Ahmed Luyombya, who borrowed Shs 230 million from Centenary Bank but later his job has been ordered to clear the loan by court.
In a ruling, Justice Bonny Isaac Teko dismissed an application by Luyombya and his guarantor, Richard Enoch Mwami, who had asked the court for permission to defend a summary suit filed by the bank.
The dispute arose from a loan of Shs 230 million that Centenary Bank advanced to Luyombya in March 2024.
According to court records, the loan was issued on March 14, 2024. Mwami signed as a guarantor, agreeing to repay the money if Luyombya failed to do so. The bank later claimed that the borrower defaulted and that after several payments, an outstanding balance of Shs 174.8 million remained unpaid.
When Centenary Bank sued to recover the money through a summary procedure, Luyombya and his guarantor asked the court to allow them to defend the case. They argued that they were not indebted as claimed and that the dispute raised serious issues that required a full trial.
At the heart of their argument was the claim that the loan was a salary loan, whose instalments were supposed to be automatically deducted from Luyombya’s monthly salary.
“There is therefore no way the first applicant would not honour his loan obligations when the instalments were always deducted automatically from his monthly salary,” their lawyers told the court.
They also argued that Mwami, the guarantor, had never been served with a proper demand notice as required by the guarantee agreement, making the suit premature against him.
Centenary Bank strongly opposed the application.
The bank’s lawyers pointed court to what they described as clear admissions in the applicants’ own proposed defence. They argued that while Luyombya denied indebtedness in his affidavit, he also admitted in his draft defence that he stopped paying the loan after losing his job.
The bank highlighted paragraphs in which the applicants stated that Luyombya struggled and stopped making payments when he lost his job and that they were ready, prepared and able to start making repayments if given time.
“This completely negates the denial of indebtedness,” the bank argued, saying the application was merely intended to delay recovery of the loan.
The bank also dismissed the argument about demand notices, stating that this was not a mortgage but a salary loan. It told court that both Luyombya and his guarantor were in fact served with demand notices in March and May 2024 before the suit was filed.
He lent a friend Shs 270 million without written agreement. Court has ordered the friend to repay
In analysing the case, Justice Teko focused on whether the applicants had raised a genuine defence that deserved a trial.
“The law requires the applicants to show a bona fide defence. A defence that is contradicted by the applicants’ own pleadings and evidence cannot be said to be bona fide,” Justice Teko
Teko noted a fundamental inconsistency between the affidavit filed in support of the application and the applicants’ own proposed defence.
“The assertion in the affidavit that Luyombya honoured his loan obligations is directly and irreconcilably contradicted by his own plea that he ‘stopped making payments’ and is now ready to start making repayments,” the judge said.
He added that this contradiction went to the very heart of the defence.
“A party cannot swear an affidavit denying a debt and then file a defence that admits default and pleads for time to pay,” the judge ruled.
“Such a defence is, in the words of the authorities, a sham.”
On the argument that the loan was a salary loan, the judge agreed with the bank that loss of employment does not erase a borrower’s obligation.
“Salary is only proof of creditworthiness,” the court observed, adding that losing a job does not extinguish a duty to repay money borrowed.
The judge also rejected the guarantor’s reliance on mortgage law cases, describing them as “misplaced”.
On complaints about the interest rate, the court was equally firm.
In the end, the court concluded that the applicants had failed to raise any triable issue and that the bank’s claim was clear and supported by admissions.
“The bank has a clear, liquidated claim supported by Luyombya’s own admissions,” Justice Teko said.
He dismissed the application and ruled in favour of Centenary Bank.
