Round three: BoU, Sudhir to face off at Supreme Court

Mutebile said a subsequent forensic investigation as to why Crane Bank became insolvent found a number of wrongful and irregular activities linked to Sudhir Ruparelia and Meera Investments Ltd. These findings, Mutebile said, form the basis of the claims in the lawsuit by Crane Bank. Mutebile insists the suit was necessary for recovery of the taxpayers’ money used to pay depositors’ funds as well as the other liabilities of Crane Bank.

“BoU set about resolving the affairs of Crane Bank in a manner that would safeguard depositors, preserve the safety of the financial system, and restore the taxpayers’ money that had been deployed to prevent loss to depositors and a potential financial crisis,” Mutebile said.

However, KAA said the so-called forensic investigation undertaken by Bank of Uganda is unreliable because the investigators did not interview Ruparelia, or the Managing Director or the Executive Director as required under forensic audit guidelines.

Mutebile also said that they had engaged Sudhir who in the process signed a Settlement and Release Agreement with BoU on March 20, 2017 in which he undertook to pay a sum of $60million and to return land titles that had been irregularly taken from Crane Bank, which is the actual owner of the branches on which its branch network sat across the country. Under this agreement, BoU says Sudhir Ruparelia only paid US$8,000,000 and refused to pay the balance.

In response to this, Sudhir lawyers said the case Bank of Uganda filed in the High Court and the Appeal in the Court of Appeal did not include any claims of any kind or any allegations of any kind in relation to a settlement agreement with Sudhir Ruparelia. They also argued that Sudhir Ruparelia has filed a counter claim, whose subject matter is based on that settlement agreement, which means the sub judice rule precludes him from elaborating more on that matter here.

The other issues of contention in this case are that Sudhir Ruparelia illegally and secretly owned 100% shareholding in Crane Bank in breach of the Financial Institutions Act, 2004. That he (Sudhir) wrongfully and illegally extracted from Crane Bank amounts totaling to US$92,830,172 and US$8,277,000,000.

BoU adds that Sudhir transferred freehold property beneficially owned by Crane Bank into the names of Meera Investments Ltd in which he and his family are the majority shareholders, without giving value to Crane Bank and rendering the Bank a tenant on its own property with a liability to pay rent to Meera Investments Ltd.

The public is also invited to note that neither the High Court nor the Court of Appeal has yet considered or taken a decision on the claims for wrongful and illegal extraction of funds from Crane Bank as claimed in the main suit.

BoU says that the implications of the two judgments are that a receiver of a financial institution/bank cannot pursue or seek recovery of assets of a bank in receivership by way of legal proceedings. This therefore renders the principle of tracing and preserving assets of an insolvent bank during statutory management and receivership futile.

The bank adds that the judgments also set a precedent that limits the Central Bank’s capacity to resolve banks in a manner that ensures accountability for mismanagement of depositor funds and promotes good corporate governance in the banking industry.

“For these reasons, BoU as receiver of Crane Bank is dissatisfied with the rulings of both the High Court and the Court of Appeal and has taken a decision to appeal to the Supreme Court in addition to pursuit of other legal recovery options,” the statement reads in part.

KAA further responds

In response to the above allegations, KAA said in their notice that the allegation that Sudhir Ruparelia owned 100% of Crane Bank is false because all the shareholders of Crane Bank were vetted and approved by the Bank of Uganda in accordance with the Financial Institutions Act.

The law firm further says there is no forensic Report of any kind that states that US $92 million was extracted from Crane Bank by Sudhir Ruparelia as Bank of Uganda alleges in the press statement.

In addition, the lawyers say, Crane Bank was subjected to numerous annual, quarterly and special audits and all its financial statements were approved every year by the Bank of Uganda without reservation of any kind.

They also said that Meera Investments Limited is a separate legal entity that is not regulated by Bank of Uganda and holds a reversionary interest in real property that the Bank of Uganda would like to take over without any legal basis and in violation of the Constitution of Uganda. This issue was considered by both the High Court and the Court of Appeal and was rejected both times on constitutional grounds, KAA lawyers say.

On limiting the capacity of the BoU to do its work on struggling banks, the KAA lawyers said that it is not the judgments of the High Court and Court of Appeal that restrict the powers of Bank of Uganda in resolution of closed banks as suggested by the Bank of Uganda.

The KAA says that both judgments stated clearly that the limitation on Bank of Uganda’s powers are found in the Financial Institutions Act and that if the Bank of Uganda is unhappy with those limitations, the appropriate remedy should be to seek to reform the law and amend the statute.

In general, KAA lawyers said that there is no court in any part of the world that can proceed to hear a case where no cause of action is disclosed.

The statement further says that in both the High Court and the Court of Appeal, the Bank of Uganda addressed the courts urging them to ignore the fact that it had no cause of action and proceed to hear the case anyway.

KAA says, by this action, Bank of Uganda was inviting the courts to ignore the law – which is wrong.

Sudhir’s lawyers also say the official reason given by Bank of Uganda to the public for the takeover of management of Crane Bank Limited was under capitalization due to provisioning for non- performing loans, not the so-called extraction and related issues that are alleged by the BoU. The lawyers say that this is an attempt to soil Sudhir Ruparelia’s image.

Fighting for media space

Francis Bwengye, a commercial lawyer at the Kampala based Bwengye & Associated Advocates told The Independent on July 03 that the two parties should not be seen fighting in the media but handle the issue in courts of law if they so wish.

He said that the two media statements issued by the two parties (BoU and KAA) are intended to show the general public and their clients that they are all right in this case.

He said the decisions made by the two lower courts are likely not to be changed by the Supreme Court – which means the BoU is “simply buying time and cleaning its image in the court of public opinion.”

He also said that BoU moves on Crane Bank are intended to punish Sudhir for allegedly ‘mismanaging’ his bank.

“But the law is not on their (BoU’s) side,” Bwengye said, “They will pay heavily in case they lose at the Supreme Court.”

****