OPINION: Bank of Uganda Statement on Crane Bank in Layman’s Terms

By James Orima

On June 30, 2020, Bank of Uganda (BoU) released a statement regarding the recently concluded Court of Appeal case: Crane Bank in Receivership v Sudhir Ruparaelia and Meera Investments.

Below is an interpretation of their statement, in layman’s terms.

  1. BoU Statement:

In exercise of its powers under sections 87(3), 88(1)(a)&(b) of the Financial Institutions Act, 2004, BoU placed Crane Bank Ltd (In Receivership) [“Crane Bank”] under Statutory Management on 20th October 2016.

Banks receive deposits from the public, and use these deposits to conduct business i.e. lend out to other customers etc. As a depositor, you deposit your money in your bank and you expect the bank to give you your money whenever you go to withdraw it.

BoU supervises banks and ensures that depositors’ money is always safe and that depositors can access their money on demand. When BoU discovers that a bank may not be able to pay depositors their money, BoU will appoint a prefect (statutory manager) to manage the bank and suspend the bank’s management. This is to ensure depositors’ funds are protected.

  1. BoU Statement:

This decision was necessary upon discovering that Crane Bank 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.

Crane Bank did not have money to conduct its affairs. Commercial banks usually borrow from other banks, but Crane Bank found it difficult to borrow money from other institutions to bail it out. It was therefore unable to raise any new money to inject into it.


The technical term for this is that Crane Bank was “significantly undercapitalized”. Crane Bank also attempted to find a buyer, and it received interest from various investors. However, all the investors opted not to either buy the bank or invest their money into it.

  1. BoU Statement:

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.

You will recall that as a depositor, you deposit your money with the expectation that you can withdraw it on demand, when you go to the counter or ATM.

In the case of Crane Bank it was becoming increasingly likely that, due to the lack of sufficient cash available at the bank, a time would come when Crane Bank customers could not access their money when they demanded it at the counter or at the ATM.

The money would just not be there. BoU therefore had to come in and inject money into Crane Bank, so that depositors could withdraw their money. If BoU had not sunk any money into Crane Bank, a lot of the money Crane Bank’s clients had in Crane Bank would be lost and depositors would suffer the loss.

People’s business savings and working capital would be wiped out. Imagine going to your bank tomorrow and being told, “We cannot give you your money because we do not have it.”

BoU had to intervene in such a drastic way because Crane Bank was one of the biggest banks in Uganda in terms of customers and if such a bank were allowed to continue operating in such high risk conditions its eventual and inevitable collapse would significantly affect not only the individual customers but also the entire economy of Uganda.

Crane Bank was later placed under Receivership and to further protect its customers, BoU transferred their accounts to DFCU where former Crane Bank customers could withdraw their money, operate their accounts and continue to conduct their bank business as if nothing had happened.

A financial institution is placed under receivership when BoU determines that the bank will not be able to pay its depositors their money or does not have sufficient capital to run its affairs. This is why Crane Bank was placed under receivership.

  1. BoU Statement:

A subsequent forensic investigation as to why Crane Bank became insolvent found a number of wrongful and irregular activities linked to Sudhir Ruparelia and Meera Investments Ltd. These findings form the basis of the claims in the lawsuit by Crane Bank. The suit was necessary for recovery of the taxpayers’ money used to pay depositors’ funds as well as the other liabilities of Crane Bank.

BoU investigated why Crane Bank could not pay its depositors and found that Sudhir, Meera and others illegally took depositors’ money out of the bank for their own personal use.

Sudhir Ruparaelia and Meera Investments were therefore sued to recover the money they had illegally taken out of the bank including the taxpayers’ money that BoU had injected into Crane Bank as an emergency remedy. This is the main suit that is yet to be heard by the High Court.

5. BoU Statement:

BoU set about resolving the affairs of Crane Bank in a manner that would safeguard depositors, preserve the safety of the financial system, and restore the taxpayers’ money that had been deployed to prevent loss to depositors and a potential financial crisis.

Depositors were at risk of losing their money and this would affect the financial system because many people would become bankrupt and businesses would become insolvent overnight.

As stated above, BoU’s “resolution of the affairs of Crane Bank in a manner that would safe guard depositors involved the injection of tax payers’ money into Crane Bank by BoU.

This move was aimed at preventing the inevitable financial crisis that would result from so many people losing their money overnight.

  1. BoU Statement:

In this effort, Sudhir Ruparelia signed a Settlement and Release Agreement with BoU on 20 March 2017 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, which is the actual owner of the branches on which its branch network sat across the country.

Sudhir and BoU signed an agreement where Sudhir accepted to pay USD 60 million in full and final settlement of all claims BoU had against him. BoU was to drop all claims against Sudhir if he paid the USD 8m in cash and handed over property all totaling up to USD 60m. Meera was also required to hand over the land titles it had taken from Crane Bank.

