Yesterday, Bank of Uganda announced plans to place Crane Bank under liquidation on its social media channels. However, several legal minds have weighed on saying that the move is unlawful and would cost taxpayers a lot of money.
Former Crane Bank Vice Chairman Sudhir Ruparelia triumphed over BoU in a landmark Shs397 billion case last year and he says he is ready to take BoU to the Supreme Court in case they attempt to liquidate Crane Bank.
“It is contempt of court and we going to apply for contempt of Court at Supreme Court,” Sudhir says.
BoU took over Crane Bank in October 2016, citing undercapitalisation and sold it to DFCU in January 2017. BoU with Crane Bank in receivership then sued Sudhir claiming he had siphoned money out of his bank. Sudhir, scoffed at BoU’s allegations as preposterous and won the landmark case and also beat BoU when they appealed.
Now in another surprising move, BoU wants to liquidate Crane Bank.
“In exercise of its powers under section 99 (1) & (2) of the Financial Institutions Act, 2004, BoU has now placed CBL under liquidation and ordered the winding up of its affairs. The Central Bank shall be the liquidator of CBL,” a BoU notice signed by Governor Tumusiime Mutebile stated.
But according to lawyers quoted by CEO magazine, the move is outside the powers granted to the Central Bank by the Financial Institutions Act (FIA).
“The powers of the Central Bank over banks is granted and governed by the Financial Institutions Act (FIA). It is not arbitrary. That Act sets out the powers and their limits and what the Central Bank can and cannot do. CBL was taken over by BOU in October 2016 and placed under statutory management. In this status it continued running as a bank with its financial institutions license, but was governed not by its Board of Directors or Shareholders, but by a Statutory Manager appointed by Bank of Uganda,” said one commercial lawyer who asked not to be named for fear of retribution from the Central Bank.
Section 95 of the FIA permits BOU to close a bank (i.e. take away its banking license) and then place it under Receivership.
“On January 18th 2017, CBL was closed as a bank (and it ceased to be a licensed bank) and was placed into Receivership by the Central Bank. It ceased to be a licensed financial institution when it was placed in receivership. All of this was within BOU’s power under the FIA, which allowed it to close the bank and to place it into receivership. In both HCCS 493/2017 and Civil Appeal 252/2019, both filed by BOU to assert powers as Receiver of CBL, the High Court and the Court of Appeal both found that the Receivership of CBL ended 12 months after it commenced (i.e. January 2018),“ CEO magazine quoted a lawyer, that is familiar with the case.
“After this date when the courts of law determined that receivership had ended, BOU lost all legal authority over the affairs of CBL. It must be remembered that BOU’s authority is granted by the FIA and is limited by the FIA. Both the Commercial Court and Court of Appeal Courts found that under the FIA, BOU’s authority as Receiver of CBL ended in January 2018. This means that after that date, BOU has no authority to make any decisions of any kind for CBL. Like at the end of all receiverships, the company is returned to its Board of Directors and Shareholders. After January 2018, CBL by law was supposed to return to its Board of Directors and Shareholders,” the lawyer said.
“The Judgments of the High Court and the Court of Appeal which state that Receivership ended are still in force and binding on all parties. They have never been stayed or set aside. BOU tried to stay the enforcement of the Judgment of the High Court in the Court of Appeal and lost that application. BOU also tried to stay the enforcement of the Judgment of the Court of Appeal and lost that application in the Supreme Court. Both BOU’s attempts to stay were dismissed with costs against BOU. The current state of the law is that Receivership ended and BOU has no power or authority over the affairs of CBL,” the Commercial lawyers added.