dfcu Bank, was reluctant to transfer into its name, the 48 properties it acquired in the now-heavily contested and controversial Crane Bank acquisition, fearing that Bank of Uganda and Crane Bank (in receivership) may fail to legally acquire the property from Sudhir Ruparelia and his MEera Investments Ltd, in which case the bank would have to incur a huge costs trying to re-transfer the property back to the businessman.
A leaked memo from city law firm, Sebalu & Lule Advocates to the dfcu Bank’s Head, Legal and Company Secretary shows that rather than transfer the titles into its names, the bank had preferred to place caveats on the property till such a time when Bank of Uganda had satisfactorily taken ownership of the said properties from Sudhir and Meera Investments.
However, in the memo, Sebalu & Lule Advocates, who were dfcu’ lawyers in the transaction, instead advised the bank to go ahead and transfer the contested properties into the bank’s names, a move several legal experts have criticized as rushed.
According to the Asset Purchase Agreement between BoU and dfcu BoU had 24 months to recover the said properties from Sudhir/Meera but if BoU failed to recover the land within the 24 months, dfcu would have an option to rescind the purchase of the leasehold properties, return to BoU the certificates of title, duly retransferred into the names of CBL and deliver up to BoU vacant possession of the leased properties. BoU would then refund them a portion of the purchase price equivalent other value of the properties.
BoU and Crane Bank (in receivership) had in the meantime, under Civil Suit No. 493 of 2017 sued Sudhir Ruparelia and Meera Investments Limited alleging that the 48 properties on which Crane Bank had its countrywide branch network initially belonged to Crane Bank, but were transferred to Meera Investments Limited and subsequently leased to Crane Bank.
BoU asked court to order Sudhir/Meera to hand it the 48 freehold certificates together with duly executed transfer deeds in respect of each one of them in favour of Crane Bank.
Dfcu, fearing that incase the attempts to secure the land from Meera failed, was reluctant to fully register the titles, fearing that in case the BoU’s case failed the bank would incur huge costs in revaluing and re-transferring the properties back.
Instead, they had opted to lodge caveats on the titles as an alternative to registering the transfers to safeguard the bank’s interests in the interim pending resolution of Civil Suit No. 493 of 2017, which is why they sought a legal opinion from Sebalu & Lule Advocates.
Sebalu & Lule instead told dfcu Bank that “our opinion is that although the proposed approach of registering caveats provides dfcu with some level of legal protection, its indisputable title to the leasehold properties can only be guaranteed through registration of the transfers executed by BoU in favour of dfcu.”
The lawyers also said that 24 months was too long a time to wait, for BoU to resolve ownership issues.
It now appears, this 08th May 2017 legal advice could have been premature, rushed and possibly misguided; misguided because both the bank and their lawyers, were well aware that the, efforts by BoU and Crane Bank (in receivership) to recover the said land were in very early stages and rushed because, dfcu had until January 2019 to effect the transfer.
Several lawyers CEO East Africa Magazine talked to, wondered why Sebalu & Lule were in a hurry to effect the transfer well knowing that there were several unresolved issues and a number of court cases on the properties.
“Unless Sebalu & Lule were interested in the legal fees involved in the transfers, I do not see any other good reason why they would be in a hurry to transfer the said land,” said one lawyer, who preferred anonymity as he has previously worked with Sebalu & Lule Advocates.
Transfer of property was fraudulent
Indeed, Sudhir in High Court Civil Court Suit No. 948 of 2017, in the Land Division (Meera Investments Ltd Vs Dfcu Bank Limited and The Commissioner for Land Registration), went ahead to challenge the transfer saying that it was an “illegality”, a “fraud” and tantamount to “trespass” on his property.
The lands commissioner on the other hand was sued for “illegally effecting a transfer of the suit properties into the names of dfcu.”
Sudhir wants court to order that Meera Investments is the registered proprietor of the suit properties and should have been consulted in any transfers of the land to dfcu and that since Meera was never consulted, the said transactions were illegal and fraudulent.
Meera also prayed for court to declare that “the transfer of the leasehold interests in the suit properties to the 1st defendant (dfcu) and taking of possession of the same… without the prior written consent of the plaintiff (Meera) rendered the leases illegal and invalid.”
Meera has also prayed that dfcu be declared a trespasser on the said properties and Meera be granted vacant possession of the said land. That is not all, Meera wants dfcu to refund “mesne profits” (profits of an estate received by a tenant in wrongful possession and recoverable by the landlord) with 20% interest, as well as damages and costs for the suit.
