KAMPALA – A top officials’ meeting of the Central Bank chaired by deputy Governor Dr. Michael Atingi-Ego resolved to await the Supreme Court decision before the government’s banker could decide the way forward in the intricate matter of Crane Bank Ltd, closed four years ago.
According to minutes of the October 28th meeting, the progression of the defunct Crane Bank Ltd into liquidation, a matter red flagged as sensitive was considered to attract of “serious legal hitches” after BoU Legal Counsel Margaret Kasule presented a legal opinion from external lawyers — Shonubi, Musoke & Co., who advised for the liquidation process to start.
However, the meeting also attended by the Director for bank supervision Dr. Tumubwine Twinemanzi then agreed that the “BOU waits for the Supreme Court decision before progressing Crane Bank Ltd from receivership to liquidation” — reads part of the minutes seen by this website.
However, even before these legal hitches were resolved, according to information gleaned from another memo, written by Ms Kasule, to the Governor on November 09th 2020, the Deputy Governor had earlier, on November 4th 2020 written to the Governor recommending that Crane Bank Ltd be liquidated.
“Bank of Uganda (BoU) took over management of Crane Bank Ltd (CBL) on October 20, 2016 and subsequently progressed it into receivership on January 24, 2017. 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,” Mr. Emmanuel Tumusiime-Mutebile, said in the notice.
It has now emerged that the move followed an October 6 letter by the defunct Crane bank majority shareholder Sudhir Ruparelia to the Uganda Registration services Bureau (URSB) seeking to repossess the company since the period of receivership had ended on 20th January 2018.
The URSB then wrote to the Governor Mr. Mutebile seeking clarifications to the matter, sparking off an internal analysis by the central bank legal team.
In an October 16 memorandum titled: “Proposed Strategy on Crane Bank Appeal,” Margaret Kasule the Central Bank’s legal counsel told the Governor that the Central Bank had over and above Dr. Joseph Byamugisha, hired another external legal counsel — M/S Shonubi Musoke & Co.
The new legal counsel M/S Shonubi Musoke & Co would support the central bank legal team to apply for stay of execution of the Court of Appeal ruling as well as another application for interim stay of execution pending the hearing of the main application.
“As we advised earlier in May 2019, matters of Crane Bank Ltd require progression into liquidation. This would ease the current impasse where legalistic arguments are being used to tie the hands of the Central Bank while attempts are being made to change status quo with the intention of rendering a favourable Supreme outcome nugatory,” Ms Kasule said in her memo, also copied to the Deputy Governor.
“Our earlier recommendation to progress CBL into Liquidation is consistent with the independent opinion given by M/s Shonubi & Company Advocates. Accordingly, we recommend the progression of Crane Bank (in receivership) into Liquidation as soon as we are legally armed. The progression will not affect the case in the Supreme Court and will only be an affirmation that a suit commenced in resolution can be pursued by a statutory manager, a receiver or liquidator regardless of the stage at which it is commenced,” she said.
However, the Central Bank’s plan has already run into trouble after an interim stay of execution application?Supreme Court – Civil Application No. 33 of 2020 Bank of Uganda/Crane Bank (in receivership) asked the court to stop Mr. Sudhir Ruparelia “preventing him from claiming, taking control, repossessing or in any way interfering with the management” of Crane Bank or of its Receiver (BoU) was dismissed.
Dismissing BoU’s application Paul Mugamba, Justice of the Supreme Court on November 9, 2020 ruled that although the order sought by BoU against URSB was to restrain it from registering any resolutions in respect to Crane Bank, there was no evidence of any resolution which was intended to be registered.
“Respectfully, I do not see any act or acts that have been done or are about to be done by the 2nd respondent (URSB) that are prejudicial to the interests of the applicant CBL/BoU,” the judge ruled.
In another internal leaked memo, titled: “Ruling on application for an injunction in Civil Application No.33 of 2020- Crane Bank in Receivership vs. Sudhir Ruparelia and Uganda Registration Services Bureau (URSB), Ms Kasule wrote:
“On the basis of the above ruling and affirmation of the Supreme Court Judge, that the power of management control and power over CBL remained with the Bank of Uganda, we recommend immediate progression of CBL into liquidation. We recommend that this be done immediately to prevent further interference with CBL’s rights and outstanding obligations. Immediate action would also enable effective pursuit of CBL’s rights and dues,”.
Ms Kasule also drafted a liquidation notice for the Governor, issued last Friday.
Financial lawyers have since poked holes into the notice, reasoning that a receiver without authority cannot progress CBL from receivership to liquidation.
City lawyer Isaac Ssemakadde of the Center for Legal Trust says Bank of Uganda and its legal advisors are wrongly interpreting the Financial Institutions Act by rushing to illegally liquidate Crane Bank, before the court processes are exhausted.
The city attorney says, already the two court rulings from the High Court’s Commercial Division and the Court of Appeal sent a warning to the central bank for wrongly interpreting the Financial Institutions Act and misusing the Act while managing the banking institutions in the country.
“The Parliament of Uganda also investigated Bank of Uganda on the closure of seven commercial banks where Crane Bank was the last one and its findings are clear and pointing at the Central bank for illegally closing these local banks,” he said.
Mr. Ssemakadde now says that the actions of the central bank to rush to liquidate Crane Bank out of fear and panic without waiting for the final decision of the Supreme Court is an act of contempt and disrespect of courts.
Nakaseke South Member of Parliament Paulson Lutamaguzi Ssemakula says the latest move by BoU was an act of complacency.
While appearing on CBS radio talkshow on Monday night, Mr. Lutamaguzi, a member of Parliament’s Committee on Commissions, State Enterprises and Statutory Authorities that extensively investigated the closure of seven commercial banks including Crane Bank called for a complete overhaul of the entire Bank of Uganda operations as recommended by COSASE saying that, the way the central bank is run makes it difficult for oversight bodies including parliament to call its management to order.
The COSASE Report, adopted by Parliament last year called for the compensation of directors in three banks – the Crane Bank Ltd, National Bank of Commerce, and Global Trust Bank, after the MPs faulted Bank of Uganda for negligently disposing of the defunct banks and breaking several provisions of there Financial Institutions Act (2004).
MPs who investigated the rot at Central Bank led by Abdu Katuntu found that the process of selling Global Trust Bank, National Bank of Commerce and Crane Bank Ltd on several instances “contravened section 95 (3) of the FIA 2004” and lacked the principles of “prudence, transparency and fairness” enshrined in the constitution and the FIA Act.
The MPs called for action against the Bank of Uganda officials involved in the seizure and irregular sale of the banks, as well as compensations to the aggrieved bank owners.