On August 26, 2019, the Commercial Court in Kampala dismissed a case in which Bank of Uganda (BoU) sued property mogul, Sudhir Ruparelia for allegedly fleecing his own bank (Crane Bank in receivership) of Shs397 billion in fraudulent transactions. The Central Bank was seeking to recover the Shs397bn.
In his ruling, the Head of Commercial Court, David Wangutusi observed that Crane Bank in receivership at the time of instituting the commercial suit against the businessman and his Meera Investments Company was none existent, hence never had powers to sue.
“In conclusion, the plaintiff/ respondent (Crane Bank in receivership) did not have jurisdiction to file HCCS no. 493 of 2017. It’s also my finding that the property the plaintiff was seeking when she filed the suit on June 30th 2017 had earlier been given away by the receiver to Dfcu bank on 24th January 2017, four days into receivership and five months before filing of this suit this leaving the plaintiff/ respondent with no property,” the court ruling reads in part.
The Court further condemned BoU to costs that Dr Ruparelia had spent in prosecuting this law suit, on grounds that it’s the one that lodged the suit on behalf of defunct Crane Bank.
It is understood that BoU will at least pay five percent of the decretal amount (total amount involve in the case) to Sudhir and his Meera Investments Ltd in the first case. This comes to US$10m (Shs36.89bn).
However, Crane Bank (in Receivership) and BoU intend to appeal against the whole of the decision given by Hon. Justice David Wangutusi on August 26, 2019, as per Notice of Appeal Application 320 of 2019 filed in the High Court.
“Crane Bank (in Receivership) is dissatisfied with the decision of the Hon. Justice Wangutusi, and has served a copy of the Notice of Appeal to Kampala Associated Advocates, the legal representatives of Mr. Sudhir Ruparelia and Meera Investments Limited,” BoU statement reads in part.
However, in its attempt to appeal a commercial litigation against property mogul Sudhir, BoU risks losing an extra US$20m (about Shs73bn going by the current exchange rate) in legal costs of taxpayers’ money should it (BoU) lose the already bad case.
This is because legal costs will increase to 10 percent. This will mean Sudhir and his Meera Investments will pocket a whopping Shs110bn should BoU also lose the appeal case which many pundits and legal brains have termed as bad.
In his 22-page ruling that was delivered by the court’s deputy registrar, Festo Nsenga on Monday, Justice Wangutusi noted that at the time BoU and Crane Bank (in receivership) filed the suit against Sudhir and his Meera Investments in January 2017, Crane Bank was a non-existing entity, having been terminated when the Central Bank sold its assets to DFCU Bank in October 2016.
The judge ruled that this rendered Crane Bank in receivership incapable of suing or being sued since there would be no assets to be claimed for.
Court noted that the public notice made it clear that BoU as the receiver had done an evaluation of the respondent (Crane Bank in receivership) and arranged for the purchase of its assets and assumption of its liabilities by another financial institution.
“In his [BoU] notice, he specifically stated that the liabilities of the respondent had been transferred to DFCU Bank Ltd and that because DFCU Bank had taken over the liabilities, it would, by way of consideration, be paid by conveying to it the respondent’s assets,” the judge ruled.
The judge noted that in so doing, the Central Bank had not only fulfilled Section 95(1)(b) of the Financial Institutions Act but had in a way also sold the respondent, albeit that the payment was in kind, by way of exchange of liabilities for assets.
While awarding costs of the suit, the court ruled that under such circumstances, the party to bear the costs must be the one who brought the matter to court and at the time of filing the suit, BoU had taken over management of Crane Bank Ltd.