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BIG BLOW TO SUDHIR! London High Court exonerates dfcu limited of connivance with Bank of Uganda over Crane Bank sale

Mr. Sudhir and his lawyers from the Kampala Associated Advocates at an earlier court hearing. (PHOTO/File).

Mr. Sudhir and his lawyers from the Kampala Associated Advocates at an earlier court hearing. (PHOTO/File).

LONDON— Bank of Uganda sold Crane Bank Limited to dfcu limited transparently, a High Court in London, United Kingdom has ruled in a $211 million dispute involved Ugandan parties.

In the case Crane Bank Ltd. and others v. DFCU Bank Ltd. and others, case number CL-2020-000859, in the High Court of Justice of England and Wales—read on October 7, 2022, Lord Pelling QC sitting in London exonerated both dfcu and BoU of wrong doing.

He ruled that BoU is justified in performing their oversight role enshrined in Uganda’s constitution especially following several red flags and warnings it had brought to Crane Bank’s notice against wrong doings.

dfcu on the other hand was cleared of the alleged connivance to buy CBL assets at undervalued rate.

“In my judgment, therefore, whether a claim in conspiracy could succeed would depend on the detailed facts, as would the applicability of the MCA Records Principle, assuming that it applies to conspiracy at all. So far as this last point is concerned, there are at least two reasons why it is at least realistically arguable that it should not.” Judge Pelling QC stated

Crane Bank Ltd. and half a dozen shareholders represented by Hannah Brown QC, David Caplan and Ben Lewy of One Essex Court, instructed by Greenberg Traurig LLP had accused dfcu limited, its executives and four development finance institutions of taking part in a fraudulent scheme to buy the lender’s assets in January 2017 as part of a sham bidding process.

CBL and it’s shareholders had told the english court that the bank, which was closed in 2016, was illegally stripped of its assets in a corrupt scheme by government ministers working with the central bank under late governor Tumusiime Mutebile and his deputy Dr. Louis Kasekende.

But DFCU Bank and its parent company— represented by Joe Smouha QC and Jackie McArthur of Essex Court Chambers, instructed by Freshfields Bruckhaus Deringer LLP denied at the hearing that it “turned a blind eye” to wrongdoing by the Bank of Uganda, saying that the central bank did “what central banks are supposed to do” to protect taxpayers when it took over CBL.

The Central Bank maintains that CBL was undercapitalized and had run out of cash, a liquidity crisis that required intervention to prevent a run on its deposits.

dfcu lawyers argued that because BoU acted “in the lawful exercise of foreign governmental powers” when seizing control of CBL, under the foreign acts of state doctrine, the court needed to treat that action as “valid and lawful.”

Under the legal principle, English courts cannot question the legality of the acts of a foreign state, specifically in this case on the matter of the state seizing property, dfcu lawyers told Mark Pelling QC, sitting as a High Court judge.

dfcu further argued that if the court were to treat what the BoU did as lawful, then the lawsuit stemming from the bank’s actions had no “real prospect of success.”

In their defence, CBL lawyers urged that it was pushed into receivership with little advance warning in early 2016 by the BoU for allegedly falling short of financial health standards and failing to secure tens of millions of dollars in emergency funding.

The lawsuit, which targeted 15 individuals and businesses, had alleged the CBL was the victim of a scheme by senior Ugandan officials to seize control of a major bank and offer it to CEFC China Energy, a Chinese energy conglomerate.

But after the deal fell apart, the bank’s assets were put up for bid, with CBL’s assets being intentionally undervalued, according to the claim.

The lawsuit had also targeted Dutch lender Rabo Development and NorFinance, a Norwegian development financial institution, which agreed to provide dfcu with the capital needed to complete the transactions.

NorFinance and Rabo Development had each owned a 27.5% stake in dfcu until December 2016 and appointed directors to its board.

Their stakes were transferred to Arise BV, a Dutch investment company co-owned by Rabobank and others, in January 2017.

The case also targeted dfcu executives, directors, and individuals at the development institutions as well as Albert Jonkergouw, Rabobank’s director in Africa.

In his ruling, Justice Mark Pelling QC, also exonerated
dfcu executives, reasoning that they acted as directors for the bank.

The Supreme Court of Uganda had dismissed the case against the Crane Bank owners Sudhir Ruparelia and Meera Investments, at all levels on technical grounds, not their proof of innocence in regard to the alleged offences for which BOU acted.

The Court of Appeal had also ruled in 2021 that CBL’s receivership ended in January 2018, a decision that would restore control to the bank’s board.

The case has also been appealed to the Supreme Court.

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