Sudhir vs BoU: taxpayer to lose over $20m

Mutebile and Sudhir

By Kagenyi Lukka

For Uganda’s banking industry, the date of 26th August 2019 was historical. In a well thought-out ruling by Justice David Wangutusi of the commercial division of the high court threw out BoU’s claims against the city tycoon Sudhir Ruparelia and his Meera Investments Limited.

Under High Court Civil Suit No.493 of 2017, Bank of Uganda (Crane bank in receivership) dragged former Crane bank owner Dr.Sudhir Ruparelia to court seeking to recover Shs397b.BoU baselessly alleged that this money had been siphoned out of the financial institution in fraudulent transactions and land title transfers.

In a miscellaneous application 320 of 2019, Sudhir protested Cbl’s legal capacity to sue.

Victoria University

Moreso,BoU had applied to commercial court for delivery of freehold certificates of title to 48 properties comprising country wide branches of former crane bank limited together with duly executed transfer deeds. The claim by BoU is that the properties were illegally transferred to Meera Investments Limited.

Fist, the commercial court clearly ruled that Crane bank under receivership had no legal basis to sue.

 He stated that, ‘In my view, the Receivership was exhausted with that transfer and conveyance. The Respondent (Cbl Under receivership) therefore had no locus standi to file any suit claiming any property because it had ceased to exist. Nonetheless, the Recivership would have in any case expired by now within 12 months from 24th January 2017’

‘The sum total is that the Respondent at the time it filed this suit was not in existence its lifetime having been terminated when it was surrendered to DFCU Bank whose consideration was the DFCU assumption of the Respondent’s liabilities which assumption was paid by conveying her assets to DFCU Bank.’ Added Justice Wangutusi.

On the transfer of freehold titles and certificates, the judge reasonably ruled that a non-citizen could not own freehold land in Uganda subject to Article 237 of the Constitution of the Republic of Uganda of 1995.

Article 237(1) states that Land in Uganda belongs to the citizens of Uganda and shall vest in them in accordance with the land tenure systems provided for in this Constitution.

The other legislation that prohibits the arrangement advanced by BoU is the Land Act on Freehold Land Tenure system.

Here the judge wisely reasoned that Majority shareholding in cbl belonged to non-citizens who can’t own freehold land.

For instance47.33% of the shareholding was transferred to White Sapphire (a company incorporated in Mauritius) with the approval of the Bank of Uganda on 24th September 2013 while another 4% of shares in cbl was owned by Jitendra Sanghani, a British citizen. The total shareholding by non-Ugandans in cbl was 51%.

‘Having found that the Respondent is a noncitizen for purposes of the Land Act and the Constitution, an attempt to confer freehold title upon it would be an illegality. An illegality because the holding of shares by noncitizens prevented them from owning land under the tenure that the Respondent’s/Plaintiff’s prayer in the plaint seeks’, the judge ruled.

BoU/Tax Payer to pay heavily.

The judge also ordered that BoU pays costs for this unwarranted suit by ’for those reasons this application succeeds and the suit is dismissed. The Respondent shall bear the costs of the application and the suit’, Justice Wangutusi ordered.

Whereas the BoU is to meet the costs, it does not get this money from the pockets of its former conflicted lawyers, incompetent staff like Margret Kasule (legal counsel) or Louis Kasekende who has been at the helm of this controversy involving Cbl.It is the tax payer to suffer and meet these costs.

Breakdown of looming costs

At high court level, court allows for 2% of the amount in dispute(decretal amount).In the suit,BoU failed to make a case for $110 million against Dr.Sudhir Ruparelia and thus 2% of the decretal amount comes down to $2.2 million. Lawyers can make a good case for up to 5 % ($5.5m).

As for Meera Investments, the estimated cost of Properties is about Ushs.400 billion. Factoring to the 2%-5%, the cost of could go up to 20bn Ushs.

The decision by BoU to appeal against the high court ruling will see the costs gallop to 10% of the decretal amount. In this case, Sudhir will be entitled to 39 billion (10% of 397 billion shillings) while Meera Investments will be paid to a tune of about 40 billion shillings (10% of 400 billion shillings).

The author is a current affairs analyst and aspiring MP Ikiiki County in Budaka district.



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