julius Mukiza of the US Embassy to the 2nd Respondent)** and that they could only deal with the 2nd Respondent upon him presenting proper documentation that showed he was given powers of attorney - 15 to manage the property. This then takes me to the second complaint by the Petitioners. - **(ii) The 2nd Respondent has changed the 1st Respondent's known business bank accounts from Bank of Baroda Uganda Limited to Guaranty Trust Bank Limited, thereby denying the Petitioners** 20 **access and accountability to the funds.**

From the email communication referred to above, dated 24 February 2015, from Julius Mukiza to the 2nd Respondent, an inference can be drawn that the 2nd Respondent opened another bank account into which he wanted the Tenant to deposit the rent. The Tenant declined to deposit funds in the said 25 account and refused to deal with the 2nd Respondent because he failed to present documents authorizing him to do so.

As a court, I expected the Petitioners to go beyond mere assertions that a new bank account was opened and that funds from Bank of Baroda were removed from the account to that new account. There is no evidence to prove or back up 30 this assertion. The court record also lacks information as to how much was held on the 1st Respondent's bank account from the time Gian Singh Bhambra passed on and when this suit was filed. The bank account details (account number and account name) held by the 1st Respondent in Bank of Baroda

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5 Uganda Limited and Guaranty Trust Bank were also not available to this honourable court.

In the absence of such information, the court cannot therefore find that the 2nd Respondent has accessed and misappropriated the funds of the 1st Respondent.

# **(iii) The 2nd Respondent was unlawfully appointed as a director of the** 10 **1st Respondent**

One of the issues raised by the Petitioners was that the 2nd Respondent was illegally appointed as a director of the 1st Respondent. The Petitioners adduced evidence in the form of Company Form No.8, which was filed with the Uganda Registration Services Bureau in December 2016. Mr. Gian Singh Bhambra

15 signed the said form on 21st October 2016. Mr. Gian Singh Bhambra, following section 201 of the Companies Act Cap 110, transferred his directorship in the 1st Respondent to his son, Dr. Kalwant Singh Bhambra. At the time the 2nd Respondent was appointed a director, **Section 201 (5) and (6) of the Companies Act 110 stated** that:

20 *"(5) The company shall, within the periods respectively mentioned in subsection (6), send to the registrar a return in the prescribed form containing the particulars specified in the register and a notification in the prescribed form of any change among its directors or in its secretary or in any of the particulars contained in the register, specifying the date of the* 25 *change.*

*(6) The periods referred to in subsection (5) are the following—*

*(a) the period within which the return is to be sent shall be a period of fourteen days from the appointment of the first directors of the company; and*

30 *(b) the period within which the notification of a change is to be sent shall be fourteen days from the happening of the change".*

5 The question is whether a directorship can be transferred, as was the case before the court. The Articles of Association that were signed by the subscribers and shareholders on the 13th August 1962 is silent on how directors should be appointed.

In a communication dated 7th March 2025 and received by this honorable court

- 10 on the 17th March 2025 from the Uganda Registration Services Bureau (*hereinafter referred to as "URSB), states that* the Directors of the 1st Respondent are: - 1. Pritam Singh Bhambra - 2. Gulamali Fateh Din - 15 3. Kalwant Singh Bhambra - 4. Avtar Singh Bhambra - 5. Gurpreet Kaur Bhambra - 6. Dharampal Singh Bhambra - 7. Shafqat Sultan - 20 Table A, Regulation 94 of the Companies Act, Cap 106 states that:

*"The Company may, from time to time, by ordinary resolution increase or reduce the number of directors and may also determine in what rotation the increased or reduced number is to go out of office". (Emphasis is mine)*

There is no record in the Company Registry that shows that the appointment of 25 the 2nd Respondent was made at the meeting, and the outcome of this resulted in a resolution being signed and registered with the URSB. A signed resolution indicating when and where the meeting was held should have accompanied Company Form 8 that was registered with the URSB on the 13th day of December 2016. This was an irregularity and illegality which cannot be

30 condoned. (**see the decision of the Court of Appeal in Consolidated Civil Appeal Nos. 0266 and 0279 of 2017: Nakivubo Road Old Kampala (Kisekka) Market Vendors Ltd. & 5 Others vs Kayita Geoffrey & 3 Others).**

Page **6** of **11** - 5 The Court still maintains that the appointment of the 2nd Respondent as a director was irregular and illegal, notwithstanding a resolution of the 1st Respondent, URSB file dated 15th April 2017. This meeting was held after Company Form 8 was lodged with the URSB (this form was signed on 21/10/2016 and lodged with the URSB on 13/12/2016). - 10 For the reasons given above, this Court finds that the 2nd Respondent was illegally and fraudulently appointed as a Director in the 1st Respondent and is hereby struck off the Register of the 1st Respondent.

