Posts tagged as: ruparelia

BOU Under Probe Over Shs1.4 Billion Payment to Private Lawyers

By Ibrahim a Manzil

Parliament — Parliament’s Committee on Commissions Statutory Authorities and State Enterprises (Cosase) is investigating Bank of Uganda officials over the expenditure of Shs1.4b in legal fees to private law firms, despite having a fully-fledged legal department.

In four successive Financial Years, the committee heard that top city law firms, including MMAKs Advocates, the firm representing BoU in Crane Bank case involving city tycoon Sudhir Ruparelia, were paid more than Shs1.4b, with an accrued balance of Shs15.8b.

The BoU matters handled by hired lawyers include representation in different court cases and offering legal opinions and processing of land documents.

The Committee chairperson, Mr Abdu Katuntu (Bugweri, FDC) yesterday grilled the central bank officials on the rationale of having in place a legal department and then hiring private lawyers.

The MPs, who are currently scrutinising the Auditor General’s reports on BoU, described the expenditure as ‘uncalled for’.

Mr Katuntu and other committee members said it is untenable to provide for a legal department, yet most of the legal work is done by private lawyers.

“Who takes the decision that this case has to be referred to the legal counsel outside?” Mr Katuntu asked.

Other MPs who spoke to Daily Monitor after the meeting called the disputed hiring of private lawyers as “a money-making venture” and called for an investigation into the deals.

The central bank’s legal director, Ms Margaret Kaggwa Kasule, however, explained that the decisions on what cases are handled by the contracted lawyers are taken with a consideration to the “complexity of the matter.”

The MPs questioned her explanation on account of the various cases BoU officials sent to private lawyers.

“That decision is taken by the legal counsel through internal consultation with the lawyers. It depends on the complexity of the matter and a number of other issues,” Ms Kasule said.

Mr Katuntu asked why “even a caveat” is placed by external lawyers, to which Ms Kasule responded that “the issues of land office, Mr chairperson, are outsourced.”

Ms Anita Among (Bukedea, Ind) said in their next siting, the central bank will be required to present “a budget for internal and external operations”.

“We also need a list of your contracts [with external lawyers] and a list of all the advocates,” she added.

BoU officials have also been asked to present the budget for MMAKS Advocates and AF Mpanga Advocates – the external lawyers representing BoU in Crane Bank case.

Mr Ruparelia accuses the two legal firms contracted by BoU of conflict of interest. The case is pending before the Commercial Court.

Mr Katuntu said the committee interface with BoU officials will see a legal audit of the bank, asking BoU governor, Prof Emmanuel Mutebile, who was characteristically silent throughout the sitting, to provide the terms of engagement.

“Bring the term of engagement between legal firms, we want to see the performance of your legal counsel, do a quick audit of cases you won and those you lost and also the costs you recovered because the cases you win, you win with costs,” said Mr Katuntu.

Other orders

Mr Katuntu also asked the central bank officials to produce its legal department’s itemised annual budget in today’s sitting without fail.

Ms Kasule said she did not have it off-head yesterday, but promised to avail it in the set of documents that will be presented today.

In an array of documents seen by this newspaper, a particular law firm received a total of Shs62m being paid in respect of “balance on agreed instruction fees and Value Added Tax.”

Another case in the documents involved another law firm, which received shs31m for “obtaining planning permission in respect of plot 15-17 Birch Avenue.”

Mr Katuntu said the legal department will have to justify its existence in relation to the amounts of money paid to the external law firm.

Mbarara Municipality MP Michael Tusiime claimed that whereas BoU is hiring private lawyers, their land in parts of Mbarara “has been encroached on.”

The central bank undertook to investigate the claim.

Totals paid

In Financial Year 2016/2017, the total amount paid to external lawyers was Shs300m, with an outstanding balance of Shs2.9b.

For FY 2015/2016, the amount paid was Shs387m, and the remaining balance amounts to a total of Shs8.8b

In FY 2014/2015, Shs681m was paid, with a total of Shs4.1b remaining in balances.

For FY 2013/2014, a total of Shs61m was paid, with no detail of the balance remaining.

Uganda: 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.

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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Uganda: 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: 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).

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: 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: Court Appoints an Arbiter in Bou, Sudhir Crane Bank Case

By GODFREY SSALI

Kampala — The Commercial Court has appointed city advocate Harriet Magala from Kituuma -Magala and company advocates to mediate in the case between Bank of Uganda and tycoon Sudhir Ruparelia over Crane Bank.

Judiciary spokesperson also the registrar in-charge of mediation at the commercial court Vincent Mugabo has confirmed the development.

He explaiend that it is now a practice that when a suit is filed in any court of law, the parties are given a chance to solve their issues amicably with the help of an independent arbitor.

This is done to reduce on the time and resources that a case can take if it went through a full trial.

Without any coerssion or intimidation, parties then file a consent judgement with court, or if they fail to reach an agreement they are at liberty to proceed with the hearing before a judge.

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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.

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