Kampala, (UG): The High Court of Uganda last month on October 24 2023 made a grand ruling which pinned the embattled dfcu Bank for illegally transferring to itself, 48 properties that Crane Bank had leased from Meera Investments before the fraudulent bank seizure.
For new readers, Meera Investments Limited, a subsidiary of Ruparelia Group, which is owned by Ugandan Billionaire, Dr Sudhir Ruparelia, who at the same time was and is still the second largest shareholder in the now defunct Crane Bank in 2017 brought a case to the High Court accusing dfcu Bank jointly with Lands Registration Board of for illegal and or fraudulent sale and possession of its 48 leasehold properties across the country. The properties were previously leased by Meera to Crane Bank.
Meera told the Court that by virtue of several lease agreements, lease variation of lease agreements and extensions of leases executed between itself and the former Crane Bank Limited it leased out its 48 properties to Crane Bank Ltd. After the leasing, Crane Bank Limited’s interests were registered as encumbrances on the 48 mailo and freehold titles, and leasehold certificates of title were processed and registered in the names of Crane Bank Limited, as the lessee. It is these properties that constituted the 48 former Crane Bank Limited branches, situated across the country.
That after the January 2017 purchase of the assets of Crane Bank, dfcu illegally and with the aid of the Commissioner of Lands Registration, transferred into its names, the 48 titles, without the written consent of Meera, as is required by law.
However, dfcu Bank denied the claims, saying that it lawfully acquired its interest in the 48 leasehold properties, having purchased the same in 2017 from the Bank of Uganda as a receiver of Crane Bank Limited. This was after Crane Bank Limited was seized and sold off by the Bank of Uganda. Dfcu Bank further told the Court that no consent was required from Meera Investments before the transfer of or taking possession of the suit properties, as the transfer was a statutory transfer under the provisions of the Financial Institutions Act. Dfcu also denied committing any illegality or fraud in the acquisition of the suit properties.
Presiding over the case ruling last month, High Court Judge, Justice Tadeo Asiimwe held that dfcu acted illegally and fraudulently in taking possession of and transferring the leasehold interests, without the prior written consent of the Meera Investments, as the registered proprietor of the Freehold/Mailo titles/interests.
Drawing the parties to Clause 8 (2) of the January 2017 Purchase & Assumption Agreement between Crane Bank Limited (In Receivership) and dfcu Bank, that provided that; “The properties are sold and assigned herein subject to the rents reserved by and the covenants and all other provisions contained in the relevant leases” Justice Tadeo Assimwe ruled that the transfer of the lease from Crane Bank to dfcu Bank, without the consent of Meera Investments was illegal.
“In my view, any dealing or transaction in the property under a leasehold certificate of title must be concluded in a manner that is consistent with the rights and powers of the Lessor. Where the lessor has reserved the right and power to consent to any transfer of physical and legal possession or parting with possession by the lessee as is the instant case, any transaction concluded having the effect of transferring legal and physical possession of the leasehold properties would be illegal and in breach of the statutory protection conferred upon the lessor by section 36 of the Registration of Titles Act (RTA),” he ruled.
The Judge also ordered dfcu to pay UGX2.4 billion to Meera Investments over and above, including the reparation of all the 48 properties into tenantable position and declared that there were no valid leases in respect of the properties and said that the leases in question which are thus an account of breach and illegality.
The Judge, therefore, ordered the commissioner of Land registration to immediately cancel 48 leases, lease variations and extensions registered as encumbrances on the mailo and freehold titles belonging to Crane Bank.
Asiimwe also issued a permanent injunction restraining DFCU, its agents and staff from trespassing on the Crane Bank properties.
“The dfcu Bank was bound to ensure that the covenant is complied with before it could take physical and legal possession thereof. dfcu Bank, aware of the legal requirement opted to depend on assurances by the Receiver (Bank of Uganda) to recover the reversionary interests and sell them. It ought to have been clear to the dfcu Bank that its contractual arrangements with the Receiver purporting to contract the Meera Investments out of its properties were not binding on the Meera Investments as the lessor and could not override the rights of the Meera Investments as a lessor, reserved under the lease covenants and protected under the provisions of the Registration of Titles Act (RTA),” the judge ruled.
