The Supreme Court in Kampala has directed that the management of Crane Bank be reverted to its shareholders but also Bank of Uganda to pay costs as the five-year battle comes to an end.
Bank of Uganda (BoU) /Crane Bank in receivership sued Sudhir Ruparelia and Meera Investments Limited for allegedly fleecing the defunct Crane Bank Limited (CBL) of Shs397 billion that the central bank wants to be refunded.
The Commercial Court in 2019 dismissed the case Bank of Uganda had lodged against Sudhir Ruparelia seeking to recover Shs 379 billion from him.
The court, therefore, ruled that Crane Bank was a non-existent entity since it went into receivership three years ago.
After losing the case, BoU ran to the Court of Appeal to challenge the lower court’s decision but again lost the case prompting them to run to the Supreme Court.
However, shortly after filing an appeal, BoU sought to withdraw it before it could be heard, prompting Sudhir’s lawyers of Kampala Associated Advocates to object to the withdrawal.
On Friday, five justices of the Supreme Court including Rubby Opio Aweri, Percy Tuhaise, Ezekiel Muhanguzi, Prof. Tibatemwa Ekirikubinza and Faith Mwondha dismissed the appeal by BoU but also directed that the central Bank pay costs in the terms found by the Court of Appeal.
“For the avoidance of doubt, the Court of Appeal upheld the finding of the trial court which ordered that the costs of the suit were to be borne by the Bank of Uganda since it was behind the filing of the suit and other subsequent actions. That order shall stand,” the Supreme Court directed.
The five justices also reasoned with the Court of Appeal that management of Crane Bank be returned to the shareholders including Sudhir Ruparelia and Meera Investments Limited since receivership had ended in 2018.
“We equally considered this aspect in our ruling and found that indeed, receivership of the appellant (Crane Bank in receivership) had ended on January 20, 2018. The implication of that finding in our view is that the management of the appellant is reverted to shareholders after January 20, 2018,” the court directed.
In previous court rulings, BoU said that the decision of shutting Crane Bank was necessary upon discovering that it 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.
“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,” BoU governor, late Tumusime Mutebile said then.
However, tycoon Sudhir denied the allegation thus counter-suing BoU, seeking compensation of $8m (Shs28 billion) in damages for breach of contract.
He asked the High Court to dismiss the case arguing that the Central Bank overstepped its mandate in commencing court proceedings against him and his Meera Investments Company.
Presenting an objection against BoU, Sudhir through his lawyers Kampala Associated Advocates, told Justice Wangutusi that when dissolving a bank, BoU had three options including putting someone else in its management – what is termed as statutory management, receivership or liquidation.
Counsel Elison Karuhanga a lawyer at Kampala Associated Advocates, argued that however, BoU chose to go for receivership yet under the law, specifically only the manager and the liquidator of the said bank is mandated to file a suit and not a Receiver.
He further explained that BoU as a Receiver could only dissolve or sell Crane Bank within 12 months but not sue its managers.
On June 30, 2017, Crane Bank Limited (in Receivership) took Mr. Sudhir Ruparelia and his Meera Investments Ltd. to court for causing financial loss amounting to UGX 397 billion to Crane Bank in fraudulent transactions and land title transfers.
Crane Bank (in receivership) in its Civil Suit No. 493 of 2017 sought High Court to compel Mr. Ruparelia to pay back the US$80,000,000, US$9,270,172.00, US $ 3,560,000.00, US$990,000.00, and UGX 52,083,995.00 as compensation for breach of fiduciary duty.
While Hon. Justice Wangutusi dismissed the UGX397 billion case against Mr. Ruperalia on a technicality, alleging that Crane Bank (in Receivership) lost its powers to “sue” and to “be sued”, thus rendering its suit a nullity, Crane Bank (in Receivership) maintaining that receivership is a management situation, and hence no legal change as to the capacity of a company to sue and be sued