Posts tagged as: crane-bank

New Twist in Sudhir, Bank of Uganda Case

By Derrick Kiyonga

Property kingpin Sudhir Ruparelia hopes to convince the judge hearing Bank of Uganda’s nearly Shs 400 billion lawsuit against him that he does not owe anything under a settlement agreement he signed early this year.

The central bank did not keep its side of the bargain, his lawyers will argue — if the suit comes to trial.

First skirmishes played out in the Commercial court on Wednesday. Judge David Wangutusi inconclusively heard an application to have Bank of Uganda lawyers: MMAKS Advocates and AF Mpanga Advocates, recused from the suit in which he is accused of siphoning billions from his former business.

As is the custom, the judge proposed mediation first, even as the central bank’s lawyers refused to accept accusations of conflict of interest on grounds that they worked for the businessman before.

With that undetermined question hanging over proceedings, a parallel front opened up just nine days ago. On September 5, BOU filed to amend its main plaint and bring an alternative cause of action.

If successful, BOU would secure the correlative rights of Crane bank, which Ruparelia ceded with the signing of a Confidential Settlement and Release Agreement (CSRA) between both parties early this year.

He would also have to pay $52 million, and transfer 47 freehold/mailo land title deeds from Meera Investments, to Crane Bank.

Under Clause 3.1 of the CSRA, “In consideration of BOU and CBL [Crane Bank Limited ] agreeing to settle and release claims as specified in this Confidential Settlement and Release Agreement, SR [Sudhir Ruparelia] agrees: To pay and or procure the payment to BOU [Bank of Uganda] of the aggregate amount of USD 60,000,000 and transfer of CBL (in receivership ) or its nominee the freehold and mailo titles set out.”

Things, however, are not as straightforward. If mediation fails and Judge Wangutusi has to hear the matter, the interpretation given by Ruparelia’s counsel, Kampala Associated Advocates, will be that he was supposed to pay BOU.

That Crane bank cannot make a claim on the $52 million or any sum of money under the CSRA since, according to him, the clause specifically states “… that USD 60,000,000 shall be paid to (BOU)… “

But it is the underlying argument which is even more involving. Sudhir thinks that the CSRA was broken immediately BOU sued him.

The court is being invited to consider Clause 12 of the CSRA, which provided that, “Without prejudice to the immediately foregoing, should any legal or administrative proceedings of any kind ensue against SR [Sudhir Ruparelia] (as defined in this agreement), the agreement stands voided and BOU shall immediately return to SR the value of the settlement consideration in immediately available funds.”

Sudhir’s lawyers have advised him that neither Crane bank nor Bank of Uganda can now enforce their rights under the CSRA.

“I have further been advised by my lawyers, which advice I verily believe to be true, that in so far as the proposed amendment attempts to introduce an alternative cause of action under the CSRA, it is barred by principle of approbation and reprobation. Crane Bank Limited having made an election to abandon the CSRA cannot resile from that election,” Sudhir says.

Another amendment that BOU seeks involves the manner in which Sudhir’s business partner, Rasik Kantaria, acquired Crane bank shares.

Kantaria is said by BoU to have procured his shares thus: First purchase worth Shs 1 billion in 2006 from Anglo Universal Holdings Limited; a company BOU claims is associated with Sudhir.

Second batch worth Shs 4 billion from Sudhir and third by acquiring shares held by Jagdish Nagrecha; Sudhir’s brother-in-law and Jyotsna Ruparelia, Sudhir’s wife, for Shs 5 billion.

The case being made is that Kantaria was Sudhir’s front since all dividends he received as a shareholder ended up in bank accounts of entities owned by Sudhir.

However, Sudhir sees an attempt by BoU to subvert his defence through the changing of original facts. He has opposed BoU’s wish to revise its original claim that Sudhir received Shs 35,234,253,980 from Kantaria to Shs 35,835,701,265.

The defence lawyers say that the Shs 35,234,243,980 figure was extracted from a PriceWaterHouseCoopers’ forensic audit report dated November 13, 2014.

They will tell Judge Wangutusi that the audit firm’s report, in fact, supports Sudhir’s argument that BOU was aware of all it alleges — and yet it still approved Crane Bank’s financial statements between 2014- 2015 . The banking regulator is stopped from suing him, they hold.

Other arguments are that BOU allegedly copied, then changed, the PWC forensic report now dated January 13, 2017 in which the Shs 35,835,701,265 figure is mentioned. The defence claims that the January report is quite different in both form and content from the PWC document of November 2014.

Sudhir asserts that on July 21, 2017 his lawyers served BOU with a notice to produce 26 documents as alluded to in BOU’s plaint since he needed them to defend himself. Listed as number one, was the PWC forensic report. On July 31, 2017, he says that BOU refused to produce any of the documents save for Crane bank’s annual report of 2014.

The defence holds that since the PWC report is the very foundation of the case given BoU’s proposed amendments to the main plaint, refusal by BoU amounts to an attempt at trial by ambush and is an abuse of court process.

Uganda: Court Battle Pitting BoU Against Ex-Crane Bank Owner Begins

The hearing of the case pitting Uganda’s banking regulator against real estate mogul and former owner of Crane Bank, Suphir Ruparelia, begun Wednesday at Kampala High Court.

The Bank of Uganda (BoU) accuses the businessman of siphoning $105 million from the collapsed Crane Bank over a 10-year period.

Further, BoU accuses Mr Ruparelia of fraudulently grabbing 48 properties built with Crane Bank money that he later transferred to Meera Investments, his real estate business, before leasing them back to the bank at exorbitant prices. The Central Bank is suing Mr Ruparelia and Meera Investments jointly.

The Central Bank wants Mr Ruparelia to pay back over Ush650 billion ($178.2 million), for the 48 properties, that includes interest in addition to handing over the titles.

BoU took over the management of Crane Bank in September last year, citing that the bank was “grossly undercapitalised and paused a systemic risk to the financial sector.” The Central Bank later sold the lender to DFCU Bank.

In his defence and in a counter suit against BoU, the businessman accuses the Central Bank of failing to properly execute its supervisory functions, which he says led to the collapse of his bank.

