What you need to know:
- In its final ruling on the matter, the court also ruled that the receivership (of Crane Bank) ended on January 20, 2018, hence its management reverted to the original shareholders and not under the control of the Central Bank.
The Supreme Court has ordered Bank of Uganda (BoU) to foot all the legal costs involving the multibillion case brought against businessman Sudhir Ruparelia by Crane Bank in receivership.
In its final ruling on the matter, the court also ruled that the receivership (of Crane Bank) ended on January 20, 2018, hence its management reverted to the original shareholders and not under the control of the Central Bank.
Receivership is the process through which a company’s assets are managed by a neutral party to assist the company to recover funds due to it creditors. The process may also aid the company to return to its profitability.
“The appeal is hereby dismissed with costs in the terms found by the Court of Appeal. The costs shall be borne by the Bank of Uganda,” ruled Justice Lillian Tibatemwa Ekirikubinza yesterday.
Mr Ruparelia owns more than 51 percent of the shares of the bank alongside other business partners.
This is the second time that the Supreme Court is ruling on the matter.
On February 11, the Supreme Court ordered the Central Bank to foot all the legal costs that Mr Ruparelia incurred the Shs397b commercial dispute from the High Court, Court of Appeal to the Supreme Court and not Crane Bank in receivership.
The court reasoned that it was BoU behind the suing of Meera Investments and Mr Ruparelia and not Crane Bank in receivership since it did not have the powers “to sue” or “be sued”, following its takeover.
However, BoU objected the court’s decision to revert Crane Bank in receivership to the original shareholders and filed an appeal, which was dismissed yesterday.
BoU wondered why the orders were part of the decree to be extracted by the businessman.
BoU argued that the Supreme Court could not handover the management of Crane Bank (in receivership) because under part IX of the Financial Institutions Act, the power to manage a distressed financial institution, is vested in BoU.
They added that Crane Bank remains a distressed financial institution and under the law, can only be managed by BoU.
But Mr Ruparelia’s lawyers said they did not come up with the idea to have the management of Crane Bank reverted to its original owners but the same was contained in the earlier ruling.
Justice Tibatemwa in her ruling yesterday, observed that it is not in dispute that that receivership of Crane Bank had ended on January, 20, 2018, 12 months after the company had been closed and its management had been taken over by Central Bank.
“It is a position at common law that where a legal relationship is terminated by effluxion of time, then the rights accruing revert back to the owner,” she ruled, adding, “Drawing an analogy from the above authority, since receivership ended by effluxion of time under Section 95 (1) of the Financial Institutions Act, the assets and liabilities of the financial institution hitherto under receivership, revert to the shareholders, with the attendant right to manage the institution. As already noted above, the entity existed as a legal person before it was licensed to operate as a financial institution.
Furthermore, the return of management to the shareholders is a logical result of the fact that the Central Bank is no longer a receiver, no longer manager. Law abhors a vacuum.”
Reacting to the final ruling of the court, Mr Peter Kabatsi and Mr Bruce Musiguzi, who represented the Mr Ruparelia, described the five-year legal battle as a “tough one”.
“It was a long tough fight, taking five years but we have finally won it, hands down,” Mr Kabatsi said shortly after the final ruling of the Supreme Court.
When this newspaper contacted Ms Charity Mugumya, the director of communications at BoU, on their take of the ruling, her daughter picked the phone call and said her mother was driving and unable to talk at that particular time.
On October 20, 2016, Crane Bank was placed under statutory management by BoU pursuant to Sections 87 (3) and 88 (1) of the Financial Institutions Act for being under capitalised.
The Central Bank pursuant Section 94 of the Financial Institutions Act, placed Crane Bank under receivership with some of its assets and liabilities sold to dfcu Bank.
On June 30, 2017, Crane Bank in receivership, filed a commercial case before the High Court, Commercial Division in which it was seeking to recover over Shs397b from Mr Ruparelia, accusing him of misappropriating the funds as the director and shareholder with his Meera Investment Company.
But on August 29, 2019, then presiding judge David Wangutusi delivered his ruling in which he dismissed the multibillion commercial dispute on grounds that Crane Bank in receivership lost its legal powers “to sue” Mr Ruparelia or “to be sued”, the moment it was placed under receivership.
Crane Bank in receivership was dissatisfied with the decision of the Commercial Court and lodged an appeal before the Court of Appeal, which appeal was equally dismissed on similar reasons.
But still being dissatisfied with the judgment of the Court of Appeal, Crane Bank in receivership, went on and appealed to the highest court in the land (the Supreme Court), but withdrew the main appeal even before the court could hear it.
Crane Bank was not satisfied that the orders of the Supreme Court also included that its management reverts to the original shareholders, a contestation that the court dismissed yesterday.