Bank of Uganda which by law is mandated to supervise, offer advice and ensure that commercial banks in Uganda run smoothly by giving them proper guidance sabotaged efforts to save Crane Bank from collapsing, a Written Statement of Defence filed by Kampala Associated Advocates representing businessman Sudhir Ruparelia the proprietor of the now defunct Crane Bank and Meera Investment reveal.
Ruparelia’s defence filing comes a few weeks after the Central Bank through Crane Bank dragged the businessman to court alleging that he fraudulently got money out of Crane Bank leading to its poor performance, loss of core capital and eventual collapsing. Ruparelia was the proprietor and face of Crane Bank. He was a substantial shareholder in the commercial bank.
Sudhir Says He Is Innocent
The Central Bank in their suit says Ruparelia siphoned about Shs400 billion and failed to remit over Shs56billion to NSSF. He is accused of illegally transferring Crane Bank properties to Meera Investment. The Central Bank wants Ruparelia to repay this money with interest, return the properties on which Crane Bank branches sat and face criminal charges.
Ruparelia vehemently denies any wrong doing. The businessman blames Crane Bank poor performing and struggling to a bad economy which did not only hit Crane Bank but also other banks and other sectors.
“The first defendant (Sudhir Ruparelia) shall contend that at all material times he never breached his duties as a non-executive director and acted in the best commercial interests of the plaintiff,” the defence document reads in part.
“The Non-Performing Loan ratio only grew substantially as a result of a significant slowed down in the economy, which affected business operation of large borrowers thus eroding the plaintiff's core capital, a situation that was experienced by other financial institutions in Uganda.”
“As a result of the slow-down in the business environment, and the property market, there was an increase in NPAs which resulted in the then Crane Bank becoming under-capitalised and necessitated an additional capital injection,”
“The plaintiff’s [Crane Bank] shareholders injected additional capital of $8million (about Shs30b) and the shareholders sought an equity investor and indeed found partners willing to capitalize the bank,” Ruparelia this did not materialize because Bank of Uganda was disinterested.
Ruparelia believes that the suit against him is intended ‘for the purpose of intimidating, humiliating and blackmailing’ him. He contends that this honourable court cannot lend its process to the blackmail which amounts to an abuse of the court process.
Given No Chance To Save Crane Bank
On the 20th day of October 2016 Bank of Uganda took over the management of Crane Bank alleging that it was undercapitalized and was a threat to the banking sector in the country. On the 20th day of January 2017 Bank of Uganda placed Crane Bank under receivership before a week later, on the 27 of January 2017, sold it to DFCU Bank at an undisclosed sum.
However, Ruparelia approached Bank of Uganda to settle the dispute and between 29 January and 20 March the parties held a series of meetings to amicably resolve the dispute. This led to the signing of Confidential Settlement and Release Agreement ("CSRA") which was binding on 20 March 2017.
Bank Of Uganda Betrays Sudhir
Key among the provisions of the Confidential Settlement and Release Agreement was that Bank of Uganda would not sue Ruparelia over the claims. As we all know a legal battle has been bestowed onto us. Now Ruparelia is accusing the Central Bank of breaching the agreement at a time he had started repaying some of the claimed money. He says he was cooperating.
As indicated in the defence papers, cClause 7 of the CSRA provides that ‘each party agrees, on behalf of itself and on behalf of the related parties not to sue, commence, voluntarily aid in any way, procure, instigate, prosecute or cause to be commenced or prosecuted against any other party or its related parties any action, suit or other proceedings concerning the released claims, in Uganda or in any other jurisdiction’.
“The defendants shall contend that, the instant suit was instituted for the purposes of intimidating, humiliating and blackmailing the defendants and shall further contend that, this hounrable court cannot lend its process to blackmail which amounts to an abuse of court process.”
Ruparelia started Crane Bank in 1995 at a time when the economy was in a mess and recovering from the 1980s political turmoil. He built it to become the fourth largest bank by asset worth Shs1.8 trillion.
At the time of putting it under receivership, he was working to beating the bad economic situation and turn it around by injecting in fresh capital. Bank of Uganda didn’t let him do it, they clamped him down.
Inconsistencies In Negotiations
As earlier noted, to save the situation, Ruparelia engaged Bank of Uganda to be allowed to save his bank. However court submission by Ruparelia’s team show that Bank of Uganda had other ideas or was not willing to play by the card.
“Sometime in January 2017, first defendants through his representatives Mr. Kakembo Katende and Mr. Azim Tharani attended a meeting at the offices of MMAKS Advocates together with Mr. Masembe Kanyerezi and David Mpanga. The purpose of this meeting was to share an alleged PWC forensic report indicating the alleged extraction of $80million.
“At the said meeting, Mr. Masembe and Mr. Mpanga declined to share the PWC forensic report but instead rang the PWC ‘auditor’ who allegedly made that allegation, put him on speaker phone and allowed only a few questions. The auditor confirmed on a speaker-phone that the $80million did not leave the plaintiff (Crane Bank) in this alleged transaction.
“The plaint contains excerpts of the report and from those excerpts the first defendant has been able to establish that the alleged forensic report is actually a draft document created by pwc on 13th November 2014.”
Sudhir Makes Demands
Ruparelia at the earliest opportunity seek for disclosure and discovery of all the operating costs that the receiver has incurred since the takeover of Crane Bank. He also demands for accountability from the receiver because none has been communicated which he says is a ‘total violation of the receiver's fiduciary obligations’.
He also seeks disclosure of all documents relating to the agreement between the receiver and DFCU bank and in particular the purchase price of the plaintiff's assets. Ruparelia also contends that ‘the plaintiff is estopped from raising any claims against him since he who comes to equity must do equity and come with clean hands’.
“The first defendant shall contend that he did not commit any frauds as alleged or at all and shall put the plaintiff to strict proof. The first defendant further denies any extraction of money from the plaintiff as alleged or at all and contends that he is not liable to refund or account for any monies as alleged by the plaintiff.”