By Andrew Irumba
Kampala: Following the Court of Appeal ruling in the multibillion case between Bank of Uganda and Crane Bank, Governor Tumusiime Mutebile has announced that matters the Supreme Court will be the once to decide over the matter, TheSpy Uganda reports.
On June 23rd, 2020, the Court of Appeal in Kampala dismissed an appeal that had been filed against businessman Sudhir Ruparelia by Bank of Uganda and Crane Bank in receivership, 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.
According to a statement signed by BoU Governor Mutebile on Tuesday, the Central Bank revealed that receivership does not take away the corporate personality of a company which includes the right to trace and recover assets and the right to sue for those assets.
Governor Mutebile says that neither the High Court nor the Court of Appeal has yet considered or taken a decision on the claims for wrongful and illegal extraction of funds from Crane Bank as was claimed in the main suit.
“The implications of these judgments are that a Receiver of a financial institution/bank cannot pursue or seek recovery of assets of a bank in receivership by way of legal proceedings,” Mutebile said.
He added that “The judgements also set a precedent that limits the Central Bank’s capacity to resolve banks in a manner that ensures accountability for mismanagement of depositor funds and promotes good corporate governance in the banking industry.”
BoU /Crane Bank in Receivership had sued Sudhir and Meera Investments Limited for allegedly fleecing Crane Bank Limited (CBL) of Shs397 billion which the Central bank wanted refunded.
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.
However, tycoon Sudhir denied the allegation and has since counter-sued 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 over stepped 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 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 it’s managers.
Background 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) maintains that receivership is a management situation, and hence no legal change as to capacity of a company to sue and be sued.