dfcu Bank, was reluctant to transfer into its name, the 48 properties it acquired in the now-heavily contested and controversial Crane Bank acquisition, fearing that Bank of Uganda and Crane Bank (in receivership) may fail to legally acquire the property from Sudhir Ruparelia and his MEera Investments Ltd, in which case the bank would have to incur a huge costs trying to re-transfer the property back to the businessman.

A leaked memo from city law firm, Sebalu & Lule Advocates to the dfcu Bank’s Head, Legal and Company Secretary shows that rather than transfer the titles into its names, the bank had preferred to place caveats on the property till such a time when Bank of Uganda had satisfactorily taken ownership of the said properties from Sudhir and Meera Investments.

However, in the memo, Sebalu & Lule Advocates, who were dfcu’ lawyers in the transaction, instead advised the bank to go ahead and transfer the contested properties into the bank’s names, a move several legal experts have criticized as rushed.

According to the Asset Purchase Agreement between BoU and dfcu BoU had 24 months to recover the said properties from Sudhir/Meera but if BoU failed to recover the land within the 24 months, dfcu would have an option to rescind the purchase of the leasehold properties,  return to BoU the certificates of title, duly retransferred into the names of CBL and deliver up to BoU vacant possession of the leased properties. BoU would then refund them a portion of the purchase price equivalent other value of the properties.

BoU and Crane Bank (in receivership) had in the meantime, under Civil Suit No. 493 of 2017 sued Sudhir Ruparelia and Meera Investments Limited alleging that the 48 properties on which Crane Bank had its countrywide branch network initially belonged to Crane Bank, but were transferred to Meera Investments Limited and subsequently leased to Crane Bank.

BoU asked court to order Sudhir/Meera to hand it the 48 freehold certificates together with duly executed transfer deeds in respect of each one of them in favour of Crane Bank.

Dfcu, fearing that incase the attempts to secure the land from Meera failed, was reluctant to fully register the titles, fearing that in case the BoU’s case failed the bank would incur huge costs in revaluing and re-transferring the properties back.

Instead, they had opted to lodge caveats on the titles as an alternative to registering the transfers to safeguard the bank’s interests in the interim pending resolution of Civil Suit No. 493 of 2017, which is why they sought a legal opinion from Sebalu & Lule Advocates.

Sebalu & Lule instead told dfcu Bank that “our opinion is that although the proposed approach of registering caveats provides dfcu with some level of legal protection, its indisputable title to the leasehold properties can only be guaranteed through registration of the transfers executed by BoU in favour of dfcu.”

The lawyers also said that 24 months was too long a time to wait, for BoU to resolve ownership issues.  

It now appears, this 08^th May 2017 legal advice could have been premature, rushed and possibly misguided; misguided because both the bank and their lawyers, were well aware that the, efforts by BoU and Crane Bank (in receivership) to recover the said land  were in very early stages and rushed because, dfcu had until January 2019 to effect the transfer.

Several lawyers CEO East Africa Magazine talked to, wondered why Sebalu & Lule were in a hurry to effect the transfer well knowing that there were several unresolved issues and a number of court cases on the properties.

“Unless Sebalu & Lule were interested in the legal fees involved in the transfers, I do not see any other good reason why they would be in a hurry to transfer the said land,” said one lawyer, who preferred anonymity as he has previously worked with Sebalu & Lule Advocates.

Transfer of property was fraudulent

Indeed, Sudhir in High Court Civil Court Suit No. 948 of 2017, in the Land Division (Meera Investments Ltd Vs Dfcu Bank Limited and The Commissioner for Land Registration), went ahead to challenge the transfer saying that it was an “illegality”, a “fraud” and tantamount to “trespass” on his property.  

The lands commissioner on the other hand was sued for “illegally effecting a transfer of the suit properties into the names of dfcu.”

Sudhir wants court to order that Meera Investments is the registered proprietor of the suit properties and should have been consulted in any transfers of the land to dfcu and that since Meera was never consulted, the said transactions were illegal and fraudulent.

Meera also prayed for court to declare that “the transfer of the leasehold interests in the suit properties to the 1st defendant (dfcu) and taking of possession of the same… without the prior written consent of the plaintiff (Meera) rendered the leases illegal and invalid.”

Meera has also prayed that dfcu be declared a trespasser on the said properties and Meera be granted vacant possession of the said land. That is not all, Meera wants dfcu to refund “mesne profits” (profits of an estate received by a tenant in wrongful possession and recoverable by the landlord) with 20% interest, as well as damages and costs for the suit.  

