DFCU Bank has written a letter to Bank of Uganda (the regulator) expressing its interest to return land titles and securities of 48 properties which housed former Crane Bank before it was fraudulently sold by Bank of Uganda to DFCU.
These properties belonged to businessman Sudhir Ruparelia and his Meera Investments Limited.
In the sale, however, the Central Bank also handed over the securities of 48 buildings to DFCU without a well streamlined audit of these properties to establish their value.
According to the Auditor General John Muwanga’s report released last year, he faulted BoU of rushing to sell Crane Bank and instructing the buyer to conduct an audit of the bank.
DFCU hired an audit firm PwC which valued the whole 48 properties at shs 47 billion- a price believed to have been under declared with a motive to pay less stamp duty to tax body Uganda Revenue Authority.
But also on the shs 47 billion, DFCU paid BoU only shs 10 billion for the lease of these properties.
On Wednesday BoU released an annual report which captures information suggesting that DFCU has agreed to return the land titles of 48 Crane Bank Branches and the bank seeks full refund of 47 billion which it claims was the value of the buildings it occupied after 2 years.
Questions lingering are who will be accountable to this 37 billion in case BoU raids coffers to compensate DFCU?
Also if DFCU was given a lease of the buildings under what circumstances does it demand full refund yet it has been occupying the properties.
The whole ping pong is likened to buying a car from a bond at 20 million you pay 40% and after driving it for 3 years you return it to the bond seeking 100% refund.
Expert say, by under declaring the value of the 48 properties while leasing, DFCU was aimed at evading tax which is criminal.
Full Letter which DFCU to BoU after the regulator failed to secure Crane Bank properties.
RE REVERSIONARY INTEREST IN PROPERTIES ACQUIRED BY DFCU BANK LIMITED UNDER THE PURCHASE OF ASSETS AND ASSUMPTION OF LIABILITIES AGREEMENT OF 25, JANUARY 2017.
We refer to the Purchase of Assets and Assumption of Liabilities Agreement dated 25 January 2017 (the “Agreement”) pursuant to which dfcu Bank Limited (the Bank) acquired certain assets and assumed certain liabilities of Crane Bank Limited (in Receivership) (CBL).
Further reference is made to our correspondences on the subject matter, letters dated 30th August 2018 and 18th January 2019 from Bank of Uganda (BOU) and letters dated 26″) September 2018 and 13th August 2019 from the Bank under the AgreementBank of Uganda as the Receiver of Crane Bank Limited (In Receivership) undertook to recover the reversionary interest (the reversion) relating to 48 leasehold properties (MIL Properties) acquired by the Bank pursuant to the Agreement.
The reversion was to be recovered from Meera Investments Limited (MIL) within 24 months from the date of the Agreement. The Agreement gave the Bank the option to acquire the reversion once recovered by BOU or to rescind the purchase of the MIL Properties in the event that BOU was not able to recover the reversion within the said 24 months from the date of the Agreement (i.e. 25 January 2019).
BOU filed HCCS No. 493 of 2017 against Sudhir Ruparelia and MIL seeking among other things the return of the reversion.
Having realized that it was unlikely that the reversion would be recovered within the 24 months. BOU requested the Bank for an extension of the contract timelines which the Bank was amenable to. albeit subject to certain conditions which are reflected in the Bank’s letters dated 26” September 2018 and 13″, August 2019. To date BOU and the Bank have not reached any agreement on the extension. 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.
The Bank hereby rescinds the purchase of the MIL Properties pursuant to clause 8.7 of the Agreement. Accordingly, in line with clause 8.8 of the Agreement, the Bank will:
(a) return to BOU the certificates of title for the MIL Properties duly re-transferred into the name of Crane Bank Limited: and
(b) deliver up vacant possession of the MIL Properties (i) Listed in Appendix A, immediately: and (ii) Listed in Appendix B by 24- January 2020.
Upon receipt of vacant possession of the MIL Properties, BOU will pay to the Bank the net book value of the MIL Properties included in Note 2.3.11 of the PwC Assets and Inventory compilation (as at 20’n October 2016. under “Land and Buildings”) subject to: (i) depreciation in relation to the period from 20 October 2016 to the date of delivery of vacant possession as specified herein: and (ii) the ground rent that the Bonk would have paid for the MIL Properties from the Completion Date (25 January 2017) up to the rescission date.
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.