  1. BoU Statement:

Under this agreement Sudhir Ruparelia only paid USD 8m and regrettably later refused to comply with his undertakings.

Sudhir immediately paid a deposit of USD 8m after signing the above agreement and then turned around and refused to pay the balance.

  1. BoU Statement:

It was at this point that BoU as receiver of Crane Bank instituted a High Court case H.C.C.S 493 of 2017 against Sudhir Ruparelia and Meera Investments Ltd. The main claims in this suit based on the findings of the forensic investigation are that;

Sudhir Ruparelia illegally and secretly owned 100% shareholding in Crane Bank in breach of the Financial Institutions Act, 2004.

Using that position of control, Sudhir Ruparelia wrongfully and illegally extracted from Crane Bank amounts totaling to USD 92,830,172 and UGX 8,277,000,000.

  • Sudhir Ruparelia transferred 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.

In response, Sudhir Ruparelia and Meera Investments Ltd filed a defence and later an application arguing 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. Both the Justice at the High Court and those at the Court of Appeal upheld these arguments.

Whereas BoU sued Sudhir for the reasons stated above, Sudhir counter-sued and stated that a receiver could not sue him. The High Court and Court of Appeal have agreed with Sudhir and said the wrong person sued Sudhir. The Court did not say Sudhir is innocent, it just said that the receiver had no powers under the law to sue. They should have used another person to sue Sudhir.

The Financial Institutions Act provides that a receiver cannot be sued. It is silent on whether a receiver can sue. However, the Act states that the statutory manager and the liquidator have the power to sue.

The Court of Appeal agreed with Sudhir’s lawyers who argued that the law did not expressly state that a receiver could sue. They argued that the correct person to sue Sudhir and Meera was the statutory manager and not the receiver.

  1. BoU Statement:

Bank of Uganda 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 Courts are saying the Receiver does not have power to sue. It is therefore stripping it of its corporate personality. BoU disagrees, as the law does not clearly say this. The law only grants the receiver immunity from suits.

The Courts said that “if you cannot be sued, it therefore also means you cannot sue”. BoU disagrees with this position. Even when a bank is placed under receivership, it should still be able to recover assets that were taken from the bank.

  1. BoU Statement:

The public is also invited to note 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 claimed in the main suit.  

The Courts have not yet decided the main issues i.e. whether Sudhir and Meera misappropriated the money from Crane Bank thereby causing it to become insolvent. BoU and Sudhir are still battling over who has the power to sue Sudhir and Meera.

Once that is concluded, the real court case will start and the evidence will be brought out showing how Sudhir and Meera allegedly defrauded Crane Bank and its depositors, and Sudhir and Meera will also bring their evidence trying to prove their innocence.

  1. BoU Statement:

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. 

A Receiver has powers to recover assets that were illegally taken out of a bank and to trace all funds that were misappropriated. The Courts are reducing this power and making the banks incapable of going after errant directors and shareholders.

In Kenya recently, funds stolen by Imperial Bank’s shareholders and Directors was traced and returned. https://www.businessdailyafrica.com/corporate/companies/Spies-trace-cash-loot-fromImperial-Bank-CEO/4003102-5467964-vd2611/index.html

  1. BoU Statement:

The judgments 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.

The Central Bank should be able to step in and ensure accountability for funds being managed by banks. This is mainly because banks use depositors’ funds. Any misuse of these funds must be dealt with in a serious manner that ensures other banks do not do the same.

The judgments are reducing the Central Bank’s power, which is dangerous, because the next time a bank is in financial trouble, the Central Bank may be reluctant to take the necessary steps to save the bank i.e inject money into the bank to safe guard depositors’ money because the Courts have said limited BoU’s power to sue and recover this money.

  1. BoU Statement:

For these reasons, BoU as receiver of Crane Bank is dissatisfied with the rulings of both the High Court and the Court of Appeal and has taken a decision to appeal to the Supreme Court in addition to pursuit of other legal recovery options.

The Receiver intends to appeal to the Supreme Court, before which it will make a case to the effect that it has the powers to sue Sudhir. If the Supreme Court agrees that it indeed has the powers to sue Sudhir and Meera, the case will return to the High Court and the real case will start.

Remember the real case is about whether or not Sudhir or Meera misappropriated money and assets from Crane Bank, and whether or not they should refund the money and return the assets.

  1. BoU Statement:

BoU wishes to reassure the public that it is committed to pursuing this matter to its logical conclusion.

BoU is determined to recover the taxpayers’ funds that were injected into Crane Bank as a result of Sudhir’s alleged misdeeds.

Sudhir on the other hand is throwing everything he has at this court case because he knows that if he wins, the Receiver will not be able to go after him and he hopes to be a free man thereafter.

In the end, the law usually provides a remedy for an aggrieved party.

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