However, dfcu in a defense filed on 28^th January 2018 by Sebalu & Lule Advocates, Dfcu argues that by virtue of assuming Crane Bank’s assets and liabilities as transferred by BoU, pursuant to statutory Authority contained in Section 95(1) (b) and (c) of Financial Institutions Act they therefore assumed the said 42 Leasehold Certificates of title.

dfcu also argues that “ownership of these properties is still subject to a court decision in High Court Civil Suit No. 493 of 2017 and therefore it was  premature for Meera to claim them.

“Whether the plaintiff is indeed the owner of those freehold properties and therefore the lessor of the 1st Defendant (Dfcu) is directly and substantially in issue in the aforementioned earlier suit,” pleads Dfcu, further arguing that they shall seek to block hearing of this case until the “question of ownership of the said 42 Freehold Certificates of Title has been determined in the prior suit.”

BoU and Crane Bank have no basis to sue

What appears to be dfcu’s strongest defence- the disputed ownership of the properties, may as well be the weakness of their case, given that the businessman in Miscellaneous Application No. 320 of 2019, has asked court to dismiss BoU and Crane Bank’s (in receivership) case against him, arguing that that the Financial Institutions Act (2004) under which BoU and Crane Bank (in receivership) sued, does not allow a receiver to sue or be sued.

This therefore means that BoU and Crane Bank (in receivership) have “no locus standi to bring the suit” against them and that the case is “barred by law.”

Sudhir, through his lawyers Kampala Associated Advocates lawyers Peter C. R. Kabatsi, Joseph Matsiko and Elison Karuhanga, also told court that Crane Bank’s (in receivership) claim on Meera Investments’ land is barred by law since Crane Bank- by virtue of being majority owned by non-Ugandan citizens is a non-citizen and therefore barred from acquiring or holding mailo or freehold land in Uganda by Section 40 (1), (4), (7)(a)(d), and (8)(a) of the Land Act.    

Justice Wangutusi has set August 26, for a ruling on the miscellaneous application.

Should the application be sustained, BoU’s entire claim on Sudhir will crumble, leaving both the central bank and dfcu Bank with multibillion counter law suits by the businessman. 

For starters, dfcu’s earlier fears of double expenses in stamp duty and registration fees as well as fresh valuations of the properties will come true, but this time a little more expensive. Most if not all the properties have since appreciated in value and could therefore attract much higher valuation and stamp duty costs.

If BoU’s main case is dismissed, it could also almost mean that Sudhir’s fraud case against dfcu and the lands commissioner in the lands division has higher chances of succeeding,  in which case both dfcu and its lawyers could suffer countersuits.

According to section 77 of The Registration of Titles Act, any certificate of title, entry, removal of encumbrance, or cancellation, in the Register Book, procured or made by fraud, is void as against all parties or privies to the fraud. Similarly, section 176 (b) of The Registration of Titles Act allows actions for recovery of land against the person registered as proprietor under the Act where that person was registered as proprietor of that land through fraud.

Similarly, any person who fraudulently procures, assists in fraudulently procuring or is privy to the fraudulent procurement of any certificate of title or instrument or of any entry in the Register Book, or knowingly misleads or deceives any person authorised to require explanation or information in respect to any land or the title to any land under the operation of the Act in respect to which any dealing is proposed to be registered, that person commits an offence by virtue of section 190 (1) of The Registration of Titles Act.

Lastly, should court dismiss the main suit, two other suits that the Ruparelia Group has against dfcu, could succeed.  

In one of the suits (HCCS No.109 of 2018), Crane Management Services (CMS) another of Sudhir’s companies is demanding for USD385,728 and UGX2,998,558,624 for severally breaching various tenancy agreements in respect to 13 properties in Kampala and Mbale. CMS is demanding for USD385,728 and UGX2,998,558,624 as rental arrears, before interest on the suit sum, general damages, interest on general damages and costs of the suit.   

In another case, Meera Investments sued dfcu for breaching a tenancy agreement for Plot 38 Kampala Road (Crane Chambers) and Plot 40A Kampala Road and wants a compensation of USD 8, 660,462.34 with interest and costs of the suit.

In both cases, dfcu is being sued, on account of being the successor in title to Crane Bank (in receivership) and as such “having by its conduct assumed the rights and obligations under the tenancies in respect of the suit properties.”

