Posts tagged as: crane

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.

Uganda

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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.

Uganda

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Lawyers Disown Sudhir Over Crane Bank Case

By Stephen Kafeero

Kampala — Lawyers contracted by Bank of Uganda to prosecute the case it brought against Mr Sudhir Ruparelia regarding the defunct Crane Bank have defended themselves against the businessman’s claims that they have a conflict of interest in the matter.

Mr Ruparelia, in an application supported by an affidavit this newspaper published verbatim on Thursday, claims that individual lawyers of MMAKS Advocates and AF Mpanga Advocates have acted as his lawyers in the past and that their representing Crane Bank in the case brought by Bank of Uganda against him amounts to a conflict of interest.

The lawyers are David Mpanga of AF Mpanga Advocates and Kanyerezi Masembe of MMAKS Associates.

Mr Ruparelia says he intends to call on the said lawyers as witnesses during his defence, and therefore that they are not qualified to represent Crane Bank (in receivership), which is suing him.

But in a jointly drawn statement, MMAKS Advocates and AF Mpanga Advocates deny that Sudhir is currently their client or has ever been.

The lawyers argue that Crane Bank, now in receivership, and Mr Ruparelia are two separate entities and representing the former cannot imply that they represented the latter even when he was a shareholder in Crane Bank.

The defence

In the joint statement of defence, the law firms state: “The claims of fraudulent extraction of monies by the 1st Defendant [Ruparelia] from the Plaintiff [Crane Bank], which are subject of this suit, only came to light subsequent to and by reason of a forensic audit carried out by PWC after the 20th October 2016 and were not known by anyone other than the 1st Defendant and his associates/co-conspirators prior to the issuance of PWC’s forensic audit report.”

The two law firms also separately deponed affidavits in defence of their instructions by Bank of Uganda to defend Crane Bank in the matter.

In his affidavit, Mr Ernest Sembatya, a partner at MMAKS Advocates states that the issues raised by Mr Ruparelia “are made by him, knowing them to be false and/or by reason of conflating Crane Bank Limited with himself”.

He states that it is up to Mr Ruparelia 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 [Sudhir Ruparelia] 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,” he says.

Mr William Kasozi, the managing partner of AF Mpanga Advocates on the other hand, says Mr Ruparelia’s claims make many false assertions about “AF Mpanga, Advocates, in general, and my partner Mr. David F.K. Mpanga, in particular.”

He says AF Mpanga Advocates since its founding in 2003, has never acted for Mr Ruparelia and none of its partners or associates have ever been engaged or done any legal related work for Mr Ruparelia and that nothing done by any of the Partners or Associates of AF Mpanga, Advocates legally or ethically disqualifies them from acting for the BoU or Crane Bank in receivership as alleged.

“… using my experience as counsel, this application appears to me to be an abuse of process and one in which the Applicant[Ruparelia] seeks to overbear and handicap the 3rd and 4th Respondents by depriving them of capable, ethical and incorruptible counsel of their choice,” he says.

In a 14-page affidavit he filed in the Commercial Court last week, Mr Ruparelia includes Mr Kanyerezi and Mr Mpanga in his list of witnesses.

The case

On October 25, 2016 Bank of Uganda took over the management of Crane Bank and suspended all members of its board, saying the then biggest indigenous bank was grossly undercapitalised and posed a systemic risk to the country’s banking sector.

BoU then transferred Crane Bank’s assets and liabilities and sold to Dfcu Bank in January, and on July 13, 2017 announced that it had sanctioned the filing of a suit against Sudhir Ruparelia and his Meera Investments to recoup money that was “fraudulently extracted from, as well as losses that were caused to Crane Bank”.

The suit seeks to recover a total of $93.8m (about Shs337b) and Shs60.3b from Mr Ruparelia, together with the freehold titles of Crane Bank’s branches, general damages, interest and costs”.

BoU instructed MMAKS Advocates and AF Mpanga Advocates (Bowmans Uganda) to represent Crane Bank.

The Bank accused Mr Ruparelia of fraudulently taking out $92.8m (about Shs334b) and another Shs8.2b of depositors’ money from Crane Bank for personal gain.

BoU also accuses Mr Ruparelia of failing or refusing to remit more than Shs52b in workers’ contributions to the National Social Security Fund.

Drama of suits

A citizen, Mr Derrick Nsereko, sued the Central bank requesting court to declare BoU officials culpable of statutory negligence and failure to comply with the Financial Institutions Act.

He said “the central bank acted in bad faith, negligently and in breach of duties in giving the bank a clean bill of health”.

