The Commercial Division of the High Court in Uganda has ordered Kenyan businessman Atul Shah to pay Megha Industries Uganda $358,431 (UGX 1.3 billion) and UGX 24.3 million for breach of a lease agreement linked to defunct Nakumatt Uganda.
The case, presided over by Justice Patience T.E. Rubagumya, arose from a dispute over unpaid rent and utility bills for retail space at Victoria Mall in Entebbe, Wakiso District.
Court found that Mr Shah, as a co-principal debtor and surety under a tenancy agreement signed in 2017, was liable for the unpaid rent arrears due to Nakumatt Uganda that had remained unpaid since the business was dissolved.
Court documents indicate that Megha Industries, the registered owner of Victoria Mall, leased space to Nakumatt through its affiliate company, Consumer Distributors Africa Limited.
Thus, in her ruling, Justice Rubagumya, noted that Shah had unjustly benefited from the lease agreement while failing to meet his obligations, before ordering that in addition to the unpaid principal, he had to pay UGX 85 million in general damages, interest at 20% per annum on the unpaid amounts, and 6% per annum on general damages until full payment is made.
Justice Rubagumya noted that Shah could not benefit from the agreement, while avoiding financial responsibility.
Megha Industries, represented by Katende, Ssempebwa & Co. Advocates, successfully argued that the businessman was bound by the suretyship contract and must fulfill his obligations.
The ruling marks another legal setback for the formerly chief executive officer of the regional supermarket chain that imploded in 2017, before closing its branches in Uganda, Rwanda and Tanzania.
Nakumatt had for over a decade dominated East Africa’s retail market before an unexpected implosion.
Megha Industries is expected to pursue enforcement and recovery of the awarded sums.
Background of the case
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The agreement covered 3,240 square meters of retail space.
An addendum to the lease agreement included a Deed of Suretyship, in which Mr Shah, a key director of Nakumatt Uganda, and two other directors agreed to act as co-principal debtors.
However, by June 14, 2017, Nakumatt had accumulated unpaid rent of $225,722.61 (UGX 829 million), service charges of $28,284 (UGX 104 million) and UGX 34 million in electricity charges.
Despite repeated demands, Nakumatt failed to pay, leading to further accumulation of debts.
Eventually, Nakumatt Uganda was declared insolvent and dissolved without clearing its outstanding debts, a move that forced Megha Industries to turn to Mr Shah, who had signed the Deed of Suretyship, making him personally liable for Nakumatt’s debts.
Megha Industries filed a suit against Mr Shah for breach of contract and unjust enrichment but due to difficulties in locating him, court in June 2024 published summonses in the Daily Monitor newspaper, asking Mr Shah file a defense.
However, Shah failed to respond to the summonses, forcing court to enter an interlocutory judgment, which allowed the case to proceed without his response.
On November 7, 2024, Justice Rubagumya ruled that Mr Shah was liable as a co-principal debtor, had unjustly enriched himself and, therefore, couldn’t escape liability.