He also alleges that BoU wrote him a letter blackmailing him to settle the case out-of-court or face criminal proceedings after they had filed their plaint in June.

The real estate magnate also accuses BoU lawyers –MMAKS and AF Mpaga– of conflict of interest and faults the Central Bank for breach of Confidential Settlement and Release Agreement. He says the two law firms have represented his Meera Investments firm.

The court battles, president over by Justice David Wangutusti, is likely to open a Pandora’s box for the Central Bank.

At least two other suits against BoU have been filed by private citizens over the collapse of Crane Bank.

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We Have Never Worked for Sudhir – BOU Lawyers

Following tycoon Sudhir Ruparelia’s petition to the High Court on Wednesday seeking to throw out two prominent law firms that are representing Bank of Uganda and Crane Bank in receivership in a Shs397 billion dispute, MMAKS Advocates and AF Mpanga Advocates have filed an affidavit in reply, saying they have never worked for Sudhir.

Below are their responses.

I, William Kasozi, of 4th Floor Dfcu Building, 26 Kyadondo Road, P. 0. Box 1520 Kampala hereby make solemn oath and state as follows:

1. That I am an adult male Ugandan of sound mind and the managing partner of AF Mpanga, Advocates, the 2nd Respondent in the present application and I swear this affidavit in reply to those of the applicant and Azim Tharani, deponed on the 5th September 2017, which were filed in support of the Application.

2. That I am a lawyer by training and an advocate of the High Court of Uganda with over 20 years’ experience in corporate and commercial matters and with a good understanding of the laws of evidence, the Civil Procedure Rules and the Advocates (Professional Conduct) Regulations SI 267 -3 (hereinafter “the Professional Conduct Regulations”) and the ethics that govern professional legal practice. I am also particularly familiar with matters of the regulation of financial institutions and corporate governance by reason of my past experience as in-house counsel and board secretary in financial institutions.

3. That I have perused the application and the affidavits in support thereof. I am of the view that the affidavits make many false assertions about AF Mpanga, Advocates, in general, and my partner Mr David F. K. Mpanga, in particular. I am also of the view that many of the conclusions that are premised on these false assertions are based on a clear misapprehension of the applicable laws perhaps as a result of negligent legal advice.

4. That prior and without prejudice to my more detailed depositions below, I wish to state the following fundamental and immutable facts:

(a) At no time since its founding in 2003 has AF Mpanga, Advocates acted for the applicant. None of our partners or associates have ever been engaged or in any way executed any instructions for the applicant;

(b) It follows from the fact I have stated in (a) above, that we AF Mpanga, Advocates are not aware of any fact(s) which may be prejudicial to the applicant in the conduct of his defence of H.C.C.S. No. 493 of 2017 by virtue of his having been our client;

(c) All of the facts that we know about this case are as a result of being advocates for the 3rd Respondent upon the instructions of the 4th Respondent, who is the former’s receiver; and

(d) The advocate-client relationship between AF Mpanga, Advocates and the 3rd and 4th Respondents in H.C.C.S. No. 493 of 2017 means that neither Mr David F.K. Mpanga, who has had direct and day-to-day conduct of this matter, nor any other partner or associate is a competent or compellable witness for the applicant on any of the matters that the applicant and Azim Tharani assert in their respective affidavits.

5. That I am familiar with the matters leading up to and the pleadings so far filed in H.C.C.S. No. 493 of 2017. AF Mpanga, Advocates’ involvement in this matter begun on or about the 28th of October 2016 when we were instructed by the 4th Respondent, which had taken over management of the 3rd Respondent, to provide legal support to PricewaterhouseCoopers Uganda Limited (hereinafter “PWC”) which was carrying out the forensic audit of the 3rd Respondent to establish the circumstances that led to its undercapitalisation and eventual takeover.

6. That I was part of a team that comprised about five lawyers, including Mr David F.K. Mpanga, which provided legal support to PWC. In our work we were giving our legal opinion on PWC’s factual findings. We also assisted PWC in carrying out registry searches, perusing and explaining the legal implications of documents which PWC found in its audit, and in attending interviews of persons that PWC deemed important to its inquiries to enable us advise PWC on the legal implications of their evidence.

7. That PWC owns all the factual findings and conclusions in its Forensic audit report of 13th January 2017 subject to the limitation that it obtained legal advice from us in the process of compiling that report.

8. That In any trial if H.C.C.S. No. 493 of 2017, PWC and other witnesses will be called to testify to prove the factual assertions that PWC made its report and upon which the 3rd Respondent’s claims against the applicant are based. The legal implications of such facts as may be taken to be proved will be matters of law to be determined by the honourable and learned trial judge after hearing submissions of counsel for both sides.

9. That in the premises, neither David F.K. Mpanga nor any other partner or associate in AF Mpanga, Advocates can be called as a witness for the applicant because we only dealt with and advised upon matters of law and our opinion was given to or for the benefit of the 3rd and 4th Respondents with whom we have an advocate-client relationship.

10. That I am aware that on or around the 18th of October 2012, AF Mpanga, Advocates received instructions to represent the 3rd Respondent as well as A.R. Kalan and Ajay Kumar, then the managing director and deputy managing director, respectively, of the 3rd Respondent, in constitutional application No. 40 of 2012 Humphrey Nzeyi v Bank of Uganda & 8 others.

11. That in the said application before the Constitutional Court, Humphrey Nzeyi, a shareholder in the defunct National Bank of Commerce (U) Limited, was seeking for a declaration that the 3rd Respondent and its then officers, A.R. Kalan and Ajay Kumar acted in contempt of an interim order issued by the Constitutional Court on the 28th September 2012 when the assets and liabilities of National Bank of Commerce (U) Limited were taken over by the 3rd Respondent, pursuant to a Purchase of Assets and Assumption of Liabilities Agreement executed by and between the 3rd and 4th Respondents on the 27th September 2012.

