Kampala: The Supreme Court has today trashed Bank of Uganda’s appeal and ruled that the liquidation of defunct Crane Bank Limited was illegal maintaining Court of Appeal’s ruling that directed BoU to return Crane Bank to its shareholders.
Supreme Court further ruled that Crane bank was closed as a financial institution and placed under receivership and hence after closure, it ceased being a financial institution and also observed that changing the status of Crane Bank (in Receivership) to Crane Bank (in liquidation) would render the appeal moot and nugatory (unnecessary).
”An interlocutory mandatory injunction doth issue returning the status quo of the 1st respondent to what it was at the time of filing Civil Appeal No. 7 of 2020,” ruling reads partially.
”…..under the law governing banks in Uganda, only a licensed Bank can be liquidated. However, Crane Bank had been closed and put under receivership which meant that it ceased being a bank and could not be put under liquidation….” Supreme Court’s ruling partially reads.
Court further found that in placing Crane Bank into liquidation, the Bank of Uganda was in contempt of court orders. The move was intended to circumvent the decision of Court of Appeal hence aimed at preventing the course of justice before.
“The 1st respondent was closed as a financial institution and placed under receivership. Upon closer, it ceased being a financial institution under the Act and it could therefore, not be progressed to liquidation. The 2nd respondent’s act therefore of moving the 1st respondent to liquidation are contrary to the above clear provisions of the law and the same cannot be sanctioned by this court” reads the ruling,” the ruling adds.
The development comes few days after BoU decided to give up against Sudhir whom they had sued for allegedly fleecing Crane Bank Limited (CBL) of Shs397 billion which the Central bank wanted to be refunded.
The above was revealed via a letter seen by this website confirming that BoU decided to withdraw an appeal they had filed on June 23rd, 2020 contesting Justice David Wangutusi’s 2019 ruling, in which he declared that BoU illegally wound up Crane Bank and sold it to DFCU bank under dubious circumstances. Because of this, the court ordered BoU to cough billions to Sudhir for wasting his time in baseless battles.
In previous court rulings, BoU said that the decision of shutting Crane Bank was necessary upon discovering that it had significant and increasing liquidity problems that could not be resolved without the Central Bank’s intervention, given that Crane Bank had failed to obtain credit from anywhere else.
“An inventory by external auditors found that the assets of Crane Bank were significantly less than its liabilities. In order to protect the financial system and prevent loss to the depositors of Crane Bank, Bank of Uganda had to spend public funds to pay Crane Bank’s depositors,” Mutebile said then.
However, tycoon Sudhir denied the allegation thus counter-suing BoU, seeking compensation of $8m (Shs28 billion) in damages for breach of contract.
He asked the High Court to dismiss the case arguing that the Central Bank overstepped its mandate in commencing court proceedings against him and his Meera Investments Company.
Presenting an objection against BoU, Sudhir through his lawyers Kampala Associated Advocates, told Justice Wangutusi that when dissolving a bank, BoU had three options including putting someone else in its management – what is termed as statutory management, receivership or liquidation.
Counsel Elison Karuhanga a lawyer at Kampala Associated Advocates, argued that however, BoU chose to go for receivership yet under the law, specifically only the manager and the liquidator of the said bank is mandated to file a suit and not a Receiver.
He further explained that BoU as a Receiver could only dissolve or sell Crane Bank within 12 months but not sue its managers.
Genesis Of The Case
On June 30, 2017, Crane Bank Limited (in Receivership) took Mr. Sudhir Ruparelia and his Meera Investments Ltd. to court for causing financial loss amounting to UGX 397 billion to Crane Bank in fraudulent transactions and land title transfers.
Crane Bank (in receivership) in its Civil Suit No. 493 of 2017 sought High Court to compel Mr. Ruparelia to pay back the US$80,000,000, US$9,270,172.00, US $ 3,560,000.00, US$990,000.00 and UGX 52,083,995.00 as compensation for breach of fiduciary duty.
While Hon. Justice Wangutusi dismissed the UGX397 billion case against Mr. Ruperalia on a technicality, alleging that Crane Bank (in Receivership) lost its powers to “sue” and to “be sued”, thus rendering its suit a nullity, Crane Bank (in Receivership) maintaining that receivership is a management situation, and hence no legal change as to the capacity of a company to sue and be sued.