The Supreme Court has ruled that Crane Bank (Under Receivership) is no longer a financial institution and therefore outside the jurisdiction of the central bank to liquidate it.
The judgement comes just weeks after Bank of Uganda withdrew its UGX397 billion Supreme Court case against Dr. Sudhir Ruparelia and his Meera Investments Limited.
“The 1st respondent was closed as a financial institution and placed under receivership. Upon closure, it ceased being a financial institution under the Act (Financial Institutions Act 2004 and it could therefore not be progressed into liquidation,” ruled the coram of 5 Supreme Court justices in unison.
Justices, Rubby Opio-Aweri, Faith Mwondha, Dr Lillian Tibatemwa, Ezekiel Muhanguzi and Percy Night Tuhaise ruled that Bank of Uganda’s moves to place Crane Bank Limited under liquidation as announced in the Sunday Vision newspaper of 15th November 2020, were “contrary to the above clear provisions of the law and the same cannot be sanctioned by this Court.”
The justices also reiterated that in law, Crane Bank Limited (in Receivership), Crane Bank Limited (in Liquidation), and Crane Bank Limited are three distinct entities with different rights, powers and obligations.
“In the result, we allow this Application and make the following orders: a temporary injunction doth issue restraining the 2nd respondent, their agents or anyone acting under their authority from placing the 1st respondent (Crane Bank- In Recievership) under liquidation pending the hearing and determination of Civil Appeal No. 7 of 2020,” the 5 justices ruled.
The highest court in the land also issued a temporary injunction restraining Bank of Uganda, their agents or anyone acting under their authority from continuing with the liquidation process of Crane Bank (in receivership) pending the hearing and determination of Civil Appeal No. 7 of 2020.”
Court also ordered that Crane Bank (in receivership) be maintained under receivership and that Bank of Uganda was in contempt of court by trying to progress Crane Bank (in receivership) into liquidation when there was an unresolved case in the matter of Crane Bank (in receivership).
Dr Sudhir Ruparelia and Meera Investments had filed Supreme Court Miscellaneous Application Nos. 39 and 40 of 2020 against Crane Bank Limited (In Receivership) and BOU seeking interim and temporary injunctions respectively to stop BOU from continuing with the liquidation process, which the court has now granted.
However, Bank of Uganda has since withdrawn Civil Appeal No. 7 of 2020- which in effect should mean that both the Central Bank’s main case and its attempts to move Crane Bank in Receivership into liquidation have both crashed. Save for any other legal manoeuvres by the Central Bank could mean the end of the much-publicised BoU case against the businessman.
It now exposes the central bank to huge legal costs by the businessman emanating from the lengthy court process, which the central bank lost at all levels.
The infamous takeover and rushed sale of Crane Bank
The whole case started on the 20th of October 2016 when the Bank of Uganda, invoking its powers under Sections 87 (3) and 88 (1) (a) of the Financial Institutions Act (FIA) took over Crane Bank Limited. Subsequently, the central bank placed it under receivership on 20th January 2017, before summarily selling its assets and liabilities to dfcu Bank on the 25th of January 2017.
Thereafter Bank of Uganda, through Crane Bank (In Receivership) sued Dr Sudhir, one of the Shareholders of the bank, together with Meera Investments Ltd vide High Court Civil Suit No. 493 of 2017. Before the main case could be heard, Dr Sudhir and Meera, raised preliminary objections through High Court Miscellaneous Application No. 320 of 2017, that among others contended that Crane Bank (In Receivership) had no basis for suing since the FIA did not allow a company in receivership any powers to sue or be sued. The High Court sustained the preliminary objections and dismissed HCCS 493 of 2017 and ordered that the costs of the suit be paid by BOU.
Dissatisfied with the High Court ruling, BoU through Crane Bank Limited (In Receivership) filed Civil Appeal No. 252 of 2019 in the Court of Appeal, but the appellate court maintained that a company under receivership can’t sue or be sued. The central bank then proceeded to the Supreme Court with Civil Appeal No. 7 of 2020 in the Supreme Court. Along the way, it lost a couple of applications before it withdrew the main suit on 15th September 2021.
“Take notice that the Appellant (BoU through Crane Bank under receivership) does not intend further to prosecute the appeal. Take further notice that the Appellant will pay the costs of the appeal and in the courts below to the Respondents,” read the notice filed by BoU with the Supreme Court on 15th August 2021.
Just weeks before it withdrew its case, on 12th August 2021, five Supreme Court Justices had unanimously dismissed Bank of Uganda’s application to replace Crane Bank (In Receivership) with Crane Bank (In Liquidation), saying that the application was in bad faith and intended to circumvent facts of the original appeal.
The in unison said that allowing BoU to switch the parties in the case would fundamentally alter the facts of the case and deny both Dr. Sudhir and Meera a chance at justice.
It wasn’t therefore surprising when the Central Bank withdrew the main appeal.
BoU’s withdrawal combined with the recent loss expose it to huge costs at the three levels of court- High Court, Court of Appeal and the Supreme Court.
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