Bank of Uganda has announced it will be appealing the recent Court of Appeal ruling, which upheld an earlier High decision to dismiss a case that had been filed against Sudhir Ruparelia by Crane Bank.
The Central Bank says it is dissatisfied with both court rulings and intends to drag the matter to the highest court on the land.
The appellant court a week ago dismissed the case in which Bank of Uganda through Crane Bank had sued Sudhir and his Meera investments accusing them of siphoning over sh397bn from the defunct Crane Bank.
In the case, Sudhir and Meera were accused of among others illegally and secretly owning 100% shareholding in Crane Bank in breach of the Financial Institutions Act, 2004.
Sudhir was also accused of using his position of control, to wrongfully and illegally extract from Crane Bank amounts totalling to USD 92,830,172 and UGX 8,277,000,000; and also transferring freehold property beneficially owned by Crane Bank into the names of Meera Investments Ltd in which he and his family are the majority shareholders, without giving value to Crane Bank and rendering the Bank a tenant on its own property with a liability to pay rent to Meera Investments Ltd.
The Court of Appeal Judges in their ruling last week, agreed with Sudhir and Meera’s reasoning, that Crane Bank had no capacity to sue them while in receivership and that upon transfer of some of its assets to DFCU Bank, Crane Bank ceased to exist.
Bank of Uganda however, maintains 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.
The Central Bank Governor, Prof Emmanuel Tumusiime Mutebile, while announcing the appeal today, went on to warn that such court rulings could set a dangerous precedent
“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. This renders the principle of tracing and preserving assets of an insolvent bank during statutory management and receivership futile,” Mutebile said.
“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.”
It should be remembered that on 20 March 2017, Sudhir Ruparelia signed a Settlement and Release Agreement with BoU in which he undertook to pay a sum of USD 60 million and to return land titles that had been irregularly taken from Crane Bank…the actual owner of the branches on which its branch network sat across the country.
Mutebile notes however, that later on, Sudhir backed out of the settlement, which prompted the law suit.
As such, Mutebile says the Central Bank “it is committed to pursuing this matter to its logical conclusion.”