On the issue of whether the titles in the possession of dfcu are now liable to cancellation, the judge ruled in the affirmative that: “The position of the law is that where a lessee or even a tenant denies the title of the Lessor and or refuses to recognise the lessor of the suit property and the covenants of the lease, such lessee or tenant becomes a trespasser on the suit property and the Lessor would be entitled to an order of vacant possession of the premises”.
“Accordingly, I find that the dfcu Bank (dfcu) became a trespasser on land in January 2017 and the certificates of titles for the lease properties illegally and fraudulently acquired and or transferred in its names are liable for cancellation on account of fraud and illegality,” he concluded.
Since Crane Bank is defunct, the court ordered that DFCU pay the costs of the suit to Meera Investment Limited the mother company of Crane Bank Limited that instituted the suit on behalf of its child company, Crane Bank, and declared Meera Investment Limited as the registered proprietor of the freehold/mailo interests in the properties.
The court gave DFCU three months to vacate the 48 properties which are located in different towns including Kampala, Kasese, Masaka, Samia Bugwe, Busia, Masindi, Gulu, Malaba, Entebbe, Kabale, Hoima, Soroti, Mukono, Ibanda, Arua, Fort Portal, among others.
Summary of the ruling
Dfcu Bank, having lost all the grounds of the case, the judge proceeded to make the following orders:
- A declaration that Meera Investments, as the registered proprietor of the freehold/ Mailo interests in the suit properties described herein above had the right to consent or otherwise to any taking of possession and transfer of the leasehold interest to the dfcu Bank.
- A declaration that the transfer of the leasehold interests in the suit properties from Crane Bank Limited into the names of the dfcu Bank was tainted with illegality and fraud and is therefore invalid.
- A declaration that the transfer of the leasehold interests in the suit properties to the dfcu Bank and taking of possession of the same by the dfcu Bank, without the prior consent of Meera Investments rendered the leases illegal and invalid.
- A declaration that there are no valid leases in respect of the suit properties. The said leases are therefore declared to be invalid and absolutely determined on account of breach and illegality.
- A declaration that that the occupation and continued utilisation of the suit properties by the dfcu Bank constitutes trespass.
- A declaration that Meera Investments as the registered proprietor of the freehold/Mailo interest in the suit properties is entitled to vacant possession of the suit properties within 3 months from the Judgment date.
- The Commissioner of Land Registration is hereby ordered to cancel the registration of the dfcu Bank as proprietor of the leasehold interests in respect of all the suit properties.
- The Commissioner of Land Registration is hereby ordered to cancel the leasehold titles in respect of the suit properties.
- A declaration that the occupation and continued utilisation of the suit properties by the dfcu Bank constitutes trespass.
- The Commissioner of Land Registration is hereby ordered to cancel the entry of the suit leases, lease variations and lease extensions registered as encumbrances on the Mailo and freehold titles of the Meera Investments.
- The dfcu Bank is hereby ordered to vacate all the suit properties and render vacant possession to Meera Investments within three months from the date of judgment after restoring them to tenantable position.
- An order of a permanent injunction is hereby issued restraining the dfcu Bank, its agents and its servants from continued trespass on the suit properties.
- Meera Investments is awarded general damages in the sum of UGX 2,400,000,000/= (Two Billion, Four Hundred Million) payable by the dfcu Bank. The said sum shall carry interest at 8% per annum from the date of this judgment till payment in full.
- Mesne profits are not awarded.
- Meera Investments is awarded costs of the suit against the defendants.
Dfcu Bank responds
In a 3rd November 2023 statement by the bank, dfcu acknowledged the ruling and said the ruling “does not affect the Bank’s day-to-day operations since the branches in question were vacated in 2020.”
dfcu Bank is also fully indemnified by Bank of Uganda under the P&A agreement,” it also added.
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