Unfortunately for Sebalu & Lule Advocates, they can nolonger represent dfcu Bank on any of the cases against the Ruparelia Group, court having found them conflicted, since they previously acted for CMS on a number of real estate related matters.

But well; all that will depend on the August 26^th ruling by the commercial court.

Ruparelia Group Chairman, Dr Sudhir Ruparelia and Meera Investments Limited, one of his real estate companies, have applied to the Commercial Court, asking it to dismiss case HCCS 493 of 2017 brought against them by Crane Bank (in Receivership).

The applicants in Miscellaneous Application No. 320 of 2019 argue that Crane Bank (in receivership) has “no locus standi to bring the suit” against them and that the case is “barred by law.”

Black’s Law Dictionary, 10^th Edition, defines locus standi to mean: “The right to bring an action or to be heard in a given forum.”

In HCCS 493 of 2017, Bank of Uganda through Crane Bank (in receivership) alleges that the businessman fraudulently took out up to $92.8m (about Shs334b) and another Shs8.2 billion of depositors’ money from Crane Bank for personal gain through various payments to two construction companies and a technology company.

The companies alleged to have been used by Sudhir for these payments have since vehemently rejected the above claims and produced evidence to discredit BoU’s claims.   

BoU through Crane Bank (in receivership) also alleges that the entire land where Crane Bank had branches, was transferred to Meera Investments Limited, another company owned by Sudhir and subsequently leased the land to Crane Bank.

Crane Bank now wants back the 48 freehold certificates together with duly executed transfer deeds in respect of each one of them in favour of Crane Bank or its nominee.

A receiver cannot sue or be sued

In their preliminary objections before Hon Mr. Justice David K. Wangutusi, today, July 3, 2019 Sudhir through his lawyers, Kampala Associated Advocates, argued that a receiver or an entity in receivership- in this case Crane Bank cannot sue or be sued.

Kampala Associated Advocates was represented by Senior Partner, Peter C. R. Kabatsi, Managing Partner Joseph Matsiko and Partner Elison Karuhanga.

“The suit was filed when Crane Bank Limited was in receivership. At issue therefore is; can a suit be filed when a financial institution is in receivership? Our submission is that the receiver has no locus to file the suit,” argued the lawyers.

Bank of Uganda on the 20^th October 2016 took over the management of Crane Bank and pursuant to Sections 87 (3) and 88 (1) (a) & (b) of the Financial Institutions Act 2004 and on the 20^th of January 2018 BoU placed the bank under receivership pursuant to Section 94 of the FIA.

Sudhir’s lawyers further argued that the FIA 2004 provides three ways in which BOU may takeover and resolve a financial institution in distress and these include: statutory management, receivership, and liquidation. They added that while the law allows the statutory manager and the liquidator to sue, it does not allow the receiver to sue or be sued.

“From 20^th October, 2016 to 20^th January, 2017 Bank of Uganda could institute a suit under Section 89 (1),(2)(e),(9) of the FIA. We shall submit that they lost that power on 20^th January, 2017 when they placed the Plaintiff under receivership,” submitted the lawyers, adding: “A financial institution under receivership is therefore a closed financial institution. When a financial institution is placed under receivership the statutory manager’s powers cease from that day and for all intents and purposes the institution is closed.

Section 95 of the FIA 2004 only grants a receiver powers to:

1. arrange a merger with another financial institution;
2. arrange for the purchase of assets and assumption of all or some of the liabilities by other financial institutions;
3. arrange to sell the financial institution;
4. liquidate the assets of the financial institution.

But even then this must be done within 12 months of taking over as a receiver.

“The powers of the receiver are therefore limited, both in extent and in time. He can only exercise the four powers mentioned above and this has to be done within twelve months,” Sudhir’s lawyers submitted, adding: “Section 95 does not mention suing as one of the things he (the receiver) will do in the exercise of his powers.”

“Under the FIA, the receiver cannot file a law suit. When the legislature does not grant an express power to a statutory entity to sue then that entity simply cannot sue. This very point was determined by the Supreme Court of Uganda,” argued KAA Advocates.     

“If a party cannot be sued, it follows that that party cannot sue. We are fortified in this by the binding decision in the supreme court in the case of The Commissioner General Uganda Revenue Authority vs Meera Investments Limited SCCA 22 of 2007,” the lawyers further submitted.

Non-Ugandan citizens cannot own mailo or freehold land

KAA lawyers also submitted that BoU’s claim on Meera Investments’ land is barred by law since Crane Bank- by virtue of being majority owned by non-Ugandan citizens is a non-citizen and therefore barred from acquiring or holding mailo or freehold land in Uganda by Section 40 (1), (4), (7)(a)(d), and (8)(a) of the Land Act.  

