East Africa

How Sudhir Defeated BoU to Retain Crane Bank Branches

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Sudhir On Tuesday breathed with a sigh of relief after the Court of Appeal upheld a decision by the Commercial court against suit by Bank of Uganda accusing him and his Meera Investments of illegal shareholding transfer.

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City Mogul, Sudhir Ruparelia of the Ruparelia Group is in up mood having defeated Bank of Uganda’s attempt to take over properties formerly housing the defunct Crane Bank.

Sudhir has since 2017 been fighting a protracted legal battle over claims that he withdrew over UGX397 billion to construct the 48 branches. On 20th October 2016 the Bank of Uganda took over management of Crane Bank as per the Financial Institution ACT 2004. The bank was later placed under receivership as per section 94 of the Financial Institutions Act.

From then, Crane Bank was conducting banking services but under the management and Control of Bank of Uganda. Bank of Uganda or Crane Bank in Receivership dragged Sudhir Ruparelia to court seeking to recover the said monies.

Bank of Uganda (in this case Crane in receivership) wanted the commercial court to recover the UGX397 billion by attaching 48 properties then housing the defunct crane bank. The land on which the properties are registered under freehold land tenure system.

Bank of Uganda had also contended that Sudhir and Meera Investments beneficially owned and controlled 100% of the shares contravening section 24 of the Financial Institutions Act.

Bank of Uganda Lawyers led by Albert Byamugisha had argued that Sudhir was the beneficial owner of the 47.33 of the shares registered in the name of pf White Sapphire limited a Company nominally owned by Rasikal Chhotalal Kantaria.

It also argued that a further 4% share that Sudhir issued Jitenderia Sanghai also belonged to him. From Bank of Uganda or Crane Bank in Receivership, while Sudhir or the Ruparelia Group was the beneficial owner of the shares transferred to Rasikal Chhotalal Kantaria and Jitendra.

Issues in Suit

One of the issues under contention was whether Sudhir owned 100% of the Shares in Crane Bank. The Commercial Court was also to determine whether the Company placed under receivership could be sued.

Bank of Uganda had sought an order to have the Ruparelia Group surrender 48 freehold certificates of title comprising the defunct Crane Bank countrywide branches.

Ruparelia Group lawyers led by Peter Kabatsi of Kampala Assciated Advocates during the hearing asked court to struck out the suit arguing that the Bank of Uganda or Crane Bank in Receivership had no locus to bring the suit.

Citing sections of the Financial Institutions Act 2004, the lawyers argued that Crane Bank lost the power to sue and be sued from 20th of January 2017 when it was placed under receivership.

Bank of Uganda lawyers however insisted that liquidation does not take away it corporate personality. It argued that receivership is a management situation and there was no legal change as capacity of a Company to sue or be sued.

The Court found that Bank of Uganda had in September 2013 approved Rasiki Kantarai one of Crane Bank’s Shareholders to transfer her 47.33% shareholding to a Mauritian-incorporated White Sapphire. The other shareholder was another alien Jitendra Sanghani with 4% shareholding.

Commercial Court Judge, David Wangutusi in a ruling delivered in August 2019 dismissed the application and directed bank of Uganda to pay costs to Sudhir. He argued that Sudhir or Ruparelia Group was not the major shareholder in Crane Bank.

The court found that Crane Bank majority shareholder were non-Ugandans based in Mauritius who under the land Uganda were not legible to holding freehold registered land. He said the majority shareholders being non citizens rendered Crane Bank likewise non citizen.

The Judge observed that evidence on record showed that the majority of the shares were owned by White Sapphire.

“It is clear from the evidence on record that the majority of the shares were owned by White Sapphire, a company incorporated in Mauritius. That it owned the majority share was a matter well known by the Central Bank because 47.33% of the shareholding was transferred to white Sapphire with the approval of Bank of Uganda” said Justice David Wangutusi.

Justice Wangutusi said the constitution and the Land Act  bar non-citizen from acquiring or holding freehold titles.

“Having found that the respondent is a non-citizen for the purposes of the Land Act and the constitution, an attempt to confer freehold title upon it would be an illegality. An illegality because the holding of the shares by non-citizens prevented them from owning land under the tenure that the respondent’s/plaintiff’s prayer in the plaint seeks,” said the Judge.

On the issue whether Crane Bank in Receivership could sue or be sued, Justice Wangutusi ruled that section 96 of the Financial Institutions Act insulated Crane Bank under receivership from Court proceedings, execution or other legal processes.

Bank of Uganda (Crane Bank in Receivership) appealed against  Wangutusi’s decision arguing among others  that the Judge erred in law by holding that Crane Bank  since it was being controlled by non-Ugandan citizens, they were not supposed to hold free hold titles.

But a Panel of Court of Appeal Judges led by the Deputy Chief Justice Alfonse Owiny Dollo , Cheborion Barishaki on Tuesday concurred with the decision of Justice Wangutusi and also dismissed the application with costs.

The Judges also agreed with the lower court that under the Financial Institutions Act, companies under receivership do not have capacity to sue or to be sued.

It is on this basis that the Court of Appeal Judges upheld the lower court’s decision before condemning the central bank to pay costs to Sudhir and his company.

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