However, dfcu in a defense filed on 28th January 2018 by Sebalu & Lule Advocates, Dfcu argues that by virtue of assuming Crane Bank’s assets and liabilities as transferred by BoU, pursuant to statutory Authority contained in Section 95(1) (b) and (c) of Financial Institutions Act they therefore assumed the said 42 Leasehold Certificates of title.
dfcu also argues that “ownership of these properties is still subject to a court decision in High Court Civil Suit No. 493 of 2017 and therefore it was premature for Meera to claim them.
“Whether the plaintiff is indeed the owner of those freehold properties and therefore the lessor of the 1st Defendant (Dfcu) is directly and substantially in issue in the aforementioned earlier suit,” pleads Dfcu, further arguing that they shall seek to block hearing of this case until the “question of ownership of the said 42 Freehold Certificates of Title has been determined in the prior suit.”
BoU and Crane Bank have no basis to sue
What appears to be dfcu’s strongest defence- the disputed ownership of the properties, may as well be the weakness of their case, given that the businessman in Miscellaneous Application No. 320 of 2019, has asked court to dismiss BoU and Crane Bank’s (in receivership) case against him, arguing that that the Financial Institutions Act (2004) under which BoU and Crane Bank (in receivership) sued, does not allow a receiver to sue or be sued.
This therefore means that BoU and Crane Bank (in receivership) have “no locus standi to bring the suit” against them and that the case is “barred by law.”
Sudhir, through his lawyers Kampala Associated Advocates lawyers Peter C. R. Kabatsi, Joseph Matsiko and Elison Karuhanga, also told court that Crane Bank’s (in receivership) claim on Meera Investments’ land is barred by law since Crane Bank- by virtue of being majority owned by non-Ugandan citizens is a non-citizen and therefore barred from acquiring or holding mailo or freehold land in Uganda by Section 40 (1), (4), (7)(a)(d), and (8)(a) of the Land Act.
Justice Wangutusi has set August 26, for a ruling on the miscellaneous application.
Should the application be sustained, BoU’s entire claim on Sudhir will crumble, leaving both the central bank and dfcu Bank with multibillion counter law suits by the businessman.
For starters, dfcu’s earlier fears of double expenses in stamp duty and registration fees as well as fresh valuations of the properties will come true, but this time a little more expensive. Most if not all the properties have since appreciated in value and could therefore attract much higher valuation and stamp duty costs.
If BoU’s main case is dismissed, it could also almost mean that Sudhir’s fraud case against dfcu and the lands commissioner in the lands division has higher chances of succeeding, in which case both dfcu and its lawyers could suffer countersuits.
According to section 77 of The Registration of Titles Act, any certificate of title, entry, removal of encumbrance, or cancellation, in the Register Book, procured or made by fraud, is void as against all parties or privies to the fraud. Similarly, section 176 (b) of The Registration of Titles Act allows actions for recovery of land against the person registered as proprietor under the Act where that person was registered as proprietor of that land through fraud.
Similarly, any person who fraudulently procures, assists in fraudulently procuring or is privy to the fraudulent procurement of any certificate of title or instrument or of any entry in the Register Book, or knowingly misleads or deceives any person authorised to require explanation or information in respect to any land or the title to any land under the operation of the Act in respect to which any dealing is proposed to be registered, that person commits an offence by virtue of section 190 (1) of The Registration of Titles Act.
Lastly, should court dismiss the main suit, two other suits that the Ruparelia Group has against dfcu, could succeed.
In one of the suits (HCCS No.109 of 2018), Crane Management Services (CMS) another of Sudhir’s companies is demanding for USD385,728 and UGX2,998,558,624 for severally breaching various tenancy agreements in respect to 13 properties in Kampala and Mbale. CMS is demanding for USD385,728 and UGX2,998,558,624 as rental arrears, before interest on the suit sum, general damages, interest on general damages and costs of the suit.
In another case, Meera Investments sued dfcu for breaching a tenancy agreement for Plot 38 Kampala Road (Crane Chambers) and Plot 40A Kampala Road and wants a compensation of USD 8, 660,462.34 with interest and costs of the suit.
In both cases, dfcu is being sued, on account of being the successor in title to Crane Bank (in receivership) and as such “having by its conduct assumed the rights and obligations under the tenancies in respect of the suit properties.”
Unfortunately for Sebalu & Lule Advocates, they can nolonger represent dfcu Bank on any of the cases against the Ruparelia Group, court having found them conflicted, since they previously acted for CMS on a number of real estate related matters.
But well; all that will depend on the August 26th ruling by the commercial court.