Dfcu Bank is embroiled in legal landmines arising from their takeover of Crane Bank in January 2017. Tycoon Sudhir Ruparelia through his companies Meera Investments Ltd and Crane Management Services has dragged Dfcu to court in three separate cases.
Case 1: Fight for his 46 properties
Sudhir’s Crane Bank had the biggest footprint in Uganda with a countrywide network of branches. This was enabled by his real estate development firm Meera Investments which owned the branches where Crane was operating.
In October 2016, Bank of Uganda put Crane Bank under receivership. Three months later, Dfcu was announced as having taken over assets and liabilities of Crane Bank. Perhaps Dfcu overstepped its limits when it took over ownership of Meera’s 46 properties that used to house difference Crane Bank branches.
The said properties are in Rukungiri, Kasese, Busia, Kawempe, Nkumba, Mukono and Kireka among others across the country.
Sudhir says Dfcu is illegally occupying the properties after they connived with the Commissioner for Land Registration to transfer them to the bank.
Meera Investments, through Magna Advocates, says is the registered owner of the branches which are either freehold or mailo systems of land tenure and is seeking to reclaim its properties, accusing Dfcu bank of trespass, asking court to force them to leave immediately.
Between 2012 and 2016, Meera leased the 46 properties to Crane bank on different terms with the leases being duly registered as encumbrances on Meera’s freehold and mailo interest.
The lease titles were subsequently processed and issued to Crane Bank.
Crane Bank agreed to pay $6,000 as ground rent for each of the properties effective on or before the January 1, of every year to the property owners (Meera Investments).
According to the plaint, for Dfcu to claim ownership of the properties, it needed consent from the real owner who in this case is Meera Investments.
The Commissioner Land Registration is sued alongside Dfcu for “illegally” effecting the transfer of Meera properties to Dfcu Bank.
Case 2: Shs5bn for walking out of long running rental agreements
In the second case, Crane Management Services is demanding $385,728 and Shs2,998,558,624 as rental arrears on 13 properties, plus interest, general damages, interest on general damages and costs of the suit. At the time of Dfcu taking over Crane Bank, CMS had existing contracts with Crane Bank that were automatically inherited by Dfcu as it took over Crane’s assets and liabilities.
CMS argues that after taking over Crane Bank assets and liabilities, Dfcu acknowledged being party to the existing agreement and assumed rights and obligations of the tenancy agreements.
“They took occupation of the premises and continued to operate from them, they removed all Crane Bank branding, adverts and notices, substituting them with their own, an indicator that they were the new tenant.”
However, on 30th April 2017, Dfcu vacated the 13 properties or spaces that Crane Bank previously rented from CMS for use as bank branches, staff accommodation and ATMs in some cases without paying arrears especially covering the period between October 2016 when the central bank put Crane Bank under administration and January 2017 when BoU handed over Crane Bank to Dfcu.
On some properties where rent was prepaid, Dfcu did not bother to meet any of its obligations and continued occupying the premises till they elected to vacate the premises at the end of April 2017.
However, vacating the properties without serving the three months notice as stipulated in the contract was tantamount to breach. In so doing, Dfcu was walking out of long term fixed rental contracts without renegotiating them.
An example is in respect to Plot 9 Market Street where rent had been prepaid up to September 2016 but by the time the central bank took over in October 2016 and eventually handed it over to Dfcu on January 27, there were rental arrears of four months. Dfcu continued to occupy it till April 2017–a total of seven months, thus amassing rent arrears of $28,730.
Case 3: $8.6m for breach of tenancy agreement on Plot 38 Kampala Road
The case arises from a December 16, 2014 tenancy agreement in which Meera Investments let the basement, ground, 1st, 2nd, 3rd and 7th Floor of Plot 38 Kampala Road (Crane Chambers) and all of Plot 40A Kampala Road for a period of 10 years.
“It was specifically agreed by the parties (Crane Bank and Meera) that the tenancies shall remain firm and binding on them until the expiry of ten years,” reads part of the plaint filed by Meera.
In the agreement, Crane Bank would pay $46,980 in monthly rent and $46,980 in ground rent per month with a 7% annual increment for Plot 38 Kampala Road and USD9,890 in rent and USD9,890 in ground rent for Plot 40A Kampala Road, payable a year in advance.
Following the takeover, Dfcu took over the entire premises previously rented by Crane Bank and rebranded. Dfcu also undertook to pay to Crane Management Services (Managers for Meera) USD531,000 in restoration costs and arrears in utility bills.
According to the plaint by Meera, Dfcu, in February 2017, entered into a revised contract in “respect of the basement and ground floors of Plot 38 Kampala Road for a fixed period of three years.”
Dfcu, however, continued to occupy 1st, 2nd 3rd and 7th Floors of Plot 38 Kampala Road and Plot 40A Kampala Road “under the terms and conditions of the tenancy agreement dated 16th December 2014” until 30th of April 2017, when it opted to vacate them.
According to Meera, this constituted a breach of clause 3(c) of the surviving tenancy agreement, that covenanted that the “tenancies shall remain firm and binding on them until the expiry of 10 year” and for this breach, Dfcu is “liable to pay the plaintiff the sum constituting rent for the unexpired period of 84 months being $8,660,462.34.”
Meera also wants interest on the sum at the prevailing commercial rate from the date the defendant was in default until payment in full.