12. That the said instruction for the 3rd Respondents and its said officers was conducted by Mr David F.K. Mpanga and Mr Brian Kalule and the only issue in that case was whether the 3rd Respondents and its then officers were aware of the existence of the Interim Order of the Constitutional Court at the time when they took over the National Bank of Commerce’s assets and liabilities. So at no time during the conduct of that case did Mr David F.K. Mpanga, Mr Brian Kalule or any other partner or associate of AF Mpanga, Advocates take instructions from the applicant about his shareholding, management or control of the 3rd Respondent nor indeed was there any hint of the facts behind the matters now in issue in H.C.C.S. No. 493 of 2017.

13. That I am aware that the 3rd Respondent’s claims against the applicant essentially stem from the applicant’s apparent inability to distinguish himself from the 3rd Respondent and include contentions that the applicant was using fronts to mask his ownership and control of the 3rd Respondent contrary to the provisions of the Financial Institutions Act 2004 (as amended) and the regulations thereunder. It is, therefore, not surprising that the Applicant still believes that when AF Mpanga, Advocates acted for the 3rd Respondent in a matter about contempt of court we acted for him. It is, however, disappointing that he is reinforced in that clearly false and legally untenable assertion by his legal advisers as he depones in paragraph 26 of his affidavit of the 5th September 2017.

14. That in January 2017, AF Mpanga, Advocates was instructed to act jointly with MMAKS Advocates in legal action against the applicant, based on the findings of the PWC forensic audit report of the 13th January 2017.

15. That Mr David F.K. Mpanga had primary day-to-day of the matter acting on instructions from officers of the 4th Respondent.

16. That all engagement by Mr David F.K. Mpanga in negotiations that culminated in the execution of the confidential settlement and release agreement of the 20th March 2017 (hereinafter “the CSRA”) or meetings that were held subsequent to discuss its implementation and all correspondence by the firm in that regard, whether formally on AF Mpanga’s letterhead or by email from Mr David F.K. Mpanga’s official email account, was upon and in furtherance of client instructions from the 4th Respondent as the 3rd Respondent’s receiver. We were acting as counsel and were and still are subject to an ongoing Advocate-Client relationship with the 3rd and 4th Respondents.

17. That the terms of the settlement which was agreed upon between the applicant and the 3rd and 4th Respondents were reduced into writing in the CSRA. The matters in contention which were subject of correspondence, some of which has been annexed to the pleadings, were matters of contested construction of the terms of the CSRA. The authorship of the correspondence attached to the pleadings is not contested. It is adduced to establish that it exists and that it was sent on a particular date with a view of a particular objective. It can be proved by calling several witnesses, including primary and secondary (copied) addressees.

18. That each party will be at liberty to call such witnesses as it deems necessary and appropriate to prove its own factual assertions in this case and the honourable and learned trial judge will make a decision as to the proper construction of the terms of the CSRA and whether acts purportedly done in pursuant thereto met released the parties of their mutual obligations to each other.

19. That in the premises, in this case, as in all litigious cases, neither party’s counsel will be witnesses, for the parties they represent or for the parties that they have been instructed to represent. Each party’s counsel shall lead the primary witnesses and adduce such admissible documentary evidence as is available to prove the case then make legal submissions. The court shall make an appropriate finding.

20. That the engagement of counsel in: making demands on behalf of clients; negotiation of those demands with a view to an out-of-court settlement; drafting agreements to evidence the terms of any out-of-court settlement; meetings to assess or review parties’ respective performance in implementation of an out-of-court settlement; and making demands in respect of perceived breaches of an out-of-court settlement do not, in and of themselves, render counsel witnesses in subsequent litigation.

21. That nothing Mr David F.K. Mpanga or any other partner or associate, said or did in pursuance of AF Mpanga, Advocates’ instructions in this case entitle the applicant to claim him or any other partner or associate as a witness as alleged in the affidavits of the applicant and Azim Tharani or at all. Further nothing done by any of the partners or associates of AF Mpanga, Advocates legally or ethically disqualifies us from acting for the 3rd or 4th Respondent as alleged or at all.

22. That using my experience as counsel, this application appears to me to be an abuse of process and one in which the applicant seeks to overbear and handicap the 3rd and 4th Respondents by depriving them of capable, ethical and incorruptible counsel of their choice.

23. That the contents of this affidavit are true to the best of my knowledge.

Sworn by the said William Kasozi at Kampala on this 7th day of September 2017

Why Sudhir wants BoU lawyers out

Tycoon Sudhir Ruparelia has petitioned High Court, seeking to throw out two prominent law firms that are representing Bank of Uganda and Crane Bank in receivership in a Shs397 billion dispute.

After the Central Bank through MMAKS Advocates and AF Mpanga Advocates sued Mr Ruparelia and his Meera Investments Company seeking recovery of billions of Shillings, in his August 3 defence, the property mogul however, listed the BoU lawyers as his key witnesses and cited conflict of interest.

In a 14-page affidavit he filed in the Commercial Court on September 6, the businessman, who accuses BoU lawyers of conflict of interest, argues that MMAKS Advocates and AF Mpanga were representing Crane Bank before receivership and on account of “an advocate-client relationship and a fiduciary relationship” it will be incongruous for them prosecute their former client.

‘Sudhir has never been a client of MMAKS Advocates’

I, Ernest Sembatya of c/o P. O. Box 7166 Kampala make solemn oath and state as follows:

1. That I am an advocate of the courts of judicature and a Partner of the 1st Respondent (“MMAKS Advocates”). I am familiar with the Advocates (Professional Conduct) Regulations SI 267-3 and the ethics that govern professional legal practice. I have read the above application and the affidavits of the applicant and Mr Azim Tharani sworn on the 5th September 2017 and respond to both on behalf of the 1st Respondent as follows;

2. That in his application the applicant (hereinafter also referred to as “SR”) contends three (3) matters in relation to the 1st Respondent. Firstly, that he is a former client of the 1st Respondent; Secondly, that by virtue of having allegedly previously acted for him the 1st Respondent is privy to prejudicial facts relevant to the claims the subject of this suit and; Thirdly, that the 1st Respondent is a potential witness on his behalf in relation to issues to be tried in this suit. All three (3) above contentions by SR are made by him, knowing them to be false and/or by reason of conflating Crane Bank Limited with himself.

