Businessman Sudhir Ruparelia has described a lawsuit accusing him of benefitting from the closure of National Bank of Commerce as a “vexatious”, “speculative” and an abuse of the court process, which should be dismissed.

Sudhir says the only thing he admits as correct in the suit is that he is “a businessman of sound mind.”

Sudhir’s defence, which he filed yesterday, is a response to a July 26 suit by businessman Amosi Nzeyi, a shareholder in the defunct NBC.

In the suit, Mr Nzeyi, asked  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 alleged  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 alleged  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 stated  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.

Also sued is Sudhir’s business partner Raskillal Chhotalala Kantaria and Crane bank, which was taken over by Dfcu bank in January this year. Through his suit, Nzeyi said all the four respondents should be held responsible for what he terms as the illegal closure of NBC.

SUDHIR DENIES LIABILITY

But in his defence, drawn by Kampala Associated Advocates (KAA), Sudhir dismisses the case, terming it as a “fishing expedition” since he is not liable to Nzeyi and NBC, either individually or corporately, as alleged.

In response to Nzeyi’s claim that BOU’s decision to take over and sell NBC’s assets to Crane bank within six hours on September 27, 2012 was in breach of the Financial Institutions Act 2004, Sudhir says he did not authorize the execution of the purchase of the assets and liabilities of NBC.

“The third defendant [Sudhir] avers that he was no party to the transaction for the sale of NBC assets and any allegations in the plaint in relation to the said transaction cannot be attributed to him, nor can he be held for any alleged loss caused as result of the said sale of NBC assets,” the defence reads.

Through Muwema and Company Advocates, Nzeyi said he went to court after learning recently that BOU sued Sudhir and his Meera Investments seeking to recover over Shs 400 billion, money he allegedly stole from Crane bank.

But Sudhir vehemently denies any fraud, further saying he has never purcahsed any of NBC’s assets. He says they were purchased by Crane bank through lawful means.

“The third defendant [Sudhir] denies any misconduct, fraud, theft or dishonesty and denies the allegation that the shareholding of Crane bank was concentrated in him, as he held only 28.83 per cent of the shares in Crane bank,” the defence explains.

According to Nzeyi, by the time of the takeover, winding up, liquidation, closure and sale of NBC by BOU, it was not an insolvent financial institution since the bank had just undertaken an expansion programme, including acquiring and refurbishing its new headquarters on Yusuf Lule road in Kampala at about $1.8 million.

CONTEMPT OF COURT

Sudhir also dismisses claims by Nzeyi that Bank of Uganda and Crane bank ignored a Constitutional court injunction restraining the central bank and its agents from taking further steps to wind up, liquidate and sell NBC.

According to Nzeyi, BOU officials continued to carry out transactions involving NBC in violation of the September 28, 2012 order. In addition, he says, all attempts to hear the main Constitutional court petition for the last five years have proven futile.

However, Sudhir denies knowledge of and liability for those contentions and maintains that the above allegations don’t relate to him at all.

DISCRIMINATION OF NBC

Nzeyi also alleges discrimination of NBC. He says NBC was summarily closed without being accorded any financial support, while BOU allegedly injected some Shs 400bn of public funds to stave off the systemic risk caused by the bank’s insolvency.

But Sudhir denies any knowledge of the alleged capital injection into Crane bank. He also denies knowledge of any discrimination, saying in any event, he cannot be liable for the said discrimination.