The Supreme Court has ruled that Bank of Uganda’s act of liquidating Crane Bank was illegal. In a ruling by a coram of five Justices of the Supreme Court, businessman Sudhir Ruparelia’s application seeking the restraining of the Central Bank from placing Crane Bank under liquidation yet there was a pending appeal case indicating that Crane Bank was in receivership was granted.
It has been a protracted legal ping pong that dates back to 2016 when BoU took over Sudhir’s Crane Bank, citing undercapitalisation. After selling Crane Bank’s assets to DFCU in 2017, BoU filed a suit under Crane Bank in Receivership against Sudhir and Meera Investments seeking to recover over Shs400 billion and 48 land titles.
The suit by Crane Bank was dismissed by High Court with costs to be paid by BoU on grounds that a bank under receivership cannot sue, receivership had ended and Crane Bank was a non-citizen company which could not hold freehold titles. Bank of Uganda appealed to the Court of Appeal which unanimously upheld the findings of the High Court. Thereafter, BoU appealed the matter to the Supreme Court.
However, before the hearing of the appeal, BoU decided to place Crane Bank into liquidation which materially altered the status of the Bank before the Court. Bank of Uganda’s application to change the status of the appellant from Crane Bank in Receivership to Crane Bank in Liquidation was equally dismissed by the Supreme Court.
After issuing a notice to the public placing Crane Bank into Liquidation, Sudhir through his lawyers, Kampala Associated Advocates filed an Application against BoU for a temporary injunction objecting to the move by the central bank to place Crane Bank under Liquidation yet there was an appeal before Supreme Court showing that Crane Bank was under Receivership. In the Application, the lawyers sought for an order of court restraining Bank of Uganda from continuing with the liquidation process of Crane Bank and a declaration that Bank of Uganda was in contempt of court orders.
Court found that placing Crane Bank into liquidation was illegal. Court reasoned that under the law governing banks in Uganda only a licensed Bank can be liquidated. However, Crane Bank had been closed and put under receivership which meant that it ceased being a bank and could not this be put under liquidation.
Court further found that in placing Crane Bank into liquidation, Bank of Uganda was in contempt of court orders. The move was intended to circumvent the decision of Court of Appeal hence aimed at preventing the course of justice before.
The Court thus allowed the Application and issued orders to the effect that Bank of Uganda should not place Crane Bank into liquidation, an order restraining Bank of Uganda from continuing with the liquidation process, an order restoring the status of Crane Bank to what it was at the time of filing a suit and declared that Bank of Uganda was in contempt of Court Orders.
This is another victory for Sudhir as the Supreme Court first overruled the objection by Bank of Uganda that it is immune from being sued under the law governing Banks in Uganda.
Court found that Bank of Uganda can be sued for anything done in bad faith. Court found that in the instant case Bank of Uganda was rightly sued as it had acted in bad faith by placing Crane Bank into Liquidation which was after losing the appeal in the Court of Appeal that upheld the high court ruling that Crane Bank under Receivership could not sue and that receivership had ended.