3. That in paragraph 26 of his Affidavit as the only proof of his being a former client of the 1st Respondent, SR states that he has been advised by his lawyers Kampala Associated Advocates and that he believes that advice to be true that by virtue of MMAKS Advocates having been the lawyers of the 3rd Respondent (“Crane Bank”) in which he is a shareholder and director, MMAKS Advocates were also his lawyers. This is patently wrong legal advice and SR’s belief is clearly mistaken. Further the question as to whether someone is your lawyer is a matter which a client should be able to immediately ascertain and should not necessitate seeking legal advice from another lawyer. SR is not and has never been a client of MMAKS Advocates.

4. That in paragraphs 27 to 38 of his Affidavit, SR states that the 1st Respondents were one of the panel lawyers of Crane Bank and provided advice to Crane Bank on various matters including the conducting of one of Crane Bank’s Board trainings. This is conceded and the 1st Respondent shall add that it still continues to act for Crane Bank (albeit now in Receivership). The present suit against SR is one of the matters that the 1st Respondent has been instructed by Crane Bank to conduct.

5. That the present suit is an action by Crane Bank to recover from SR (its majority (sole) shareholder) five (5) distinct monetary sums in the total amount of $110,587,103 (plus interest) said to have been unlawfully extracted by SR from Crane Bank as well as to recover from Meera Investments Limited (SR’s company) forty-eight (48) freehold certificates of title said to have been unlawfully transferred by SR from the names of Crane Bank into the names of Meera Investments Limited.

6. That in addition to fact that SR has never been a client of MMAKS Advocates, the factual basis for the five (5) monetary and one (1) property claims by Crane Bank against him, set out in in paragraph 5 above, only came to light subsequent to and by reason of a forensic audit commissioned by Crane Bank and the 4th Respondent, conducted by Pwc and issued on the 13th January 2017.

These facts had been fraudulently concealed by SR and were not known by anyone other than SR and his associates/co-conspirators prior to the issuance of Pwc’s forensic audit report. It cannot therefore be said and neither does SR aver in his Affidavit that he disclosed to the 1st Respondent any matters pertaining to this fraud. Accordingly the contention that the 1st Respondent is privy to prejudicial facts relevant to the extraction claims the subject of this suit and obtained other than from the Pwc forensic audit report is untrue.

7. That in relation to SR’s contentions contained in paragraphs 34 to 36 of his Affidavit with regard to the report by the 1st Respondent on the Companies Registry search of Crane Bank’s shareholding attached as “K” to SR’s Affidavit this was a report compiled on Crane Bank’s (and not SR’s) instructions and merely stated what the Companies registry filings indicated as to the registered shareholding in Crane Bank. The registered shareholding in Crane Bank is not in contention as this suit relates to the undisclosed ultimate beneficial shareholding by SR in Crane Bank which was revealed by the Pwc forensic report and which SR in any event denies. The 1st Respondent cannot testify on this matter being the lawyers of Crane Bank who bring this suit against SR.

[A copy of Crane Bank’s instruction letter to the 1st Respondent based on which the search report was compiled is attached as “A”]

8. That in relation to SR’s contentions contained in paragraphs 39 to 46 of his Affidavit that the 1st Respondent shall be required to testify on his behalf in relation to the cash extraction allegation pertaining to Infinity Investments Limited, the 1st Respondent avers that it acted for Crane Bank (and not SR) in relation to drawing and registering the mortgage and debenture security deeds and subsequently in issuance of Notices of Default and Notices of Sale in relation to the securities which had not been released. No sale or recovery was however achieved.

Subsequent to the takeover of Crane Bank, Pwc through its forensic audit, established that Infinity Investments Limited’s loan disbursement was onto accounts operated by SR through his close associates, that valuable securities were released without the loan having been paid off and that the remaining securities were worthless. None of these facts were known to anyone other than SR and his associates/co-conspirators and these facts were not known to the 1st Respondent and neither does SR allege that they were. Accordingly the 1st Respondents who were the lawyers of Crane Bank and for whom they still act on this recovery, cannot be said to be witnesses for SR in claim made against him by Crane Bank.

9. That the 1st Respondent has on various occasions acted against entities owned by SR including Meera Investments Limited as for instance in H.C.C.S No. 185 of 2006 Meera Investments Limited vs AG, UIA and LIRA which continued for ten (10) years and was only disposed of on the 25th February 2016 and in which the 1st Respondent acted for UIA against Meera Investments Limited.

[A copy of the pleadings and Judgment in the above case are attached as “Bi” to “Biii”]

10. That in relation to the Affidavit of Azim Tharani, the question of whether SR extracted the USD 80,000,000 sum the subject of the falsified Nostro account is a matter to be determined at trial based on the Pwc forensic audit report and the testimony that will be given by them on the detailed evidence disclosed in the report. The matter will not be determined based on hearsay oral evidence as to what was allegedly said on a telephone call. Neither the 1st nor 2nd Respondent as lawyers for the 3rd Respondent can testify on that matter.

11. That the Advocate-Client relationship between MMAKS Advocates and the 3rd and 4th Respondents in H.C.C.S. No. 493 of 2017 means that no lawyer of MMAKS Advocates is a competent or compellable witness for SR on any of the matters that he and Azim Tharani assert in their respective affidavits.

12. That it is not for SR to choose which law firm or lawyers to act for entities that sue him and it is a party’s right to have their matters conducted by counsel of their choice. This Application is a clear abuse of process and a sinister attempt by SR to control which Counsel will conduct this litigation against him with the hope that the contest will not be conducted by capable, ethical and incorruptible counsel of the 3rd and 4th Respondents’ choice.

13. That I swear this Affidavit in opposition to this Application.

14. That what is stated herein is true to the best of my knowledge.

Sworn at Kampala by the said Ernest Sembatya this 8th day of September 2017

Hearing Date Set for Sudhir Case Against BOU Lawyers

By Betty Ndagire & Juliet Kigongo

Kampala — The High Court has set Wednesday next week to hear an application in which businessman Sudhir Ruparelia is seeking to boot out two prominent law firms representing Bank of Uganda (BoU)and Crane Bank in receivership in a Shs397b case.

