By Our Reporter
Kampala: City tycoon Sudhir Ruparelia has raised a storm at Dfcu Bank, after accusing the bank and its top managers of allegedly grabbing property belonging to Meera Investments limited, and transferring ownership of the same into their names.
Sudhir contends that dfcu bank was misled by their lawyers of Sebalu & Lule Advocates into illegally transferring title properties that belong to former Crane Bank Ltd landlord Meera Investment Ltd into Dfcu’s names.
Documents seen by Spy Uganda indicate that Sebalu & Lule Advocates, who were recently barred by the High Court from representing dfcu Bank against Sudhir, erroneously advised the Bank to transfer leasehold titles from Crane Bank Ltd during the controversial takeover two years ago.
According to the documents exchanged between the law firm and dfcu bank titled ‘Transfer of former Crane Bank Household Properties’, dated May 8, 2017, the law firm skipped, overlooked or neglected to consider important aspects of the law, including the fact that banks are not allowed to invest in business for fear of conflict of interest with their clients, apart from their main premises.
“In light of the length of time between the completion of date and when dfcu can vividly exercise the option to rescind the purchase of household properties, our recommendations is that the transfer be registered immediately,” reads part the document drafted by Sebalu & Lule Advocates.
However, banking experts contend that the whole procedure of transferring property ownership from Meera Investments to dfcu was marred with fraud, since there was no consent from the Landlord (Meera Investment Ltd) to dfcu managers or their lawyers to transfer the lease ownership into their names.
According to industry experts “This thus makes the transfer null and void because lack of consent alone from the landlord nullifies the whole procedure.”
This is because ownership of the said property belonged to Meera Investment Ltd, which is an independent body from the defunct Crane Bank Ltd. In essence, Crane Bank was renting banking space from Meera Investments.
The managers Meera Investments now wonder how ‘so-called senior’ lawyers like Sebalu & Lule Advocates could have ignored and or overlooked such very important aspects of law, thereby misadvising dfcu bank to grab the property, which is now bound to cause the bank losses in billions of shillings in form of reparations and compensation to Meera Investments.
Genesis of the Saga
The problem dfcu bank and its bosses are facing currently started in October 2016, when Bank of Uganda (BoU) wound up Crane Bank due to insolvency, put it under receivership before eventually selling it to dfcu bank in January 2017 for Shs200Bn.
By virtue of the sale, dfcu Bank had to take over all Crane Bank’s assets, liabilities, nonperforming loans, client base and deposits. Among the assets dfcu inherited from Crane Bank were 46 properties, which used to house Crane Bank’s branches across the country. It emerged that whereas dfcu bank thought Crane Bank owned these properties, it turned out that it was just renting them from Meera Investments.
But Sudhir argued that between 2012 and 2016, Meera leased the 46 properties to Crane Bank on different terms, with the leases being duly registered as encumbrances on Meera’s freehold and mailo interest.
The lease titles were subsequently processed and issued to Crane Bank, under the agreement that the Crane Bank was to pay USD6,000 as ground rent for each property starting on or before January 1, of every year to the property owners (Meera Investments).
However, after dfcu taking over the defunct Crane Bank, Sudhir advised them to desist from taking over the 46 properties because they belong to Meera Invetsments, not Crane Bank. However, he got shocked to later learn that dfcu Bank, acting on the advice of Sebalu & Lule advocates, had transferred ownership of the properties into their names.
The lease agreements, court documents show, provided that Meera had the option to review the ground rent after the expiry of three years.
Meera had also agreed with Crane Bank under various lease agreements that in case of any breach, non-performance, or non-observance of what they had agreed on in the lease agreements, it would be lawful for Meera to seek legal redress from court.
“It was further agreed between the plaintiff [Leaser] and Crane Bank [Lessee] that anything done contrary to the terms of the lease agreements would forthwith cease the lessee’s rights or interest in the suit properties without prejudice to the leaser’s entitlement to rent unpaid and due,” Meera claims.
With the agreements in place, on October 20, 2016, BoU took over Crane Bank under statutory management.
On January 24, 2017 Bank of Uganda announced that it had transferred all the assets and liabilities of the bank to dfcu Bank, including the contentious properties, which Sudhir now wants to rescue, reason why he recently dragged the bank to court.
“Through a subsequent search at the relevant land registries, the plaintiff (Meera Investments) discovered that; without it’s prior written consent, the first defendant (dfcu), in addition to taking possession of the suit properties, caused the leasehold interest to be transferred into its names and had been registered thereon as the proprietor of the leasehold interest,” Meera Investments contend in their plaint before the high court Commercial Division.
They add that at the execution of the transfers in favour of dfcu and at the time of causing the transfer of the leasehold interest into the names of dfcu Bank, the registration of Meera as the proprietor of the freehold and mailo was and is still intact.
Meera says dfcu Bank was aware of this fact or could have ascertained by way of a simple search or consulting them but all these avenues were ignored.
They also fault the commissioner land registration for fraudulently going ahead to transfer the leases of the properties to Dfcu without the prior consent of the owners.
“The plaintiff avers that the second defendant (commissioner land registration),
[was]
well aware of the existing lease agreements and the conditions therein including the requirements for obtaining prior written consent from the plaintiff as the leaser, before any transfer of the leases and parting with possession thereof, nonetheless proceeded to illegally transfer and register the first defendant as lessee of the suit properties, without any consent or authorisation from the plaintiff as required under the various lease agreements,” Meera argues in their plaint.
However, Sebalu & Lule Advocates, argued that Sudhir fraudulently transferred freehold titles of 48 plots of land (where the bank had its branches), purchased and developed them using the bank’s finances, before registering them in the names of Meera Investments instead of Crane bank.
The plots, according to the court documents, were then reportedly leased to the owner (Crane bank) at Shs100m premium for 49 years and USD6,000 in ground rent per year payable to Meera Investments, which was conflict of interet.
However, Sudhir has since dismissed the allegations as ‘presumptuous, speculative, founded on fanciful reasoning and
do not reflect the market realities of obtaining leasehold titles in Uganda.’
Sudhir contends that BOU’s allegation that Crane Bank obtained over 14 freehold titles is false since the bank is a non- citizen, thus couldn’t hold the land as a freehold owner as stipulated by the Land Act.
He also argued that the bank acquired several leases with different tenures, some of which were to last seven years with a commercial view that it was better in the long run to obtain freehold titles in lieu of the said leases.
Sudhir also noted that after Crane bank obtained over 14 freehold titles, it was considered that pursuant to the Land Act, the Bank could not hold the land as a freehold owner since it was a non-citizen within the meaning of the Land Act.
This has since created a standoff, whereby Meera prays to court to declare that the continued presence of dfcu Bank on its properties is illegal, tantamount to trespass and that they should be ordered to vacate with immediate effect, such that Meera can enjoy vacant possession of their properties.
