Behind Sudhir win

SUDHIR CASE: Plan to have BOU pay heavily

Kampala, Uganda | JULIUS BUSINGE & ISAAC KHISA | Real estate tycoon Sudhir Ruparelia has won a major case in the High Court in Kampala that could see the Bank of Uganda pay him billions of shillings in costs and compensation for lost business and properties.

Sudhir’s victory is a major blow to Bank of Uganda’s attempt to recover about Shs397billion it claimed he syphoned from his Crane Bank Ltd before the central bank took it over on October 20, 2016 and sold it to dfcu bank for a song.

In a bid to get money and titles to the 48 branches of Crane Bank in the names of Meera Investments Ltd, Bank of Uganda in 2017 sponsored Crane Bank Ltd in Receivership to launch a civil suit against Sudhir and Meera Investments.

Crane Bank Ltd in Receivership, as the entity that Bank of Uganda formed after taking over Crane Bank and placing under receivership was called, sued Sudhir for alleged illegal shareholding and owning 100% of Crane Bank which was against the banking laws.

It alleged that Sudhir owned 47.33% of Crane Bank Ltd registered in the name of a company called White Sapphire Ltd, which name was owned by one Rasikal Chhotalal Kantaria, 4% shares registered in the names of Jitendra Sanghai, 19.93% shares registered  in the names  of his wife and three adult children.

Sudhir was accused of syphoning $93million from Crane Bank and $80million which was paid to non-existent entities for his own benefit.

Crane Bank Ltd in Receivership also alleged that Sudhir took $9.7million from Crane bank through Infinity Investments Ltd; another company Sudhir owned, to allegedly pay Technology Associates Ltd for services it did not supply.

Finally, it was alleged that Sudhir failed to remit Shs52 billion in standard and special contributions’ interest and penalty to NSSF from January 2007 to December 2016.

In total Crane Bank Ltd in Receivership wanted court to compel Sudhir to pay over Shs397 billion as compensation for financial losses he allegedly caused to Crane Bank.

In the case of Meera Investment Ltd, Crane Bank Ltd in Receivership alleged that as a company owned by Sudhir, it dishonestly took over freehold and mailo land owned by Crane Bank for free. For this reason, Crane Bank Ltd in Receivership wanted Meera Investment Ltd to handover titles to the 48 properties comprising the countrywide branch network of the former Crane Bank and $990,000 as interest, general damages, and costs of the suit.

Instead of paying the Shs397 billion and handing over the titles of the 48 branches of the former Crane Bank, Sudhir in 2019 petitioned the High Court against Crane Bank Ltd in Receivership.

Sudhir made two main arguments; first that Crane Bank Ltd in Receivership does not have the right or capacity to sue him, and two; that the case against Meera Investment Ltd is barred in law.

Based on the Aug.26 High Court ruling by Justice David Wangutusi, the head of the Commercial Court Division, it appears Sudhir has once again defeated Bank of Uganda.

The Court ruled that Crane Bank in Receivership at the time of instituting the commercial suit against Sudhir and his Meera Investments Company was none- existent and therefore could not sue. The case against Sudhir was accordingly dismissed with costs of the suit to be paid by Bank of Uganda to Sudhir.

In the case again Meera, Justice Wangutusi based on a letter that BOU wrote to Crane Bank on March 01, 2013, authorising Crane Bank to transfer 47.33% shares from Rasik Kantaria to White Sapphire Ltd, a company based in Mauritius while Jitendra Sanghani who owns 4% shares is British. Together they own 51% shares.

“The majority shareholders being non-citizens renders the company likewise noncitizen,” Wangutusi ruled. Under Ugandan law it is illegal for a noncitizen to hold a freehold title.

In any case, Wangutusi ruled, the 48 branches that Crane Bank in Receivership wanted from Meera Investment Ltd had already been given away by the receiver to dfcu bank on January 24, 2017, four days into receivership. This move left Meera with no property, the court ruled.

The Bank of Uganda seizure of Crane Bank, which was the fourth largest bank by deposits in Uganda at that time, was seen as a bold move.

But the parliamentary committee on Commissions, Statutory Authorities and State Enterprises (COSASE), which investigated it, said in February that “the takeover of Crane Bank by Bank of Uganda was illegal.”

COSASE said in its report that Crank Bank had recovered from liquidity distress by January 01, 2019 – about a month before Bank of Uganda sold it to dfcu on January 25, 2017.

“In fact, Bank of Uganda had stopped injecting money on 9th January 2017. Therefore the bank’s liquidity position had stabilised,” reads the report presented to parliament.

At the time of takeover, Central Bank Governor Emmanuel Tumusiime Mutebile said Crane Bank was systemically under-capitalised and posed a danger to financial sector stability.

But Sudhir, citing an Auditor General’s report queried the failure by the Central Bank to help revive his bank and instead sold it to dfcu for the paltry price of Shs200 billion which was the value of Crane Bank’s bad books.