Mr Ruparelia on Wednesday filed an affidavit in court accusing MMAKS Advocates and AF Mpanga Advocates of conflict of interest and breach of advocate-client relationship on account of their past dealings with him and the Crane Bank now in receivership.

The head of the Commercial Court, Justice David Wangutusi, who is going to handle the matter, has accordingly notified all the parties in the case. Mr Ruparelia, who insists that BoU lawyers are his principal witnesses in the Crane Bank case, is represented by Kampala Associated Advocates (KAA).

“Take notice that this court will be moved on the 13th day of September, 2017 at 9am or so thereafter so counsel for the applicant (Mr Ruparelia) can be heard,” the court’s hearing notice issued yesterday reads in part.

Justice Wangutusi is expected to determine whether the BoU lawyers conflicted in acting for BoU and Crane Bank in receivership yet they were representing Crane Bank before the central bank took it over last year on account of alleged malpractice. Mr Ruparelia, in his application insists that the BoU lawyers represented Crane Bank since 2005.

“MMAKS Advocates were Crane Bank’s lawyers [from 2005] until the date of its takeover by Bank of Uganda on 20th October, 2016. During the management and conduct of the affairs of Crane Bank, the executive directors regularly consulted and wholly relied upon the advice of MMAKS Advocates and in that consultation, the board and the management shared facts which are in issue in the case,” Mr Ruparelia’ s affidavit reads in part.

According to court documents, Justice Wangutusi will also rule on whether by acting as BoU counsel, they would be in violation of advocate-client relationship and the advocate (professional conduct) regulation.

The judge will also determine whether some of the lawyers such as Timothy Masembe Kanyerezi and David FK Mpanga from the aforementioned law firms are potential witnesses in High Court case 493 of 2017 and if so, be barred from representing BoU and Crane Bank.

Argument

In justifying his rejection of the law firm of AF Mpanga Advocates, the businessman avers that the considerations contained in the report by PWC that was instituted to investigate his alleged mismanagement of Crane Bank, was heavily based on the legal analysis and advise given by Bowmans Uganda which is the other name of AF Mpanga Advocates.

Mr Ruparelia argues that the implication of this law firm being heavily involved in coming up with the PWC report, is that they will be are necessary, competent and compellable witnesses to speak of the veracity of the contested report.

On the same day, the Commercial Court will hear an application in which BoU conceded to filing a response to Mr Ruparelia’s countersuit challenging BoU on breach of the Confidential Settlement and Release Agreement. In the countersuit, Mr Ruparelia is seeking to recover $8m from BoU for alleged breach of the agreement he had with central bank authorities.

Although the two parties had agreed not to sue each other, central bank sued Mr Ruparelia seeking to recover close to Shs400b from him. Mr Ruparelia denies any wrongdoing and accused BoU of blackmail. The BoU lawyers have since applied for late submission after Mr Ruparelia’s lawyers protested what they called the blatant violation of the rules. BoU is, however, requesting court to accept their defence despite being filed out of time.

Affidavit

Complaint: In his application, Mr Sudhir Ruparelia argues that the alleged fraud case that was brought against him by BoU, has a number of falsehoods such as him having been involved in the day-to-day running of the his former Crane Bank and that nothing could happen without his knowledge or approval.

To that effect, he wants Mr Masembe of MMAKS Advocates to defend him on this allegation on grounds that he is aware that: “As my personal lawyers, they are witnesses to the fact that I only sit on the board of directors and did not run the said bank on a day-to-day basis nor was I the dominant executive force.”

He further quotes the BoU fraud against him where it’s alleged that he oversaw then Crane Bank which he allegedly owned and controlled, loan out money to Infinity Investments Ltd at a highly irregular basis and that there was no effort to recover the said loan money. But Mr Ruparelia refutes this assertion on grounds that when Infinity Investments Ltd started defaulting on servicing the loan, MMAKS Advocates was instructed to recover the same.

Uganda: Sudhir Demands Quick Court Win

By Derrick Kiyonga

Nearly 19 days after he counter-sued Bank of Uganda (BOU) for $8 million and got no response, businessman Sudhir Ruparelia yesterday wrote to the Commercial court asking for a quick judgment in his favour.

Sudhir, the owner of the defunct Crane bank, wants court to enter a default judgment because BOU failed to respond to his counter claim within the mandatory 15 days.

A default judgment is a binding judgment in favour of either party based on failure to take action by the other party. Most often, it is a judgment in favour of a plaintiff when the defendant fails to respond to summons to appear before a court of law.

When he filed his defence on August 3, 2017 against a BOU suit accusing him of stealing over Shs 400 billion from Crane bank, Sudhir also filed a counter claim against the central bank.

In the counter claim, Sudhir wants BOU to pay him $8m for breach of clause 12 of their Confidential Settlement and Release Agreement (CSRA).

The clause stipulates that, “Without prejudice to the immediate forgoing should any legal or administrative proceeding of any kind ensue against SR [Sudhir Ruparelia] as defined in the agreement, the agreement stands voided and BOU shall immediately return SR the value of the settlement.”

On August 10, 2007, Sudhir filed an amendment to the counterclaim and served BOU lawyers, saying that Justice David Wangutusi should find BOU culpable for unjust enrichment having taken Sudhir’s money and refused to return Crane bank.

Sudhir claims BOU also went ahead to institute civil proceedings against him contrary to the CSRA. Through Kampala Associated Advocates (KAA), Sudhir said yesterday that BOU officials were supposed to respond to his counter claim within 15 days from the date of service of the amended counter claim.

BOU, the businessman said, has never filed a response.

“On August 28, 2017, we carried out a search in the register at the Commercial court and established that the counter defendants [BOU] had not filed a reply to the counter claim,” says Sudhir’s letter to the Commercial court. “To this end, the counter defendants are out of time within which to file a reply.”

