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What We Missed Out in the Bank of Uganda and Sudhir Ruparelia Saga

CM Advocates LLP - Uganda > CM Uganda Insights  > What We Missed Out in the Bank of Uganda and Sudhir Ruparelia Saga

What We Missed Out in the Bank of Uganda and Sudhir Ruparelia Saga

On 30th June 2017 Bank of Uganda as receiver for Crane Bank Uganda Limited (“Crane Bank”) filed a civil suit against businessman Sudhir Ruparelia, the founder and former Vice chairman of Crane Bank Uganda Limited. The suit alleged that as its proprietor, the businessman had allegedly mismanaged the Bank and embezzled over Ugx. 400b.

The businessman vowed to fight back in what he termed as breach of a fiduciary duty pursuant to a confidential Settlement and Release agreement entered into with Bank of Uganda in the lead up to the takeover of Crane Bank.

Upon receipt of the plaint and summons, the businessman through his Lawyers requested for 21 documents which had been referred to but not attached on to the plaint, maintaining his innocence and that Bank of Uganda had no evidence of the alleged mismanagement and embezzlement. In his defense, Sudhir raised a counterclaim where he wanted Bank of Uganda to pay $8m for breaching clause 12 of the Confidential Settlement and Release Agreement. Bank of Uganda could not respond to the counterclaim within the stipulated timelines of 15 days from the date of receipt.

Meanwhile, the businessman applied to court and succeeded in discharging Bank of Uganda’s legal counsels; Timothy Masembe Kanyerezi of MMAKS Advocates and David Mpanga of Bowmans on grounds of conflict of interest as they had earlier advised, represented and guided him on some of the transactions Bank of Uganda was now claiming were unlawful. The ruling from the application will be celebrated and referred to for years to come for having elucidated the parameters and true meaning of conflict of interest between client and advocate.

The businessman further exposed Bank of Uganda for its unfamiliarity and non-adherence to the law it is charged with enforcing. He filed Miscellaneous Application No. 320 of 2019 among others, challenging the Locus standi of Crane Bank (in receivership).

Once again, the High Court agreed that Crane Bank (In Receivership) could not sustain the suit since the Financial Institutions Act, 2004 did not give a financial institution under receivership the right to sue or be sued while under receivership. In its defense, Bank of Uganda unsuccessful relied on the corporate personality of Crane Bank which was quite feeble an argument in light of the express prohibition under the Financial Institutions Act, 2004. More so, Section 133 of the Financial Institutions Act, 2004 gives the Financial Institutions Act precedence and in the event of conflict, the Financial Institutions Act prevails. The learned Judge further indicated that there was no cause of action simply because Crane Bank (In receivership) was left with no assets to claim and that it was non-existent when the receiver (Bank of Uganda) transferred all her assets to DFCU.

The High Court judgment may have been a relief for the Business man and his associate entities, however what is its impact on financial institutions and Bank of Uganda (the regulator of the institutions)?

Several allegations were made by Bank of Uganda on the lack of Corporate Governance Principles in the defunct Bank, Sudhir beneficially owning 100% of the shares in the Defunctant bank, failure to remit NSSF contributions for the employees amounting to UGX 52,000,000/= and siphoning of money by Sudhir through his associates. We have had a trend of Banks closing shop including but not limited to; Global Trust Bank, National Bank of Commerce, Greenland Bank, Teefe Bank, International Credit Bank, among others and all these allegations by Bank of Uganda have been made against those Banks.

Had Bank of Uganda critically analyzed the provisions of the Financial Institutions Act, 2004, they would have had the right party as a plaintiff and we would have had the benefit of having the matter resolved on its merits rather than technicalities like it did.

With all the above discussed, it still leaves us wondering how the said fraudulent activities were going on under the watch of the Central Bank. Let us not forget Crane Bank Limited was named the Bank of the year on several times and this evaluation was being made depending on the supervisory arm of Bank of Uganda. This leaves a lot desired on Bank of Uganda and also the confidence the Bank users can have in the Central Bank.