BoU faces huge costs over Crane Bank-Sudhir case

Experts say there are lessons to learn from this case and that the central bank should not be hanged for losing it

Kampala, Uganda |  JULIUS BUSINGE | Uganda’s central bank is facing huge costs after losing court cases in the Commercial and Court of Appeal over Sudhir Ruparelia, Meera Investments Limited and Crane Bank Limited (under receivership).

The Bank of Uganda had in 2017 sued Sudhir and his Meera Investments Limited for allegedly siphoning around $92.8million (about Shs334billion) and another Shs8.2billion of depositors’ money from Crane Bank for personal gain.

Sudhir’s lawyers – Kampala Associated Advocates – told The Independent they are compiling all the costs and damages incurred during the entire court proceedings for compensation.

Though the lawyers remained cagey on the amount of compensation, The Independent understands that it will be in billions of shillings owed to the high profile of the case.

“ BoU can now go wherever they want…but I don’t think they are going to change much because the law [the Financial Institutions Act] is very straight forward…it settles the question completely; they [BoU lawyers] did not read the law before filling the suit,” one of the KAA lawyers said on June.26.

It is now upon Sudhir and his companies to decide on whether or not to sue BoU, his lawyers said. Sudhir fronted a team of Kampala’s prominent lawyers in the Court of Appeal who included; Peter Kabatsi, Joseph Matsiko,  Elson Karuhanga,  Jet John Tumwebaze,  Bruce Musinguzi, Ms. Barbra Musimenta, Rayner Mugyezi and JoakimKuntaKinte.

On the other hand, BoU was represented by Dr. Joseph Byamugisha and Albert Byamugisha.

The genesis of the case

The Court of Appeal on June 23, 2020 dismissed an appeal and upheld the decision of the High Court in a suit filed by Bank of Uganda, on behalf of Crane Bank Ltd (in receivership), against Sudhir Ruparelia and Meera Investments Ltd.

In dismissing the appeal, the Court of Appeal held that the trial judge was satisfied that the preliminary points of law which the respondents raised were based on the presumption that the facts in the plaint were true and that the points of law, if upheld, were sufficient to conclude the case.

Court of Appeal Justices, Alphonse Owiny Dollo; Cheborion Barishaki and Stephen Musota agreed with an earlier ruling by Commercial Court Judge Justice David K. Wangutusi’s August 26th 2019 that a bank in receivership (Crane Bank Limited in this case), under the Financial Institutions Act (2004) cannot sue or be sued and therefore Crane Bank (in receivership) cannot and should not have sued businessman Sudhir Ruparelia and his company Meera Investments.

While delivering their ruling , Civil Appeal 252 of 2019 at the Court of Appeal, the trio also ruled that Crane Bank (in receivership) being a foreign owned bank, cannot own freehold land in Uganda and therefore has no legal basis to sue Sudhir for land it cannot own.

“The appeal consequently fails. It is thus dismissed with costs here and the court below,” ruled the justices. The costs would be borne by Bank of Uganda.

BoU loses twice

This is the second time, Bank of Uganda’s case- HCCS 493 of 2017, in which BoU, through Crane Bank (in receivership) alleged that the businessman fraudulently siphoned around $92.8million (about Shs334billion) and another Shs8.2billion of depositors’ money from Crane Bank for personal gain, has failed.

Sudhir’s victory is a major blow to Bank of Uganda’s attempt to recover the alleged cash (Shs397billion) it claimed he syphoned from his CBLbefore the central bank took it over on October 20, 2016 and sold it to dfcu bank for a paltry Shs200bn.

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 is 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 JitendraSanghai, 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.

In addition, 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. This all collapsed with the latest June 23 ruling.

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.