Sudhir said he should win the case without any fight from BOU. “This is, therefore, to pray that a default judgment be entered against the counter defendants [BOU] for payment of USD8,000,000, together with interest at the rate of 18 per cent per annum as sought in the counterclaim,” Sudhir said.

Asked why they hadn’t filed a defence yet, David Mpanga, a lawyer for BOU, said they were pulled back by Sudhir’s amendments to his counter claim and that the businessman’s lawyers “forgot to serve me”.

Prodded about Mpanga’s assertions, Sudhir’s lawyers admitted they didn’t serve Mpanga but said they served BOU secretary and MMAKS who are the lead lawyers of the bank.

In response to Sudhir’s request, MMAKS advocates yesterday wrote a letter to the registrar of the commercial court, accusing KAA of repeatedly refusing to serve AF Mpanga Advocates despite earlier protests. Nevertheless, the BOU lawyers insist that Sudhir’s application is premature.

In his counter claim, Sudhir said that on January 27, 2017, BOU sold at an undisclosed sum, assets of Crane bank to Dfcu Bank Limited. After the assets sale, Sudhir said, central bank approached him and urged him to settle the dispute, resulting in an agreement captured in the CSRA.

Last evening, BOU filed its defence filed yesterday; saying Sudhir’s narrative of the CSRA and the circumstances surrounding the failure of its implementation is selective.

BOU says Sudhir’s account fails to take into account the basic fact that the counter claimant himself was in fundamental breach of the CSRA, after he refused to provide the settlement consideration in the terms of Clause 3 of the CSRA.

According to BoU Clause 3.1 of the CSRA says, “In consideration of BOU and CBL [Crane Bank limited] agreeing to settle and release claims as specified in the Confidential Settlement and release agreement, SR [Sudhir Ruparelia] agrees: “to pay and/or procure the payment to BOU of the aggregate amount of US $60,000,000.00 (the Settlement Consideration); and (b) to transfer to CBL {In Receivership) or its nominee the Freehold and Mailo titles.”

BOU says that the take over the management of Crane Bank and placing it under receivership; and entering into an arrangement under which DFCU Bank Limited purchased the banks’ assets and assumed its liabilities, were all done in good faith, for appropriate cause and lawfully pursuant to express powers vested in it as regulator under the Financial Institutions Act (FIA).

Mixed Fortunes for Uganda Banks in First Half of 2017

By Bernard Busuulwa

Stanbic Bank Uganda’s profits dropped by 11 per cent in the first half of 2017, compared with the same period last year, on the back of falling interest margins and tough economic conditions.

DFCU, which acquired Crane Bank assets and liabilities early in the year saw its profit after tax rise to Ush114 billion ($31.2 million) at the close of June 2017, from Ush23 billion ($6 million) at the end of June 2016.

A decline in the Central Bank Rate from 15 per cent to 10 per cent in the period under review and reduced yields from Treasury bills and bonds partly contributed to the drop in profits.

The CBR is a benchmark policy rate that determines the cost of funds mobilised by commercial banks.

Stanbic Bank Uganda’s prime lending rate dropped from 24 per cent to 19 per cent to reflect the CBR.

Net interest margins fell to 8.6 per cent between January and June 2017, from an average of 9.4 per cent in the first six months of 2016.

Subsequently, the bank’s interest income shrank by about Ush15 billion ($4 million). Yields earned from the 91-day Treasury bills declined to 10.7 per cent from 15.2 per cent.

Stanbic Bank’s net interest income dropped by three per cent to Ush178 billion ($48.8 million) at the end of June while non-interest income fell by 10 per cent to Ush136 billion ($37.3 million).

Total income dropped by six per cent to Ush314 billion ($86 million). Its return on assets declined to 4.1 per cent from 4.8 per cent during the period under review.

Increased loans

The bank’s loans and advances rose by eight per cent to Ush2 trillion ($548.5 million) while customer deposits grew by 12 per cent to Ush3.2 trillion ($877.6 million), according to the bank’s latest financial results.

“It is not surprising that bad loans in the industry have risen to Ush1.6 trillion ($438.8 million) out of a total credit portfolio of Ush10 trillion ($2.7 billion).

This has affected the lending appetite among banks but the worst is behind us,” said Stanbic Bank Uganda managing director Patrick Mweheire.

The bank’s share price at the Uganda Securities Exchange rose slightly to Ush27.50 ($0.0075) on last week Tuesday after the announcement of its half-year results but fell to Ush27.25 ($0.0074) on Wednesday. No interim dividend was declared for 2017.

DFCU Ltd

On the other hand, DFCU Ltd financial performance for the first six months of 2017 was boosted by the acquisition of some Crane Bank assets and liabilities in a deal that was finalised in January this year.

The bank’s latest financial results show total income rose to Ush255 billion ($69.9 million) as at the end of June 2017, from Ush83.8 billion ($22.9 million) in June 2016.

Total assets rose to Ush3.1 trillion ($850 million) from Ush1.6 trillion ($438.8 million) during this period. Customer deposits grew to Ush1.84 trillion ($504.6 million) from Ush982 billion ($269 million).

The lender’s capital base also increased to Ush500 billion ($137 million) after the acquisition deal from Ush200 billion ($54.9 million).

“We did due diligence on Crane Bank and carried out valuation of its assets and liabilities; we are ready to absorb any shocks that may arise from this acquisition,” said DFCU Bank managing director Juma Kisaame.

DFCU Bank is a sole subsidiary of DFCU Ltd. DFCU Ltd’s share price on the USE remained unchanged at Ush758 ($0.21) for two straight sessions after the announcement of half-year results.

The company did not declare an interim dividend for 2017 but it plans to allocate more than 200 million shares in a rights issue.

The cash will be used to repay a $50 million shareholder loan owed to Arise BV, a Dutch holding company that owns 55 per cent of the firm. The rights issue is to be concluded in October but details on the transaction value, offer price and allotment ratio were not available by press time.

Simon Mwebaze, the general manager at UAP-Old Mutual Financial Services Uganda, a fund management and stock brokerage firm, said the DFCU’s share price is unlikely to gain much in coming weeks.

