Shs 397b Bank of Uganda versus Sudhir suit set for ruling on Monday

By Our Reporter

The ruling of the case in which Bank of Uganda (BoU)/Crane Bank in Receivership sued Kampala businessman Sudhir Ruparelia for recovery Shs397 billion is to be delivered on Monday by the Head of Commercial Court, Justice David Wangutusi, according to a notice in the High Court.

The ruling which have put both sides on tenterhooks will be the third in which both sides are involved. Sudhir was successful in the first cases where he successfully argued against conflicted lawyers of MMAKS Advocates and Sebalu & Lule Advocates as conflicted lawyers, both law firms having worked for the Ruparelia Group.

The case arose after BoU closed CBL ON October 20, 2016 on account of undercapitalization and would later sell CBL’s assets to DFCU Bank at Shs200 billion.  Sudhir has dismissed BoU’s allegation that he and his Meera Investments Limited, fleeced former Crane Bank Limited (CBL) of Shs397 billion in fraudulent transactions. BoU wants Sudhir and Meera Investments Limited to refund the Ssh397 billion allegedly stolen.

Last month, Sudhir’s lawyers of Kampala Associated Advocates presented a preliminary objection against BoU case before Justice Wangutusi. Sudhir’s lawyers have asked court to dismiss the BoU suit, arguing that BoU overstepped its mandate in filing the case that has dragged on for years now.

“When dissolving a bank, BoU had three options. It can put someone in management in what is called statutory management, receivership or liquidation and it chose to go for receivership. Under the law, specifically, only the manager and the liquidator can sue. The case cannot be filed by a receiver,” said Ellyson Karuhanga, one of the lawyers representing Sudhir.

He said that under the law, BoU has four functions to dissolve and not selling the financial institutions.

“The receiver cannot be sued on that act and cannot sue anyone. His action is protected by the law. The second point we are raising is that the receivership is limited by time, the law gives the receiver 12 months to carry out its function and after this, he cannot do anything,” the lawyer stated.

“For us, a receivership, unlike the others, is not a siege, they are not surrounding the bank to find out what is happening. The law does not allow the company whose majority shareholder is a Mauritius based company to obtain those companies as is the case of Crane Bank,” he argued.

The lawyers made the objection when the case filed in January 2017 came up for hearing today.

Mr Bruce Musinguzi also argued that Sudhir was no longer the majority owner of CBL that he founded after Rasik Kantaria, a Kenyan national, on December 6, 2010, snapped up 47 per cent of the bank’s shares.

He said that Kantaria later transferred his shares to White Sapphire Ltd, a company incorporated in Mauritius and that a one Jitendera Sanghani, a British citizen, held 4 per cent stake in CBL.

He also said that under Uganda’s Constitution and the Land Act, CBL in receivership could not own or hold freehold property and was, therefore, not capable of holding the suit property in its names.

In his e submission, BoU’s lawyer, Joseph Byamugisha argued that when a financial institution is placed under receivership the power to commerce or to continue with the civil suit does not stop.

Sudhir in the counter suit-sued BoU, seeking compensation of $8m (Shs28 billion) in damages for breach of contract. On June 30, 2017, BOU filed a suit against Sudhir in court, which the businessman says was in breach of clause 12 of the Confidential Settlement and Release Agreement (CSRA) that was reached by both parties after BoU closed and liquidated Crane Bank Limited.

The clause stipulates that, “Without prejudice to the immediate forging should any legal or administrative proceeding of any kind ensue against SR [Sudhir Ruparelia] as defined in the agreement, the agreement stands voided and BOU shall immediately return to SR the value of the settlement.”

Each side now awaits the ruling set for Monday next week.