By Andrew Irumba
Twed Tower: The Court of Appeal has Tuesday June 23, 2020, upheld a High Court ruling compelling Bank of Uganda (BoU) to compensate city tycoon Dr Sudhir Ruparelia, for alleging that he and others swindled over Shs397Bn that had been injected into his Crane Bank for recapitalization.
The ruling stemmed from a 2016 case BoU filed on behalf of Crane Bank (under Receivership), alleging that Sudhir, businessman Godfrey Kirumira and others allegedly siphoned money that BoU had used to recapitalize the defunct CBL before they wound it up and sold it to troubled dfcu Bank via a phone call.
However, Sudhir vehemently refuted the allegations and through his lawyers of Kampala Associated Advocates (KAA), managed to win it in August 2019 following a ruling by High Court Justice David Wangutusi, who ruled that BoU officials erred in lodging a suit against Sudhir on behalf of Crane Bank Ltd, because an entity under receivership has no capacity to sue or be sued.
Justice Wangutusi also ruled that BoU officials illegally wound up and sold Crane Bank Ltd to dfcu Bank and that whatever they did was in contravention of the law and process of winding up a company and putting it under receivership.
Court thereafter awarded Sudhir costs of the suit and damages worth over Shs10Bn, although BoU officials were not satisfied with the ruling, so they filed an appeal through their lawyers.
But despite filing the appeal, even the Court of Appeal has today upheld the High Court Ruling and dismissed the Appeal with costs to the Respondent (Sudhir and Another) meaning that the burden to be borne by the Bank of Uganda in compensating him has doubled.
This was after a Panel of Court of Appeal judges led by Deputy Chief Justice Alfonse Owiny- Dollo upheld the judgment of Commercial Court judge David K. Wangutusi in an application filed by Bank of Uganda, seeking a refund of Shs397 billion from Sudhir which he allegedly pulled out from Crane Bank. The Court of Appeal dismissed the case with costs.
How It All Begun
Trouble started when Bank of Uganda (BoU) alongside Crane Bank (in receivership) dragged Sudhir and his Meera Investments Limited to the High Court Commercial Division, for allegedly causing a financial loss to Crane Bank after he fraudulently siphoned Shs397 billion which belonged to customers before the financial institution was taken over by the Central Bank.
However, the presiding judge, Justice David Wangutusi dismissed BoU’s application on grounds that Crane Bank in receivership lacked a legal basis to sue Sudhir.
The judge ordered that the applicant (BoU) should also pay the businessman legal costs.
But it should be noted that this is now the third time Sudhir is flooring officials Bank of Uganda, after court last year also ruled that dfcu Bank should vacate all the 49 properties belonging to Meera Properties Limited, which had been leased out to Crane Bank.
Trouble for dfcu bank started in 2016 when they bought Crane Bank at Shs200m, after it was illegally wound up by the Central Bank, on top on inheriting its assets and liabilities.
However, when the Auditor General was conducting a forensic audit into the sale of Crane Bank, he ascertained that dfcu Bank only paid Shs139 billion, which it borrowed from the regulator (BoU), and the credit facility an interest free loan, which exposed the conflict of interest and collusion between the buyer (dfcu) and seller (BoU).
It was not long before it came to light that the process of selling Crane Bank was a conspiracy hatched by Bank of Uganda officials together with city lawyers and dfcu Bank managers.
Court thus evicted dfcu Bank from all properties which initially housed Crane Bank branches across the country after ruling that they had been illegally seized from Meera Investments. It was also decreed by court that dfcu Bank had to compensate Meera Investments LTD and Sudhir for the losses they had incurred during the time dfcu Bank was illegally occupying their buildings.
A Company Under Receivership Has No Legal Capacity To Sue Or Be Sued
In their preliminary objections before Hon Mr. Justice David K. Wangutusi, Kampala Associated Advocates, lawyers argued that a receiver or an entity in receivership- in this case Crane Bank cannot sue or be sued.
“The suit was filed when Crane Bank Limited was under receivership. At issue therefore is; can a suit be filed when a financial institution is in receivership? Our submission is that the receiver has no locus to file the suit,” argued the lawyers.
Bank of Uganda on the 20th October 2016 took over the management of Crane Bank and pursuant to Sections 87 (3) and 88 (1) (a) & (b) of the Financial Institutions Act 2004 and on the 20th of January 2018 BoU placed the bank under receivership pursuant to Section 94 of the FIA.
Sudhir’s lawyers further argued that the FIA 2004 provides three ways in which BoU may takeover and resolve a financial institution in distress and these include: statutory management, receivership, and liquidation. They added that while the law allows the statutory manager and the liquidator to sue, it does not allow the receiver to sue or be sued.
Section 95 of the FIA 2004 only grants a receiver powers to:
Arrange a merger with another financial institution;
Arrange for the purchase of assets and assumption of all or some of the liabilities by other financial institutions;
Arrange to sell the financial institution;
Liquidate the assets of the financial institution.
But even then this must be done within 12 months of taking over as a receiver, a period which BoU officials didn’t wait to expire before selling Crane Bank to dfcu Bank.
“The powers of the receiver are therefore limited, both in extent and in time. He can only exercise the four powers mentioned above and this has to be done within twelve months,” Sudhir’s lawyers submitted, adding: “Section 95 does not mention suing as one of the things he (the receiver) will do in the exercise of his powers.”
“Under the FIA, the receiver cannot file a law suit. When the legislature does not grant an express power to a statutory entity to sue then that entity simply cannot sue. This very point was determined by the Supreme Court of Uganda,” argued KAA Advocates.
“If a party cannot be sued, it follows that that party cannot sue. We are fortified in this by the binding decision in the supreme court in the case of The Commissioner General Uganda Revenue Authority vs Meera Investments Limited SCCA 22 of 2007,” the lawyers further submitted.