“Investors will be focussing on the pending rights issue and possible risks to its balance sheet caused by Crane Bank’s doubtful assets that were exposed by the Bank of Uganda forensic audit report,” said Mr Mwebaze.

IGG Asked to Investigate Wealth of BOU Official

Photo: The Independent

The Bank of Uganda headquarters

By GODFREY SSALI

Kampala — A concerned citizen on Wednesday petitioned the office of the Inspector General of Government (IGG) asking for investigations into the wealth of a Bank of Uganda (BOU) official.

Denis Nyombi a lawyer from Denis Nyombi & Co. Advocates said he is seeking the IGG’s intervention because he is privy to information that BOU’s Director for Supervision Justine Bagyenda under declared her assets and liabilities to the IGG, contrary the Leadership Code Act, 2002.

Nnyombi noted that he has documents linking Bagyenda and other officials in the directorate of supervision at the Bank of Uganda to several properties yet they earn a gross monthly salary of less than Shs32m.

Nnyombi said: “Pursuant to the Whistle Blowers Protection ACT, 2010, any person with information that can be helpful in the fight against corruption and fraud is encouraged to present his case and that’s why I petitioned.”

Nnyombi wants Bagyenda to be investigated for prosecution over incompetence and possible corruption and fraud in relation to the ongoing saga between BOU and Crane Bank.

More on This

Ugandan Citizen Wants Probe into Wealth of Central Bank Official


MPs to Investigate Central Bank’s U.S.$99 PensHow Crane Bank Takeover Led to Shs114b Dfcu Profit

Bank of Uganda Summoned to Defend Itself Against Businessman

Court Summons BOU Over SudhirHow Sudhir Will Battle BOU Charge-By-Charge

Forensic Report into Uganda’s Defunct Crane Bank is Leaked

President Okayed Crane Bank Closure – Central Bank GovernorDeputy Speaker Blocks BOU Parliamentary Investigation

Some of the properties in question are alleged to be in Naguru Bukoto and Kungu area in Kira municipality.According to Nnyombi, a meeting has already been scheduled between him and the IGG over the matter.Bank of Uganda has been on the spot over the systematic institutional failure that midwifed Crane Bank’s collapse with political pundits and economists accusing it for its weakness to spot pervasive perfidy at the formerly Sudhir Ruparelia owned bank.The Supervision Acts and Regulations as well as the government’s 1997 Intervention Policy empower Bank of Uganda to conduct full on-site examination of all commercial banks using a risk-based supervision methodology.Last month, a citizen sued Bank of Uganda for failing to properly supervise the business of Crane Bank Limited, a fortnight after the central bank dragged businessman Sudhir Ruparellia and Meera Investments Limited to court for alleged fraud.Derrick Nsereko, a resident of Kampala filed civil suit number 362 of 2017 through his lawyers, Kashillingi, Rugaba and Associates against Bank of Uganda seeking a declaration that it failed to properly supervise the business of Crane Bank Limited (CBL) in accordance with the Financial Institutions Act, and for the years 2013 to 2016 shied away from taking corrective action in respect of CBL’s financial affairs hence putting depositors’ funds at risk.The woes of Crane bank started on Thursday October 20, 2016, after Bank of Uganda took over the management of Crane Bank Limited over undercapitalization and later transferred its liabilities (including deposits) to DFCU Bank in exercise of its powers as receiver, under Sec 95(1)(b) of Financial Institutions Act, Bank of Uganda .More on ThisMPs to Investigate Central Bank’s U.S.$99 Pens

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How Does Bank of Uganda Change After the Demise of Crane Bank?

opinionBy Karoli Ssemogerere

The affairs of an entity in receivership take a long time to resolve. It will be a long sunset for Crane Bank, its owners and Bank of Uganda. The Central Bank has put Governor Emmanuel Tumusiime-Mutebile on a public relations offensive to justify the closure of Crane Bank and explain away its lax regime that allowed Crane Bank to sink deeper into an abyss from which it could never recover.

Crane Bank has been covered from many angles. Its collapse marked the height of a major crisis in which banks made losses from non-performing loans. The failure of big loans like Steel Rolling Mills, a $50 million loan at Standard & Chartered, was one of them. The highly publicised bailout list shortly after the February 2016 elections where most of the items on the list had contributed handsomely to the campaign of President Museveni turned heads in town.

The New Vision has done good coverage of how one borrower was uniquely treated after fleeing from her creditors and successfully getting Shs64 billion on favorable terms from government.

In fact, if just two or three of Crane Bank’s bad loans performed, the story would be different. The rise in the toxic loans portfolio partly arose from BoU’s laxity allowing a rogue interest rate regime to reign in the banking sector.

In its bid to mop inflation, BoU raised the CBR to the high teens to mop out election inflation pressures. Commercial banks raised their lending rates to as high as 29 per cent to 30 per cent per annum. BoU also sat still allowing unrestricted repackaging of failing loans that were sold across banks delaying disclosure and provisioning of some of the worst loans. Once liquidity dried up, these loans assumed penuriously prohibitive interest rates some as high as 40 per cent.

Courts have been wish-washy on this subject, a combination of lack of exposure and training in financial matters, but even they have fixed the commercial rate at 25 per cent. The Central Bank also appears to have been inept at enforcing the laws on the book. When the Financial Institutions Act was first passed, a proposal to cap the maximum share holding of an individual was behind closed doors raised from 25 per cent to 49 per cent against global banking best practices, which favour dilution of shareholding.

All three key players behind this change are still alive and active in public life. It is, therefore, incredible to listen to the Governor lamenting about shareholding issues in this respect.

BoU’s regulatory function also appears to have been overwhelmed by small and big conflicts of interest. Officially a failing bank like Crane Bank could not have been the one told to assume the assets and liabilities of National Bank of Commerce. It would be interesting for BoU to explain what this chain meant for the retention and acquisition of key government agency accounts.

These accounts holding billions of shillings ultimately saved Crane Bank from shuttering where depositors’ recovery would have been limited to statutory amounts. BoU has neither disclosed the total cost of keeping Crane Bank open nor the actual sale price of Crane Bank. BoU publicly disclosed it injected Shs200 billion, but it is suing Sudhir Ruparelia for Shs400 billion.