Then on July 25, the liquidated National Bank of Commerce (NBC) and former shareholder Amos Nzeyi sued Bank of Uganda, Crane Bank and its former owner Mr Ruparelia and a Kenyan tycoon Rasiklal Chhotalal Kantaria over Crane Bank taking over NBC’s assets.

In the back and forth, it became apparent that BoU had entered a Confidential Settlement and Release Agreement (CSRA) signed between Mr Mutebile for BoU on behalf of Crane Bank Limited/CBL (in receivership) and Mr Ruparelia.

The latter agreed to pay $60m (about Shs214b) in cash and to transfer all freehold and mailo titles for land on which all Crane Bank branches around the country are sitting, as part of the “settlement consideration.”

BoU ran to court after Mr Ruparelia, apparently, breached the CSRA but the businessman would later file a counter-suit before the Kampala High Court against Bank of Uganda (BoU) and Crane Bank Limited (CBL), seeking to be repaid $8m (about Shs 29b in accordance with an agreement he had signed earlier with the two.

Mr Ruparelia accuses BoU and Crane Bank of breaching the agreement under which he had so far paid them the $8million.

Then last month, Mr Ruparelia moved to the Commercial court seeking a default judgement after what he said was the failure of BoU to respond to his counter suit on time within the mandatory 15 days.

Last week, he petitioned the High Court, seeking to throw out MMAKS Advocates and AF Mpanga Advocates, the BoU lawyers and Crane Bank in receivership on mainly conflict of interest grounds.

The law firms have since responded calling his application a bluff and an attempt to determine who will prosecute him and his co-accused.

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

[Monitor] 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.

Uganda: 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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Uganda: How Sudhir Will Battle BOU Charge-By-Charge

Photo: The Monitor

A photo montage of the under fire Crane Bank proprietor Sudhir Ruparelia, left, and Bank of Uganda governor Emmanuel Tumusiime-Mutebile.

By Derrick Kiyonga

In its case versus Sudhir Ruparelia, Bank of Uganda levels several charges against the businessman.

Overall, Sudhir is accused of superintending the theft of about Shs 400bn from Crane bank before it collapsed last year. But last week, Sudhir filed a robust response to each and every charge at the Commercial court.

DERRICK KIYONGA carefully scrutinized Sudhir’s 62-page defence and, in this article, relates each response to the corresponding BOU charge.

In its case, BOU claims that when Sudhir Ruparelia was still Crane bank owner, the bank paid US$10.2 million for the core banking system software and other attendant software services between 2003 and 2015.

Apparently at least $9.2m out of $10.2m was paid in 2013 to Technology Associates Group Limited, a Dubai-registered company related to Technology Associates Limited in Uganda. The Dubai company and its Ugandan affiliate, according to BOU, are run by Nair Girisch, a business associate of Sudhir.

The embattled tycoon, says the central bank, was until 2014 a director and shareholder in Technology Associates.

The bank allegedly paid other companies for upgrades and software that were not installed. In response, Sudhir said BOU in its onsite examination report of May 2013 asked Crane bank to upgrade its core banking software to fully support its operation before December 31, 2013.

Consequently, the Crane bank board in its meeting of September 4, 2013 resolved that management engages listed software vendors to get: Temenos, Infosys, Tata and Polaris.

Technology Associates then made a proposal to Crane bank on October 21, 2013, and the role of the company, according to Sudhir, was to provide the software and manage the migration from a distributive system to a core banking system.

On October 28, 2013, Sudhir said, Crane bank’s then managing director A.R Kalan wrote to the board and sought its approval to purchase T24 software from Technology Associates for the sum of $5,940,172 for Uganda and $1,300,000 for Rwanda.

Sudhir said he was not and has never been a shareholder or director of Technology Associates or any of its companies or subsidiaries as alleged.

To prove that he is not a shareholder in Technology Associates, the businessman said he will rely on documents from various company registries.

Furthermore, BOU alleges that $80m was siphoned from Crane bank on October 26, 2013 and over $9.2m “extracted” from the institution on different dates in the same year, purportedly for the supply of core banking systems and software licenses.

BOU claims that on October 26, 2013, some liabilities to the tune of $80m (Sh204b), caused by the siphoning of monies from the bank, which had been kept off-book, were brought back into the books of the financial institution to create an impression that the books balanced.

However, Sudhir said that during trial he will seek disclosure of the accounts from which the alleged $80m was extracted and the accounts to which the money went but insists that at no time did he receive or know of the sum of money spoken of.

Sudhir said though he has repeatedly asked for the PricewaterhouseCoopers forensic report, which formed the basis of the BOU suit, the central bank declined to disclose it.