“The majority shares in CBL are held by a company incorporated in Mauritius. A further 4% is held by Mr. Jitendera Sanghani, a British national. This would in effect mean that a total of 51.33% of the shares are held by non-citizens…..It is well settled that under no circumstances can a non-citizen hold freehold land and a number of authorities elucidate this Constitutional point.”                              

The lawyers also dismissed Crane Bank’s prayers to have the land held in trust for them by a designated nominee saying that doing so would “would defeat the express provisions of Article 237 of the Constitution” shich says that mailo land and freehold land cann only be owned by Ugandan citiznes.

“The purpose of this Court is to interpret the transaction in accordance with the law and not to side step the law with ingenious legal trusts. A trust is a creature of the doctrine of equity and the branch of law called equity and trusts. One of the maxims of equity is that: “equity follows the law and will therefore not allow a remedy that is contrary to the law”. The Court cannot construct this trust because it will be an illegal trust. A court of law cannot grant an illegal prayer,” closed the lawyers in their submissions.

Justice Wangutusi has set August 26, for a ruling on the objection.

City Businessman and billionaire Dr Sudhir Ruparelia, has applied to the Commercial Court to dismiss a case brought against him and his real estate firm, Meera Investments Ltd by Bank of Uganda through Crane Bank (in receivership).

In Miscellaneous Application No. 320 of 2019 the businessman wants Civil Suit No. 493 of 2017- Crane Bank (in receivership) vs. Sudhir Ruparelia & Meera Investments Ltd, dismissed arguing that the applicant (Crane Bank) has no locus standi, as a company under receivership cannot sue and be sued.

Locus standi, is a law term used to mean the ability, right or capacity of party to bring an action or to appear in a court and or participate in a case.

In HCCS 493 of 2017, Bank of Uganda through Crane Bank (in receivership) allege that the businessman fraudulently took out up to $92.8m (about Shs334b) and another Shs8.2 billion of depositors’ money from Crane Bank for personal gain through various payments to two construction companies and a technology company.

Some of the companies alleged to have been used by Sudhir for these payments have since vehemently rejected the above claims and produced evidence to discredit BoU’s claims.    

Crane Bank also accuses Sudhir of failing to remit more than Shs52 billion in workers’ contributions to the National Social Security Fund (NSSF) and wants him to pay the amount. 

It is also alleged that the entire land where Crane Bank had branches, was transferred to Meera Investments Limited, another company owned by Sudhir and subsequently leased the land to Crane Bank. Crane Bank wants the land back.

However the businessman, through his lawyers, Kampala Associated Advocates, in an application to court argues that “H.C.C.S 493 of 2017 is expressly barred by law as the respondent (Crane Bank) has no power to sue or be sued.”

The lawyers also argue that Crane Bank cannot sue for “the recovery, transfer and return of freehold property when the respondent is a non-citizen within the meaning of the law”- since 51% of the bank is owned by non-Ugandans.

The Ugandan Constitution and the Land Act, bars none Ugandans from owning freehold property. The lawyers therefore argue that Crane Bank is not capable of holding the suit property in its names and therefore cannot sue for it.

The lawyers also hold that Crane Bank is not “permitted by law to institute or commence actions against its shareholders and hence the instant suit (H.C.C.S 493 of 2017 ) is barred by law.”

They also want the NSSF claims against Sudhir dismissed arguing that the claim for the National Social Security Fund should have been made against Crane Bank and not its shareholders, as the shareholders were not involved in running the bank.

Sudhir’s lawyers also say, the case brought against the businessman “does not disclose a cause of action against the applicant (Sudhir)” as provided for by Order 6 Rule 29 of the Civil Procedure Regulations.

The businessman, through his lawyers want the entire H.C.C.S 493 of 2017 dismissed with costs.  

The case will first be heard on 3rd July 2019.

Shaky BoU Case

This recent application further threatens BoU’s case following a December 2017 dismissal by the Commercial Court of BoU’s lawyers- MMAKS Advocates and Bowmans Uganda from representing Bank of Uganda.  

Parliament’s Committee on Commissions, Statutory Authorities and State Enterprises (COSASE) and the Auditor General have also found that the seizure and subsequent sale of Crane Bank and 6 other banks breached several provisions of the Financial Institutions Act (2004) and want the owners of the banks compensated by BoU.