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Tycoon Nzeyi sues Sudhir, BoU

Kampala- The legal face-off between Bank of Uganda (BoU)and property magnate Sudhir Ruparelia has taken an intriguing twist.

The liquidated National Bank of Commerce (NBC) and former owner Amos Nzeyi have sued Bank of Uganda, Crane Bank and its former owner Mr Ruparelia and a Kenyan tycoon Rasiklal Chhotalal Kantaria.

The suit was filed in the High Court yesterday.

Just last month, Bank of Uganda also sued Sudhir and his Meera Investments seeking to recover about Shs400b he allegedly fraudulently took out of his self-owned Crane Bank (also now liquidated).

The NBC was closed by BOU in 2012 and liquidated to Crane Bank (also now liquidated).
The NBC and its former chairman Nzeyi are represented by lawyer Fred Muwema.

In the suit, Mr Nzeyi, wants court to declare that BOU’s takeover of NBC and the subsequent sale of its assets to Crane Bank within six hours after the seizure on September 27, 2012 was illegal and in bad faith.

Mr Nzeyi alleges that BoU’s takeover and liquidation of the bank was in breach of the Financial Institutions Act 2004 and should be declared null and void. He also wants court to hold BoU liable for its alleged failure to supervise the banking sector, which is its statutory duty.

Mr Nzeyi wants BoU to provide a register of assets and liabilities inherited from NBC at the time of takeover, proof of tax compliance in the sale of NBC assets to Crane Bank and a forensic investigation report plus refund of the money spent on purported liquidation expenses.

The petitioner is seeking general damages for reputation damage, loss of business, inconvenience and mental anguish caused to the shareholders.

In the suit, Nzeyi and NBC allege that Mr Ruparelia and Mr Kantaria “acted dishonestly in authorising the execution of the purchase agreement for NBC assets and did not meet the test of managing, controlling and owning the bank.”

The NBC, formerly owned by former prime minister Amama Mbabazi, retired Justice of the Supreme Court Prof George Kanyeihamba and current premier, Dr Ruhakana Rugunda, was licensed on September 21, 2004. The central bank closed it for alleged insolvency in 2012.

Mr Nzeyi and NBC contend that by the time BoU closed the bank, its financial health had stabilised as proved by the central bank’s monitoring report of September 2012.

They claim they had undertaken an expansion programme approved by BoU in which NBC had acquired and refurbished new headquarters on Yusuf Lule Road in Kampala at about $1.8m and purchased several automated teller machines (ATMs).

The suit states that NBC had also recapitalised up to Shs7 billion to meet BoU’s minimum capital requirements. The shareholders allege that despite the recapitalisation, the bank “was suffering arbitrary civil penalties and a ban on borrowing and lending imposed by the central bank.”

The NBC further states that at the time of closure it had procured T24 Temenos Core banking system with approval of the central bank.

In the BoU’s separate but related case against Mr Ruparelia also in the High Court, the central bank accuses him of inflating the same T24 Temenos Core Banking system to $10.2m.

Shortly after the takeover, NBC on September 28, 2012 petitioned the Constitutional Court and secured an interim order restraining BoU from winding up and liquidating the commercial bank but the injunction was disregarded. The NBC lawyer, Mr Muwema, argues that unlike the 2012 case, the present one “seeks to enforce the commercial rights of the bank.”

He said the court order was ignored and attempts to have the case disposed of have, for the last five years have been futile.

He alleges that between September 29, 2012 and October 1, 2012, Mr Ben Sekabira and Mr Godfrey Yiga, “forcefully took securities from NBC aware of the injunction while Ms Justine Bagyenda, the executive director for supervision [of Bank of Uganda] participated in the sale of some foreign currency deposits of NBC to the tune of Shs2.1 b aware of the court order.”

In its suit, NBC says it’s pursuing Mr Ruparelia’s associate Mr Kantaria because he is “prominently named as the person who lent him his name, supported and omitted to report or stop the commission of fraudulent acts by Mr Ruparelia.”

Mr Muwema argues that “the high end dishonesty and fraud said to be committed by Sudhir against his own ‘bank’ and acquiesced to by Mr Kantaria is the same species of dishonesty and fraud whose contours were extended to NBC with the supervision and approval of Bank of Uganda.”

The NBC alleges BoU conspired with Crane Bank to sell its assets secretly within a record six hours after the seizure, contrary to provisions of the Public Procurement and Disposal of Public Assets Act.

©Daily Monitor


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