Sudhir floors dfcu Bank again as UK’s Court of Appeal defers trial of Crane Bank case at lower court

LONDON, UK: Businessman Sudhir Ruparelia, the proprietor of the now-defunct Crane Bank Limited yesterday victory yet again in his legal battle against dfcu Bank after UK’s Appellate court okayed the trial of the multi-billion dispute before the English High Court.

The decision by the Court of Appeal from the High Court of Justice Business and Property Courts in England means an earlier decision by the lower court exonerating DFCU bank and its shareholders from fraudulently taking over Crane Bank has now been quashed and rendered invalid.

Crane Bank, which was owned by Tycoon Sudhir appealed to the English Court of Appeal, which appeal was heard on April 3-5, 2023.

In the court’s judgement delivered this Wednesday, July 26, 2023, the English Court of Appeal held that “while dfcu bank, dfcu Limited and others who challenged the jurisdiction of the UK courts to try this matter may be right that the English Court does not have authority to consider the claim, however as some of BoU’s acts may be of commercial nature and /or there may be public policy reasons why the English Court should decide the claim, this issue should not be decided at a preliminary stage through a jurisdiction challenge but should instead be determined through a trial.”

“I would allow the appeal on the ground that there are serious issues to be tried as to whether part or all appellants’ claims fall within the Commercial Activity Exception and/or the Public Policy Exception.”

The appellants aver that the sale of CBL was commercial rather than sovereign in character, therefore falling outside the foreign act of state rule.

The appellants assert that from 2016 senior Ugandan government officials and officials of the Bank of Uganda engaged in a corrupt scheme to take control of CBL, making improper use of statutory and regulatory powers to do so, and then selling assets for the benefit of the parties to the scheme.

The appellants further argued that the Dfcu which was the first respondent in the appeal case joined the corrupt scheme as the purchaser of CBL assets from BoU. Dfcu Bank’s holding company -Dfcu Limited, and former executives and directors are also alleged to have joined the scheme.

Below is the ruling in full

Case Background

Until 2016, CBL was Uganda’s largest locally-owned bank. At the end of 2015, it had a strong balance sheet, showing total equity of about US83m and highly profitable, with net operating income of about US$4m and was highly profitable, with financial statements audited by KPMG and approved by BoU.

The corruption that led to sell of CBL involved a foreign national Dr Patrick Ho, who sought preferential access for CEFC China (CEFC) Energy in Uganda by bribing various government officials, including the Foreign Minister (Kuteesa) and deputy BoU Governor [Kasekende] then, in respect of which Dr Ho was convicted in US.

Dr Ho is said to have told the Foreign Minister then that acquisition of a local bank in Uganda was CEFC’s top priority, and in about June 2016, CBL was identified as a target.

As such BoU adjusted CBL’s capital position on July 1, 2016 and ordered CBL to raise extra capital of $46.4 million by July 31, 2016. Further BoU withdrew CBL’s authorization to conduct most financial businesses and placed a lien over about $50 of treasury bills held by CBL, seriously inhibiting CBL’s ability to raise the additional capital. Worse still, In August 2016, BoU ordered CBL to raise more capital of about $26 million.

On September 2016 the late BoU Governor Emmanuel Tumusiime Mutebile issued a press release falsely claiming CBL’s problems of weal loan performance and depositor flight. This triggered a run on CBL.

Between July and September 2016, CBL’s shareholders raised US$ 8.2m to recapitalize CBL, but BoU refused the money to be injected and required that it be held on deposit at the BoU. BoU also thwarted investment in CBL by independent financial institutions.

Then on October 13, Kasekende through Foreign Minister’s wife, privately informed Dr Ho of the possible acquisition of CBL. At their request the next day, CEFC sent an email to Kasende’s private email expressing such interest.

On October 16, 2016 CBL requested emergency liquidity assistance from BoU, of about US$ 115m, offering a prime property held by Sudhir’s other company, worth more than 115m, as collateral but BoU refused the request, offering only $22.8m on terms which were impossible for CBL to meet.

On October 2016, BoU placed CBL into statutory management under the FIA provisions.
BoU would later claims to have injected $135m into CBL as liquidity support yet $79.5m is unaccounted for by BoU.

However, CEFC’s interest in acquiring CBL ceased in late October 2016 and BoU privately approached Dfcu bank with preferential terms to buy CBL assets, which was illegal as it breached FIA. DFCU’s bid was accepted on December 23, 2016.

Then BoU placed CBL into receivership on January 24, 2017, with BoU as receiver, and the central bank on January 25, 2017 sold CBL assets to Dfcu at Shs200 billion paid in instalments, and interest-free, with BoU wanting to get the interest from CBL shareholders.

It should be noted that CBL’s loans worth Shs100 billion was not reflected in the sale agreement, which CBL says was transferred to BoU or its officers secretly as quid pro quo, [or part of it] for the sale of CBL’s assets to Dfcu bank at undervalue.

CBL dragged Dfcu bank and its executives to the UK courts in December 2020, but the respondents said the case could not be heard outside of Uganda, stating that claims were debarred by the foreign act of state rule so that there was no serious issue to be tried.

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