They say that when elephants fight, it’s the grass that suffers. In this instance the grass is the tax payer who is set to feel the financial burden as a result of a Shs397 billion case it lost against businessman Sudhir Ruparelia on Monday.
BoU claimed that the tycoon had syphoned the Shs397 billion from his Crane Bank before they put it under statutory management in October 2016. The bank was later sold in a questionable deal to dfcu in January 2017 and BoU filed later the suit against Sudhir and his Meera Investments Ltd.
Meera Investments came into the picture due to a dispute of 48 branches that used to house Crane Bank’s countrywide network. Meera owned the properties but BoU claimed they had fraudulently been transferred from Crane Bank to Meera and then rented out to Crane Bank. Sudhir successfully won this one as his lawyers Kampala Associated Advocates argued that according to the Land Act, a non-citizen (in this instance Crane Bank that was 51% foreign owned) was not allowed to own freehold land.
The main case of Shs397 billion was thrown out because Crane Bank (in receivership) that entered suit with BoU was not allowed to sue or be sued according the Financial Institutions Act (2004).
In his ruling delivered by the Deputy Registrar Festo Nsenga, on Monday August 26, Commercial Court head Justice David Wangutusi on top of dismissing the case awarded costs to Sudhir and his Meera Investments.
Earlier in the case, Wangutusi had proposed arbitration because the verdict would be costly to the loser. Sudhir knowing the merits of his case chose to go the distance and the ruling in his favour means he will recover his hefty legal costs.
In fact, after the ruling, Sudhir thanked his team of lawyers and noted off the calf that anyone to win such a case needed very good and of course expensive lawyers. Now his bill is being transferred to the tax payer.
Tax payer could lose over Shs119 billion
The legal fees for a case before the high court is five percent of the sum involved. In this case, Sudhir is set to receive compensation of his legal fees amounting to Shs19.85 billion and his Meera Investments will also get Shs19.85 billion with the sum totaling to Shs39.7 billion.
Bank of Uganda intends to appeal the case and considering that it was decided on the basis of the law, the will most likely not win. In the Court of Appeal, costs are awarded at a rate of 10 percent of the suit. In this instance, Sudhir would be paid Shs39.7 billion and Meera would also get Shs39.7billion. This would bring the taxpayer’s bill to Shs119 billion.
Is BoU using court cases to siphon money?
BoU is already under scrutiny for hefty legal fees going to lawyers. During the Crane Bank take over, close to Shs4 billion was paid to law firm MMAKS Advocates who were later declared conflicted and were barred from representing Bou against Sudhir as they had previously served as his lawyers. Sudhir also won conflict of interest cases against Sebalu & Lule Advocates and AF Mpanga Advocates.
These are all senior lawyers and they were not expected to file a suit that would be kicked out on the basis of the law. But with the tax payer footing the bill, it is not surprising that now BoU wants to appeal a case they know they will most likely lose.