The Central Bank had statutory powers to take over Crane Bank, its assets and liabilities, but did it stretch this a little too far when it decided to claim 42 properties that were occupied by Crane Bank but belonged to Meera Investments? Did Dfcu’s transaction advisors and lawyers mislead them to fall for the Central Bank position even when they perhaps knew that Central Bank did not have regulatory jurisdiction over Meera, which is not a financial institution? Or did the potential benefits of a juicy Crane Bank takeover, blind Dfcu to the potential risks? Well, the daggers are out, with the Central Bank and Crane Bank suing Sudhir and Meera Investments; Meera on the other hand is suing Dfcu and the Commissioner or Land Registration. These suits are likely to go on for not less than 5 years before actual victor is known- but will Sudhir have the last laugh?
Seen from atop the table, Dfcu Bank’s acquisition of Crane Bank, or rather Bank of Uganda’s handover on a silver platter of Crane Bank to Dfcu Bank, as some analysts argue, was profitable move.
Dfcu is yet to announce its full 2017 results but in its mid-term results announced in August 2017, the bank reported that that after-tax profit had grown by 396% from UGX23 billion in the first six months of 2016 to UGX114 billion in the first six months of 2017.
The acquisition of Crane Bank’s hefty loan book, also saw Dfcu’s assets grow by 67% from UGX1.8 trillion to UGX3 trillion in the same period.
Customer deposits also grew from UGX1.1 trillion to UGX1.8 trillion.
As Dfcu shareholders happily wait to smile all the way to the bank when the final full results for 2017 are declared and dividends paid out, they may have to hold onto that happiness as they have now learned that the triumphant acquisition of Crane Bank was not all that juicy- at least until the courts say so.
Businessman Sudhir Ruparelia, through his real estate company Meera Investments Limited, is suing Dfcu Bank for trespassing on over 42 properties formerly leased by Crane Bank from Meera, but that have since been transferred into Dfcu’s names, following the statutory takeover, overseen by Bank of Uganda.
Absa, ENS Africa, A&O Shearman and Nomura Advise Asahi Holdings on USD 2.3bn Acquisition of 65% Stake in EABLSudhir is praying that Dfcu be evicted from the 42 properties and that he be compensated for this illegal occupancy.
On trial is whether in handing over properties belonging to Meera Investments but leased to Crane Bank to Dfcu, BoU either overstepped its powers or was the central bank and its lawyers simply negligent? Also on trial will be whether Dfcu top executives in their hunger to take over the juicy Crane Bank did not do enough due diligence or were they misled by their transaction advisors.
Although not on paper, on trial will be the competences of the various lawyers involved in the rushed acquisition. This case is also critical in redefining the powers of the central bank and will as such be a critical precedent in the finance and banking law in Uganda.
Background: Sudhir sues DFCU Bank
Just when everyone thought the takeover of Crane Bank by Dfcu was over and it was time for Dfcu shareholders to start cashing in on their prized acquisition, Sudhir has dragged Dfcu to court. He wants back 42 properties currently occupied by Dfcus; properties he says Dfcu is illegally occupying, having connived with the Commissioner for Lands Registration to transfer them to Dfcu.
In the HCCS Civil Suit No. 948 of 2017, beforevthe Land Division (Meera Investments Ltd Vs Dfcu Bank Limited and The Commissioner for Land Registration, Meera has sued Dfcu “on account of illegality and fraud committed
