By Spy Uganda
Kampala: Justices of the Constitutional Court have on Wednesday, October 4, 2020 ruled that the sale of the defunct National Bank of Commerce (NBC) to Crane Bank in September 2012 was legally handled by the Central Bank.
The judgment in the Constitutional Petition of Humphrey Nzeyi vs BOU & AG delivered focused on whether the takeover, liquidation, revocation of license and sale of National Bank of Commerce by Bank of Uganda was unconstitutional.
The Court by majority decision of 4:1 found that the acts of BOU were constitutional and dismissed the Petition with each party bearing its own costs.
It should be remembered Nzeyi had petitioned the Constitutional Court challenging the legality of BOU’s decision which Court ruled that the acts of Bank of Uganda (BOU) to intervene and revoke the license of NBC and then wind up are not unconstitutional.
“It is still possible to argue that notwithstanding the law, the manner in which the act of removing management and winding up the NBC were done could have been unconstitutional. The onus to prove this, lies with the petitioner; but I find he has not been able to do so. It is not enough in my view to say that the whole process was rushed in one day,” Justice Kiryabwire held.
Other judges who concurred with him are Cheborion Barishaki, Ezekiel Muhanguzi and Stephen Musota.
In his dissenting ruling, Justice Kenneth Kakuru reasoned that the complainant and the shareholders of the defunct NBC were entitled to redress in form of damages but was unable to ascertain them from the record.
Justice Cheborion Barishaki noted in his judgment that given the uniqueness of the business in which financial institutions carry out, time is of essence in their regulation.
“on the basis of the evidence produced by BOU,I would conclude that there was reason for closure of the NBC in the public interest of achieving stability of the banking sector by maintaining good prudential control authorized by the constitution,”Barishaki noted.
“Bank of Uganda was entitled to exercise all the powers granted to it by FIA and in my view, it did so for the proper purpose of avoiding damage to the financial system which would have been occasioned by the possible collapse of NBC.”
The judge urged Nzeyi that if he thought the process of liquidating and later sale of NBC was done illegally and under irregularities, the course of action would be an application for judicial review in the High Court.
“It is for the above reasons that I would dismiss the petition with no order as to costs,” Justice Barishaki said
Background Of The Case
On September 27, 2012, BOU wrote to the Managing Director of NBC communicating the take over of its management and that it is on the same day a public notice was issued by BOU winding up its affairs.
According to Court records, on the same day, BOU concluded a purchase and assumption agreement with Crane Bank Limited which then took over all deposits.