The Governor says that Dfcu Bank acquired “assets and liabilities” of Crane Bank. This is misleading as some of these liabilities are in the custody of BoU. Dfcu in their half year results, says it spent Shs63 billion on Crane Bank “assets and liabilities”, including Shs600 billion in loans. Its half year report also says their deposits grew by 900 billion meaning about 1 trillion disappeared during the run on the bank in the time between BoU’s intervention and fire-sale to Dfcu.

An inventory of the Crane bad loans stuck with BoU probably exceeds Shs400 billion, which is why many stories and half-truths have harmed BoU.

Mr Ssemogerere is an Attorney-at-Law and an Advocate.

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Businessman Denies Takeover of Bank Assets

Photo: Joseph Kiggundu/Daily Monitor

Kampala businessman Sudhir Ruparelia.

By Anthony Wesaka

Kampala — Property mogul Sudhir Ruparelia has submitted his defence in the case that was recently brought against him by former shareholders of the defunct National Bank of Commerce (NBC).

In his written defence he filed before the Commercial Court last Thursday, Mr Ruparelia denied being involved in the takeover of NBC about five years ago. The NBC was taken over by Bank of Uganda (BoU), which sold it to Crane Bank owned by Mr Ruperelia at that time. Crane Bank too was liquidated in October last year and later sold to dfcu Bank.

“The 3rd defendant (Mr Ruparelia) did not take possession of NBC’s T24 Core Banking System at all nor did he in any way act with dishonesty. The plaintiffs shall be put to strict proof of the said allegations,” Mr Ruparelia states in his defence.

He is represented by Kampala Associated Advocates.

“The 3rd defendant (Mr Ruparelia) avers that he was not party to the transaction for the sake of NBC assets and any allegations in the plaint in relation to the said transaction cannot be attributed to him nor can he be held liable for any alleged loss caused as a result of the said sale of the NBC assets,” he says.

However, Mr Ruparelia admits that the NBC assets were purchased by Crane Bank but for lawful consideration.

In September 2012, BoU took over NBC and sold it to Crane Bank owned by Mr Ruparelia at the time.

NBC was co-owned by former prime minister Amama Mbabazi, city businessman Amos Nzeyi and retired Supreme Court judge George Kanyeihamba, among others.

Last month, Mr Nzeyi sued Mr Ruparelia on account that he and Mr Rasiklal Chhotalal Kantaria acted dishonestly in purchasing NBC assets and did not meet the test of managing, controlling and owning the bank.

Mr Ruparelia is jointly sued with his business associate Kantaria, Crane Bank and BoU.

Mr Ruparelia denies having committed any act of dishonesty or fraud or acted in any irregular way. He argues that the allegations against him have no merit.

His co-accused, Mr Kantaria, Crane Bank and BoU, had not filed their defence by close of yesterday.

“The 3rd defendant (Mr Ruparelia) avers that he did not authorise the execution of the purchase of assets and assumption of liabilities agreement for NBC’s assets and that the allegations of dishonesty are false and misconceived,” Mr Ruparelia further states in his defence to the NBC suit.

In the suit, Mr Nzeyi wants the Commercial Court to declare that BoU’s takeover of NBC and the subsequent sale of its assets to Crane Bank within six hours after the seizure on September 27, 2012, was illegal and in bad faith.

Mr Nzeyi further alleges that the central bank’s takeover and liquidation of NBC was in breach of the Financial Institutions Act 2004, and should be declared null and void.

He also wants court to hold BoU liable for failing to supervise the banking sector, which is its statutory duty.

He is further seeking court to order BoU to provide a register of assets and liabilities inherited from NBC at the time of the takeover, proof of tax compliance in the sale of NBC assets to Crane Bank and a forensic investigation report plus refund of the money paid for purported liquidation expenses.

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Deputy Speaker Blocks BOU Parliamentary Investigation

By GODFREY SSALI

Kampala — The Deputy Speaker Jacob Oulanyah has halted a proposed parliament investigation of Bank of Uganda (BOU) in relation to circumstances leading to the closure of Crane Bank. He cited sub judice.

Oulanyah made his ruling Tuesday afternoon after Budadiri East MP Nathan Nandala Mafabi presented a motion urging parliament to set up a select committee, after arguing that the central bank had failed to supervise the operations of Crane Bank.

The motion has been seconded by Igara West MP Raphael Magyezi who added that parliament needs to investigate whether BOU breached sections of the Public Finance Act and Financial Institutions’ Act.

Oulanyah based his ruling on the rule of sub judice that limits debates on a matter before courts of law.

“I rule that the proposed parliamentary investigation are sub judice but let us keep monitoring the progress so that where necessary we review the matter,” said Oulanya.

He therefore barred any MP or committee including the committee on Commissions, Statutory Authorities and State Enterprises from investigating Bank of Uganda.

Court cases

Oulanyah also notified the house of a letter written last Friday to his office by Prof. Emmanuel Tumusiime Mutebile over three court cases regarding the matter.

He added that he also received a letter by MMAKS law firm that is representing Crane Bank reminding him about the rule of Sub judice

“I need to examine whether the investigation by parliament will deal with the matters that are before court for determination,” said Oulanya.

The court cases are; Case file HCCS No. 493 of 2017 (Crane Bank Limited (In Receivership versus Sudhir Ruparellia and Meera Investments Limited) and another case where a Ugandan named Dennis Nsereko filed a suit against Bank of Uganda before High Court’s Civil Division, accusing it of failing to play its supervision role in accordance with Part Viii of the of the Financial Institutions Act.

The third case is one where the liquidated National Bank of Commerce (NBC) and former owner Amos Nzeyi sued Bank of Uganda, Crane Bank and its former owner Mr Ruparelia and a Kenyan tycoon Rasiklal Chhotalal Kantaria over BOU’s takeover of NBC and the subsequent sale of its assets to Crane Bank within six hours after the seizure on September 27, 2012 which they say was illegal and in bad faith.

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