AUDITORS

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Sudhir also said at all time, as a shareholder and board member of Crane bank, he relied on reports of audit firms that had been prequalified and approved by BOU.At the earliest opportunity, he said, he will seek a third party notice against BOU auditors, PWC, KPMG and Deloitte purposely to indemnify him for any misstatements in the audited financial reports.”The first defendant as a non-executive board member, only saw accounts after they had been approved by the auditor together with a letter to the management by the auditors, known as a management letter,” Sudhir said, adding that he only signed off the accounts after the board, the external auditors and BOU in a tripartite meeting had approved them.According to court documents, in the 2009 audit report, PWC for instance, stated: “Our responsibility is to express an independent opinion on the financial statements based on our audit. We conducted our audit in accordance with international standards on auditing.”Those standards require that we comply with ethical requirements and plan and perform our audit to obtain reasonable assurance that the financial statements are free from material misstatement. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.In our opinion the accompanying financial statements give a true and fair view of the state of the company’s affairs as at December 31, 2009.”Sudhir added that in its 2013 report, KPMG said it performed “the audit to obtain reasonable assurance that the financial statements are free from material misstatements.””In our opinion, the financial statements give a true and fair view of the financial position of Crane Bank Limited as at December 31, 2013, and its financial performance and its cash flows for the year ended in accordance with international financial reporting standards,” KPMG stated.LAND QUERIESBOU alleges that Sudhir fraudulently transferred freehold titles of 48 plots of land (where the bank has its branches), purchased and developed using the bank’s finances into the names of Meera Investments from Crane bank.The plots, according to the court documents, were then reportedly leased to the owner (Crane bank). Each plot was reportedly leased to the bank at Shs 100m as premium for 49 years and $6,000 in ground rent per year payable to Meera Investments.Before delving into the merits of the allegations, Sudhir dismisses the allegations as presumptuous, speculative and founded on fanciful reasoning. He said they do not reflect the market realities of obtaining leasehold titles in Uganda.He added that BOU shall be put to strict proof regarding the said allegations. According to Sudhir, BOU’s allegation that Crane bank obtained over 14 freehold titles is false since the bank is a “non- citizen,” thus couldn’t hold the land as a freehold owner as stipulated by the Land Act.Consequently, Sudhir said that of the 48 bank branches, six were acquired by Meera Investments and leased to Crane bank, adding that the bank [Crane] acquired the rest of the titles.As part of Crane bank’s expansion plan, he said, the bank acquired a number of leases with different tenure, some of which were to last just seven years. Apparently, Crane bank took a commercial view that it was better in the long run to obtain freehold titles in lieu of the said leases.Subsequently, he said, after Crane bank obtained over 14 freehold titles, it was considered that pursuant to the Land Act, the bank could not hold the land as a freehold owner since it was a non-citizen within the meaning of the Land Act.SHAREHOLDINGWhile BOU claims that contrary to the law, Sudhir is the sole owner of Crane bank, in his defence the businessman lists six other people and one company with whom he co-owned the bank.Besides, Sudhir who had 28.8 percent share, others were: White Sapphire Limited with 47.33 percent, Jyotsna Ruparelia, 13.39 percent, Jitendra Sanghani, 4.00 percent, Meera Ruparelia, 2.00 percent, Sheena Ruparelia, 2.00 percent, Rajiv Ruparelia 2.00 percent and Tom Mugenga 0.1 percent.Sudhir will further argue during trial that on August 6, 2013, Crane bank sought and obtained specific advice from MMAKS Advocates, who are now BOU lawyers, regarding the structure and shareholding of the bank.According to him, MMAKS Advocates conducted a due diligence of the bank and confirmed the shareholding above and thus he said since BOU has never opposed or disputed the opinion of MMAKS Advocates, it’s therefore estopped [barred] from departing from the said opinion.”The plaintiff is estopped from denying that the persons to whom it has issued share certificates are its shareholders, and BOU is estopped from challenging the shareholding,” he said.INFINITY INVESTMENTSAccording to BOU, over $3.5m and more than Sh8.2bn was taken out of Crane bank on December 27, 2014, disguised as credit facilities to Infinity Investments Limited and eventually written off as bad debts under Sudhir’s instructions.Infinity Investments Limited is reportedly owned by Sudhir. But Sudhir denies owning Infinity Investments. He said the company is run by Mahmoud Bharwani who he describes as a reputable businessman in Kampala and the loan facilities were advanced to the company on the strength of, among others, a personal guarantee of Bharwani himself.Sudhir contends that there were efforts to recover whatever was outstanding on the loan facilities and consequently Crane bank still instructed MMAKS Advocates to conduct recovery, sell off the security and sue Bharwani.”The write-off was in accordance with the Credit Classification and Provisioning Rules and did not absolve Infinity Investments Limited from its obligations for which it remains liable,” Sudhir said, adding, that all decisions in respect of Infinity Investments Limited were not made personally by him, but were decisions made by the Crane bank board at the recommendations of management.He further said MMAKS Advocates handled the securitization, documentation and registration of the credit and security documents of Infinity Investments Limited facility and raised one of the issues to the board that are now raised in the plaint.

