The Observer | Bank of Uganda Case | Sudhir wants Mutebile as his witness

Posted August 4, 2017 by Ugandan Diaspora News Team in CRANE BANK COLLAPSE ~ 1,210 views


In his 62-page defence filed yesterday at the Commercial court in response to a Shs 400bn Bank of Uganda lawsuit against him, businessman Sudhir Ruparelia has asked that BoU governor Emmanuel Tumusiime-Mutebile and the bank’s lawyers Timothy Masembe Kanyerezi and David Mpanga should be his witnesses.

In its lawsuit filed on June 30, Bank of Uganda is seeking to recover $93.8 million (Shs 337.6bn) and Shs 60.3bn from the former Crane bank proprietor and his real estate company Meera Investments.

Sudhir, however, in his defence insists that the BOU case should be thrown out because he signed an agreement with BOU barring the bank from suing him. According to Sudhir, on March 20, 2017 Bank of Uganda entered into a Confidential Settlement and Release Agreement (CSRA) with him.

Sudhir Ruparelia
He says clause 6 of the agreement stipulates that, “This confidential settlement and release agreement is in full, complete and final settlement of all claims that either party (or related parties or shareholders) may have against the other, and each of Bank of Uganda and Crane Bank Limited hereby fully and finally releases and forever discharges and shall refrain from instituting, directing, procuring, instigating or maintaining all or any actions, claims, sanctions [whether administrative, civil or criminal in nature],” the agreement reads.

Through Kampala Associated Advocates, Sudhir claims that clause G of the agreement provides that “This confidential settlement and release agreement is neither an admission of fact nor liability by Sudhir Ruparelia in connection with the covered conduct or a concession or acceptance by Sudhir Ruparelia that he would not have any well- founded defences to the claims and demands made by BOU in connection with the covered conduct or a waiver of any advocate-client privilege which he or his advisers would benefit from.”

Furthermore, clause 7 of the agreement 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 jurisdictions.”

“At trial, the defendants shall raise a preliminary point of law to the effect that the CSRA is a complete bar or estoppels to the filing of any suit by the plaintiff against the defendants and further that, by the executing of the CSRA, the plaintiff is stopped from bringing the instant suit, the suit is barred in law, is in breach of contract and one of the remedies listed in the plaint are available to the plaintiff by virtue of the CSRA,” the defence further reads.

Sudhir also contends that MMAKS and AF Mpanga Advocates, who are BOU lawyers, cannot institute proceedings against him because doing such is in breach of the advocate-client relationship. Sudhir singled out MMAKs who are BOU’s leading lawyers. He said they cannot represent the plaintiff against him because such instructions are in clear and flagrant violation of advocate-client relationship.

“That the plaintiff further instructed the law firm M/S AF Mpanga Advocates (Bowmans) notwithstanding the said law firm’s conflict of interest,” the defence reads. Masembe was once Sudhir’s lawyer when Crane bank took over National Bank of Commerce.

The businessman also challenges the forensic report done by PricewaterhouseCoopers on November 13, 2014, which formed the basis of the BOU suit. According to his defence, at no time since November 13, 2015, did Sudhir or indeed any member of the board of directors of BOU ask any of the questions raised in the report.

On April 14, 2015, Sudhir says that BOU held a tripartite meeting attended by the BOU external auditors KPMG, which was convened ostensibly to approve Crane bank’s accounts for the year ending December 31, 2014. He said, at the meeting the central bank did not raise any of the issues raised in the forensic report.

Following the draft forensic report, Sudhir says BOU conducted an onsite inspection and the bank’s director for Supervision, Justine Bagyenda held a meeting with the board of Crane bank but did not raise any issues that are raised in the report.

“The first defendant shall contend that the suit is barred by the principle of approbation and reprobation having made an election out of the draft PWC report or any other form which election BOU currently in control of plaintiff cannot resile,” he says.


Sudhir contends that BOU knows very well why Crane bank collapsed. Sometime in 2015-2016, Sudhir says that Crane bank had to make additional provisions for bad loans referred to in the banking industry as non-performing assets.

According to Sudhir, additional provisions were necessitated by the slowdown in the economy that impacted generally on the profitability of banks.

Furthermore, Crane bank landed into financial trouble because a number of its customers trading in South Sudan, in the oil and gas sector in Uganda and in the economy generally sought and failed to get a “government bailout” to pay off bank loans, including those owed to Crane bank.

Former Crane bank headquarters on Kampala road
On June 13, 2016, he says Prime Minister Ruhakana Rugunda wrote to President Museveni explaining the measures government was taking to rescue distressed businesses.

“As a result of the slowdown in the business environment and the property market, there was an increase in NPA [non-performing assets], which resulted in the plaintiff [Crane bank] becoming under-capitalized and necessitated an additional capital injection,” he explains.

He says on July 2016, BOU stopped Crane bank from carrying out business relating to various facilities such as letters of credit, bank guarantees, bid bonds, performance bonds and writing of fresh loans.

This action, he says, crippled Crane bank’s banking business and caused the bank to lose many customers. BOU subsequently, he says, placed a blockade on Crane bank’s treasury bills with a maturity value of Shs 169 billion which, according to him, crippled the bank further.

Shortly, he say, thereafter messages began circulating on social media claiming that Crane bank was at risk of closure, which he says caused a run on the bank. Customers, he said, rushed to withdraw their deposits hence within a space of 30 days, Shs 250bn had been withdrawn from Crane bank.


“The plaintiff then moved from a capital adequacy problem to a liquidity problem. The plaintiff accordingly approached BOU from which it sought to borrow money as a lender of last resort under the FIA.”

Although BOU alleges that Sudhir was a single shareholder in Crane bank, contrary to the law, the businessman says that is totally false. He says he was a substantial shareholder within the context of section three of the Financial Institutions Act, which defines a shareholder as any person with more than five percent of shares.

“At all material times the first defendant’s [Sudhir] shareholding and directorship was approved by BOU which found him to be a fit and proper person to hold the said shares and directorship,” Sudhir says.

Sudhir also denies BOU’s claim that he owned 47.33 percent of Crane bank’s shares registered in the name of White Sapphire Ltd, a company incorporated in Mauritius and owned by business partner Rasiklal Chhotalal Kantaria.

“That first defendant shall contend that Kantaria was a shareholder of the plaintiff until he transferred his shares to White Sapphire, a company that Mr. Kanataria wholly owns,” Sudhir says.

He also denies that he personally refused to remit NSSF contributions worth Shs 7.5 billion. He contends that once the case commences, he will assert that that there was no under declaration of NSSF contributions.

Source — The Observer

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Ugandan Diaspora News Team

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