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Sudhir Seeks Injunction Against BoU, dfcu Lawyers as Crane Bank Fraud Case Hearing Looms

Embattled Kampala businessman Sudhir Ruparelia has rushed to court seeking an injunction against top Ugandan business law firm, Sebalu and Lule Advocates from representing dfcu bank and Bank of Uganda; a move interpreted as aimed at using technicalities to elude justice.

Sudhir says an injunction should be issued against the prestigious law firm from representing the two institutions as it had previously represented Crane Management Services that owned Crane Bank which was sold to dfcu.

“In view of the advocate-client relationship between the applicant (Crane Management Services Ltd) and the 1st respondent (Sebalu & Lule advocates), the latter’s continued participation as defence counsel for the 2nd respondent (Dfcu bank) herein, which is the defendant in High Court Civil Suit (HCCS) No. 109/2018 against the applicant/plaintiff, is prejudicial to the applicant’s head suit,” the petition tendered before the Commercial Court on Tuesday reads in part.

Sebalu & Lule is yet to respond to the suit.

However, the development comes after the law firm finalized preparations to have Sudhir prosecuted on charges related to embezzlement, fraud, misstatements to mislead the regulator and concealing his true shareholding in Crane Bank before it was taken over in 2016 by the central bank.

The case comes up for hearing in January, 2019 after Sudhir and Bank of Uganda failed to resolve their dispute out of court.

According to documents tendered before court, Sudhir Ruparelia as a director, major shareholder, vice chairman and generally as a person that exerted the greatest control over Crane Bank, concealed his true shareholding in the Bank; oversaw the irregular transfer of the Bank’s branches to Meera Investments Limited and also benefitted from irregularly declared dividends, ‘due’ to White Sapphire.

Sudhir is also said to have conspired with others to embezzle/cause financial loss to Crane Bank Limited by use of cash extractions from Interdico, AI and Technology Associates; was instrumental in the approval of credit facilities for related companies and associates, when there was no intention the loans would be repaid; and he failed to disclose his interests.

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Founded in 1980, Sebalu & Lule were hired by Bank of Uganda to bolster Bank of Uganda’s internal legal team to manage the BoU fraud case.

The law firm has a long record of winning high profile business cases and its enrollment by BoU could have sent shivers down the spine of the Ruparelia family.

In addition to aforementioned charges, Sudhir is also accused of receiving stolen property in respect of bank branch transfers, and White Sapphire dividends; embezzlement, influence peddling; nepotism; receiving and possessing property for himself or related parties and breaching prohibition on insider transactions.

Sudhir last year sued dfcu, seeking return of bank branches where Crane Bank offices were previously located, a case that is yet to be determined.

How Meera Investments acquired Crane Bank (CBL) land

On 25 September 2012, the Board of CBL resolved to transfer the freehold and Mailo ownership of parcels of land on which CBL branches are located purportedly to Meera Investments Limited (“MIL”), a related entity that is fully owned by the Ruparelia family, to enable CBL, a non-citizen, to hold the leasehold interest.

Court documents show CBL consequently sold the land to MIL for Shs 100M per plot, regardless of its size and location.

No basis was given for the Shs 100M price. Each plot was then leased back to CBL for various periods but mainly for 25 years and a premium of Shs 100M.

In addition to the premium, MIL was to be paid USD 6,000 per year as ground rent, for each plot, again, regardless of the size and location.

This rent was to be reviewed after three years.

It was noted that 28 out of the 46 parcels of land that CBL transferred to MIL were initially leasehold properties.

CBL thus had acquired them as leaseholds, expended money and time to convert them into freehold only later to transfer the freehold to MIL.

It’s argued that in such cases, CBL could have requested for the extension of the lease on these parcels of land from the local Government without having to resort to MIL or having to pay the high ground rent.

Additionally, lawyers argue, in such instances, interposing MIL into the ownership of the land was an unnecessary dissipation of CBL’s assets, for the Ruparelia’s own personal gain at MIL.

Consequently, it would appear that the Board’s decision to transfer the Bank’s freehold titles to MIL was not motivated by business efficacy reasons, it was unnecessary and resulted in minimal value addition to the Bank.

It is also questionable why CBL initially took leases of 25 years instead of 49 or 99 years.

It was noted that the branches located in the transferred land were bought, built and fitted out with the Bank’s money and therefore beneficially belong to the Bank which has since been bought by dfcu.

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