# **Issue No. 2: Whether the 2nd Respondent rightly ignored the resolution of other shareholders**

| S/NO. | NAME OF SHAREHOLDER | NO. OF SHARES HELD | |-------|--------------------------|--------------------| | 1. | Shafqat Sultan | 125 | | 2. | Ahmed Salik | 124 | | 3. | Dharampal Singh Bhambhra | 82 | | 4. | Jaspal Singh Bhambhra | 81 | | 5. | Kalwant Singh Bhambhra | 43 | | 6. | Avtar Singh Bhambhra | 20 | | 7. | Gurpreet Kaur Bhambhra | 20 | | 8. | Dev Inder Singh Bhambhra | 1 | | 9. | Sanjeevan Singh Bhambhra | 1 | | 10. | Gurkipal Singh Bhambhra | 1 | | 11. | Bhagwant Singh Bhambhra | 1 | | 12. | Ghulam Ali Salik | 1 |

15 The shareholding in the 1st Respondent as at 7th March 2025 is as below:

The meeting of shareholders contested by the 2nd Respondent was called by a shareholder with 82 shares in the company, and also a Director. Those who could attend the meeting passed resolutions and signed them off. The total

- 5 number of shares held by those who attended and signed was 167 shares. The 1st Petitioner is the only Director who participated in that meeting. The 2nd Respondent disregarded the outcome of the meeting because one director called it, minority shareholders attended it, and the Secretary did not sign the resolution. This begs two questions: - 10 (a) Was the meeting held on the 1st April 2023, convened in accordance with the law?

**Article 14 of the Articles of Association of the 1st Respondent,** in part, states that:

"The *Company shall in each year hold a general meeting as its annual* 15 *general meeting in addition to any other meetings in that year, and shall specify the meeting as such in the notices calling it; …"*

Table A of the Companies Act, Cap. 106 and Regulations 48 and 49(1) state as follows:

#### **Regulation 48 states that:**

20 "*All general meetings other than the annual general meetings shall be called extraordinary general meetings".*

## *Regulation 49(1) states that:*

*"The Directors may, whenever they think fit, convene an extra ordinary general meeting, and extraordinary general meetings shall also be convened*

25 *on such requisition, or in default, may be convened by such requisitionists, as provided by section 135 of the Act". (Emphasis is mine)*

## **Section 135(1) of the Companies Act in part, states that:**

*at general meetings of the company, or …"*

*"The Directors of a company, notwithstanding anything in its articles, shall, on the requisition of the members holding not less than one tenth of the paid* 30 *up capital of the Company as at the date of deposit, carry the right of voting*

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- 5 Relating the above-cited provisions of the Companies Act to the matter before the court, a notice calling for an extraordinary general meeting was issued by the 1st Petitioner, within the ambit of Regulations 48 and 49 (1) of Table A of the Companies Act. The intention of this meeting was very clear, to deliberate and pass a resolution concerning the issue raised by M/s AF Mpanga, the - 10 lawyers representing the American Embassy which in the Tenant at Plot 63/67 5th Street Industrial. For the resolution to be passed, it required special notice of twenty-eight days as set out in **section 145 of the Companies Act.** The Notice calling the meeting is dated 27th March 2023, and the meeting was scheduled to be and was held on the 1st April 2023. The Notice Period was - 15 **three (3) days.** It is only an adjourned meeting that can be called within a notice period less than what is provided for in the law. The notice can however be shortened if all the members entitled to attend and vote agree to a short notice or by members who together hold not less than one tenth of the paid up capital of the Company (**see section 135(1) of the Companies Act, Cap. 106** - 20 **and the case of Fang Min vs Uganda Hui Neng Mining Limited & 5 Others, HCCS No. 0318 of 2016)**.

Whereas the members who called the meeting held more than one tenth of the paid up capital of the Company, there is no proof on the court record that they agreed to have this meeting after a three days notice period as opposed to 25 twenty-eight days. This court, therefore, finds that the meeting held on 1 April 2023 was not in accordance with the law and the deliberations and resolutions of the meeting are not binding on the first Respondent.

The 2nd Respondent also questioned the Resolution arising from the meeting held on the 1st April 2023 because it was only signed by one director. **Section**

30 **53 of the Companies Act, Cap. 106 states that:**

"*A document executed by a director and the secretary of a company or by two directors of a company and expressed to be executed by the company*

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5 *has the same effect as if executed under the common seal of the company."*

My reading and understanding of the section is that company documents should be executed by at least two officers of the company. This maybe two directors or more; or a director and a secretary. Where the document is

10 executed by these officers, there is no requirement to seal/ stamp the document.

It is only where an already executed document that requires authentication, where the authentication can be done by only one officer of the company as seen from **section 57 of the Companies Act, Cap. 106 states that:**

15 *"A document or proceeding requiring authentication by a company may be signed by a director, secretary, or other authorized officer of the Company and need not be under its common seal". (Emphasis is mine)*

I find that the Resolution was not executed in accordance with the law and is, therefore, invalid. Shareholders are members of the Company, but they are not 20 necessarily authorized officers of the Company.

#### **Issue No. 3: What remedies are available to the Petitioners?**

The Directors and Shareholders of the 1st Respondent are hereby directed to convene an extraordinary general meeting within a period of not less than two months from the date of this judgment to deliberate and pass resolutions 25 concerning the following:

- 5 (a) Renewal of the Lease Agreement between the 1st Respondent and the American Embassy; - (b) Management of the property located on Plot 63/67 5th Street Industrial; - (c) Disbursement and distribution of the proceeds from the rent; and - (d) Any other relevant matter that they deem fit for the proper management

10 of the assets of the 1st Respondent.

This court makes no order as to costs.

I so order.

## **Dated and signed at Arua this 22nd day of May 2025.**

15 **Harriet Grace Magala**

**Judge**

**Delivered online via ECCMIS this 23rd day of May 2025.**

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