How Sudhir Will Battle BOU Charge-By-Charge

By Derrick Kiyonga

In its case versus Sudhir Ruparelia, Bank of Uganda levels several charges against the businessman.

Overall, Sudhir is accused of superintending the theft of about Shs 400bn from Crane bank before it collapsed last year. But last week, Sudhir filed a robust response to each and every charge at the Commercial court.

DERRICK KIYONGA carefully scrutinized Sudhir’s 62-page defence and, in this article, relates each response to the corresponding BOU charge.

In its case, BOU claims that when Sudhir Ruparelia was still Crane bank owner, the bank paid US$10.2 million for the core banking system software and other attendant software services between 2003 and 2015.

Apparently at least $9.2m out of $10.2m was paid in 2013 to Technology Associates Group Limited, a Dubai-registered company related to Technology Associates Limited in Uganda. The Dubai company and its Ugandan affiliate, according to BOU, are run by Nair Girisch, a business associate of Sudhir.

The embattled tycoon, says the central bank, was until 2014 a director and shareholder in Technology Associates.

The bank allegedly paid other companies for upgrades and software that were not installed. In response, Sudhir said BOU in its onsite examination report of May 2013 asked Crane bank to upgrade its core banking software to fully support its operation before December 31, 2013.

Consequently, the Crane bank board in its meeting of September 4, 2013 resolved that management engages listed software vendors to get: Temenos, Infosys, Tata and Polaris.

Technology Associates then made a proposal to Crane bank on October 21, 2013, and the role of the company, according to Sudhir, was to provide the software and manage the migration from a distributive system to a core banking system.

On October 28, 2013, Sudhir said, Crane bank’s then managing director A.R Kalan wrote to the board and sought its approval to purchase T24 software from Technology Associates for the sum of $5,940,172 for Uganda and $1,300,000 for Rwanda.

Sudhir said he was not and has never been a shareholder or director of Technology Associates or any of its companies or subsidiaries as alleged.

To prove that he is not a shareholder in Technology Associates, the businessman said he will rely on documents from various company registries.

Furthermore, BOU alleges that $80m was siphoned from Crane bank on October 26, 2013 and over $9.2m “extracted” from the institution on different dates in the same year, purportedly for the supply of core banking systems and software licenses.

BOU claims that on October 26, 2013, some liabilities to the tune of $80m (Sh204b), caused by the siphoning of monies from the bank, which had been kept off-book, were brought back into the books of the financial institution to create an impression that the books balanced.

However, Sudhir said that during trial he will seek disclosure of the accounts from which the alleged $80m was extracted and the accounts to which the money went but insists that at no time did he receive or know of the sum of money spoken of.

Sudhir said though he has repeatedly asked for the PricewaterhouseCoopers forensic report, which formed the basis of the BOU suit, the central bank declined to disclose it.

AUDITORS

Sudhir also said at all time, as a shareholder and board member of Crane bank, he relied on reports of audit firms that had been prequalified and approved by BOU.

At the earliest opportunity, he said, he will seek a third party notice against BOU auditors, PWC, KPMG and Deloitte purposely to indemnify him for any misstatements in the audited financial reports.

“The first defendant as a non-executive board member, only saw accounts after they had been approved by the auditor together with a letter to the management by the auditors, known as a management letter,” Sudhir said, adding that he only signed off the accounts after the board, the external auditors and BOU in a tripartite meeting had approved them.

According to court documents, in the 2009 audit report, PWC for instance, stated: “Our responsibility is to express an independent opinion on the financial statements based on our audit. We conducted our audit in accordance with international standards on auditing.

“Those standards require that we comply with ethical requirements and plan and perform our audit to obtain reasonable assurance that the financial statements are free from material misstatement. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

In our opinion the accompanying financial statements give a true and fair view of the state of the company’s affairs as at December 31, 2009.”

Sudhir added that in its 2013 report, KPMG said it performed “the audit to obtain reasonable assurance that the financial statements are free from material misstatements.”

