According to confidential correspondence seen by this website between dfcu Bank and BoU, dfcu Bank has decided to exercise a clause in the Crane Bank buying agreement that said, if the central bank, failed to hand over to dfcu, vacant and freehold possession of 48 properties that previously housed Crane Bank branches with 24 months, dfcu bank had the right to return the leasehold titles to BoU and claim compensation.
However a challenge has arisen within BoU circles, because, whereas the sale agreement said that on return of the properties, dfcu bank would be compensated a portion of the purchase price equivalent to the net book value of the properties, included in Note2.3.11 of the PWC Assets and Compilation as at 20th October 2016- estimated at about UGX47 bn, dfcu had acquired the said properties for only UGX10 bn.
Compensating them UGX47bn, would therefore make dfcu bank UGX37 bn richer- yet they have been occupying the properties for nearly 3 years without paying rent.
It shall be recalled that according to the Public Accounts Committee on Commissions, State Authorities and State Enterprises (PAC – COSASE) reported that bank of Uganda had not valued Crane Bank’s assets and liabilities as required by law and corporate governance and as such the purchase price of UGX200bn- payable over 30 months at no interest rate was unreasonable.
BoU instead relied on a purported valuation by dfcu Bank who was “an interested party and eventual purchaser” of Crane Bank’s assets and liabilities.
The Auditor General in his report to parliament had earlier opined that not only was the UGX200bn unjustified, but the fact that dfcu Bank was allowed to pay over 30 months without any interest, had caused tax payers a loss of UGX39 bn in lost interest.
*Dfcu Bank to quit all Ruparelia Group properties by January 24th 2020*
Two weeks ago, we reported that dfcu had started an internal procurement process to relocate its branches that are operating in the said Crane Bank branches.
A confidential request for proposals document titled: “Consultancy Services for relocation of selected dfcu Bank branches – 2019”, issued to selected architectural firms, that CEO East Africa Magazine has seen, said that dfcu was looking for an architectural consultant to”setup new premises, relocate the existing premises, decommission the vacated premises and support vacant handover of the vacated premises to the respective property owners.”
The dfcu letter to Central Bank rescinding the offer to buy the 48 properties
When contacted for comment, dfcu bank at the time declined to comment, but days later said the branch relocations were within their business plans to realign their digital ambitions.
On 12th September 2019 letter by dfcu Bank’s Managing Director, Mr. Mathias Katamba and a one Agnes Mayanja, a Chief Risk Officer to the Governor and Executive Director BoU, confirms that indeed dfcu bank board has after several postponements, has moved to rescind the offer to acquire the 48 properties and is in advanced stages of vacating and returning them to BoU as per the agreement.
“Following court’s dismissal of HCCS No 493 of 2017 on 26th August 2019, it is unclear how long it will take BoU to recover the reversion from MIL.
This state of affairs creates uncertainty for the bank which is prejudicial to its business interests.
In line with its strategic interests and risk management framework, the board has resolved that it is in the best interest of the bank to exercise the option to rescind the purchase of the MIL Properties,” wrote the dfcu senior executives.
Dr Sudhir Ruparelia addresses a media conference soon after Commercial Court dismissed the BoU case. He said everyone who participated in the illegal closure, takeover and sale of Crane Bank would be made to pay
“The bank hereby rescinds the purchase of the MIL properties pursuant to close 8.7 of the Agreement,” dfcu added.
In Civil Suit No. 493 of 2017, BoU and Crane Bank (in receivership) had sued Sudhir Ruparelia and Meera Investments seeking to recover up to UGX397 bn and the 48 properties.
In his ruling, Hon Justice David Wangutusi, said BoU “did not have jurisdiction to file HCCS No. 493 of 2017” and that the orders sought against Meera are “barred in law, rendering” BoU with no “cause of Action” against Meera.
Regarding the 48 properties, Hon Justice David Wangutusi said that “any orders awarding delivery of freehold title to the Plaintiff/ Respondent (Crane Bank (in receivership)) would be illegal and barred in law,” since Crane bank “cannot hold freehold and any pleadings seeking court orders to that effect amount to no cause of action.”
The Bank has filed a notice of appeal, an application for stay of execution and Memorandum of Appeal. The hearing of the application for stay of execution has been fixed for November 27, 2019.
In their letter, dfcu’s Katamba and Mayanja said that accordingly, in line with clause 8.8 of the Agreement, it would immediately return to BoU the certificates of title for the MIL properties duly re-transferred into the name of Crane Bank Limited- a process that would be completed by 24th January 2020.
According to insider sources at BoU, rather than be paid in cash, which might cause more furore given that the Central Bank is cash-strapped, dfcu is exploring options of having the UGX47 bn, deducted from the balance remaining on the purchase price of Crane Bank.
As at June 30, 2019, dfcu Bank had paid UGX140 bn and the outstanding receivable amounted to UGX60bn- according to the Auditor General’s letter accompanying BoU’s annual report for 2018/19 ended June 2019. The amount due from dfcu Bank Limited is interest free and dfcu is supposed to make full payments by the end of January 2020.
This theory is supported by the last paragraph of dfcu’s letter to BoU which reads: “The bank acknowledges that the rescission process and the payment associated therewith may entail certain other modalities; we therefore consider a meeting to agree these modalities and the associated timelines important.”
Dfcu has elected to return the properties to BoU, the fate of several other court cases amounting to UGX35bn in claims, launched by the Ruparelia Group against dfcu Bank as the successor in title to Crane Bank (in receivership) is also unclear.
Our team tried to reached out to dfcu’s Managing Director, Mathias Katamba and the Executive Director, William Ssekabembe for a comment, but both had not replied to our inquiry.