The Bank of Uganda (BOU) has said it will be petitioning the Supreme Court against the dismissal of the UGX.397BN Crane Bank case, by the Court of Appeal claiming the judgement of this case has a crucial precedent that affects its powers.
The Court of Appeal last week dismissed an appeal filed by Bank of Uganda against an earlier judgment that had dismissed a shs397 billion commercial dispute between Crane Bank (in receivership) and businessman Sudhir Ruparelia.
BOU insists that the lawsuit against Sudhir Ruparelia was necessary for recovery of taxpayer’s money and the judgment against it limits the capacity of the Central Bank to ensure safety of customers’ deposits in commercial banks.
In a statement signed by the Governor, Prof. Emmanuel Mutebile, BOU assured the public that it is committed to pursuing the matter to its logical conclusion.
In August 2019, 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.
BOU claimed that Sudhir illegally and secretly owned 100 percent shareholding in Crane Bank in breach of the law, and wrongfully used this position to illegally extracted money from CBL.
BOU also stated that Sudhir transferred freehold property owned by CBL into names of Meera Investments Ltd in which he and his family are majority shareholders without giving value to CBL 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 defense 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 Court of Appeal upheld Sudhir’s arguments.
However, Bank of Uganda maintains that receivership does not take away the personality of a company which includes the right to trace and recover assets and the right to sue for those assets.
“The public is also invited to note that neither the High Court nor the Court of Appeal has yet considered or taken on the claims for wrongful and illegal extraction of funds from Crane Bank as claimed in the main suit” part of the statement reads.
It further states that the implications of the judgments in this case 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, which renders the principle of tracing and preserving assets of an insolvent bank during statutory management and receivership futile.
BOU says 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’s funds.
“For these reasons, BOU as a receiver of Crane Bank is dissatisfied with the rulings of both the High Court and Court of Appeal and has taken a decision to appeal to the Supreme Court in addition to pursuit of other legal recovery options” It adds.