“In our opinion, the financial statements give a true and fair view of the financial position of Crane Bank Limited as at December 31, 2013, and its financial performance and its cash flows for the year ended in accordance with international financial reporting standards,” KPMG stated.

LAND QUERIES

BOU alleges that Sudhir fraudulently transferred freehold titles of 48 plots of land (where the bank has its branches), purchased and developed using the bank’s finances into the names of Meera Investments from Crane bank.

The plots, according to the court documents, were then reportedly leased to the owner (Crane bank). Each plot was reportedly leased to the bank at Shs 100m as premium for 49 years and $6,000 in ground rent per year payable to Meera Investments.

Before delving into the merits of the allegations, Sudhir dismisses the allegations as presumptuous, speculative and founded on fanciful reasoning. He said they do not reflect the market realities of obtaining leasehold titles in Uganda.

He added that BOU shall be put to strict proof regarding the said allegations. According to Sudhir, BOU’s allegation that Crane bank obtained over 14 freehold titles is false since the bank is a “non- citizen,” thus couldn’t hold the land as a freehold owner as stipulated by the Land Act.

Consequently, Sudhir said that of the 48 bank branches, six were acquired by Meera Investments and leased to Crane bank, adding that the bank [Crane] acquired the rest of the titles.

As part of Crane bank’s expansion plan, he said, the bank acquired a number of leases with different tenure, some of which were to last just seven years. Apparently, Crane bank took a commercial view that it was better in the long run to obtain freehold titles in lieu of the said leases.

Subsequently, he said, after Crane bank obtained over 14 freehold titles, it was considered that pursuant to the Land Act, the bank could not hold the land as a freehold owner since it was a non-citizen within the meaning of the Land Act.

SHAREHOLDING

While BOU claims that contrary to the law, Sudhir is the sole owner of Crane bank, in his defence the businessman lists six other people and one company with whom he co-owned the bank.

Besides, Sudhir who had 28.8 percent share, others were: White Sapphire Limited with 47.33 percent, Jyotsna Ruparelia, 13.39 percent, Jitendra Sanghani, 4.00 percent, Meera Ruparelia, 2.00 percent, Sheena Ruparelia, 2.00 percent, Rajiv Ruparelia 2.00 percent and Tom Mugenga 0.1 percent.

Sudhir will further argue during trial that on August 6, 2013, Crane bank sought and obtained specific advice from MMAKS Advocates, who are now BOU lawyers, regarding the structure and shareholding of the bank.

According to him, MMAKS Advocates conducted a due diligence of the bank and confirmed the shareholding above and thus he said since BOU has never opposed or disputed the opinion of MMAKS Advocates, it’s therefore estopped [barred] from departing from the said opinion.

“The plaintiff is estopped from denying that the persons to whom it has issued share certificates are its shareholders, and BOU is estopped from challenging the shareholding,” he said.

INFINITY INVESTMENTS

According to BOU, over $3.5m and more than Sh8.2bn was taken out of Crane bank on December 27, 2014, disguised as credit facilities to Infinity Investments Limited and eventually written off as bad debts under Sudhir’s instructions.

Infinity Investments Limited is reportedly owned by Sudhir. But Sudhir denies owning Infinity Investments. He said the company is run by Mahmoud Bharwani who he describes as a reputable businessman in Kampala and the loan facilities were advanced to the company on the strength of, among others, a personal guarantee of Bharwani himself.

Sudhir contends that there were efforts to recover whatever was outstanding on the loan facilities and consequently Crane bank still instructed MMAKS Advocates to conduct recovery, sell off the security and sue Bharwani.

“The write-off was in accordance with the Credit Classification and Provisioning Rules and did not absolve Infinity Investments Limited from its obligations for which it remains liable,” Sudhir said, adding, that all decisions in respect of Infinity Investments Limited were not made personally by him, but were decisions made by the Crane bank board at the recommendations of management.

He further said MMAKS Advocates handled the securitization, documentation and registration of the credit and security documents of Infinity Investments Limited facility and raised one of the issues to the board that are now raised in the plaint.

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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Uganda: Deputy Speaker Blocks BOU Parliamentary Investigation

Photo: The Monitor

Bank of Uganda governor Emmanuel Tumusiime-Mutebile

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.

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He therefore barred any MP or committee including the committee on Commissions, Statutory Authorities and State Enterprises from investigating Bank of Uganda.Court casesOulanyah 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.More on ThisCrane Bank Wasted Billions in Dubious Software Deals

The forensic preliminary report by PricewaterhouseCoopers (PWC) into the mismanagement of Crane bank shows payments were… Read more »

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