The Constitutional Court in Kampala has thrown out a petition by tycoon Amos Nzeyi against Bank of Uganda challenging the sale of his liquidated National Bank of Commerce.
In 2012, Bank of Uganda announced the liquidation of NBC and the bank plus its assets were later sold to Crane Bank Limited which was owned by businessman Sudhir Ruparelia.
Nzeyi dragged the Central Bank to court arguing that his bank was hurriedly and fraudulently sold without being heard.
On Wednesday, in a majority judgment of 4 to 1 , a panel of five justices of the Constitutional Court including Kenneth Kakuru, Geoffrey Kiryabwire, Cheborion Barishaki, Ezekiel Muhanguzi and Stephen Musota agreed that the process of winding up the bank and subsequent sale to Crane Bank Limited was done legally.
“The acts of the BOU as presented by the petitioner (Nzeyi) in this matter to my mind appear to be too generalized. I found that the provisions used by the BOU to intervene and revoke the licence of the NBC and then wind it up are not unconstitutional,” Justice Kiryabwire said in the lead judgment.
The judges said it is not enough to claim the process of liquidating and sale of National Bank of Commerce was not done legally without providing evidence to prove the same.
“The onus to prove this lies with the petitioner but I find he has not been able to do so. It is not enough in my view to say the whole process was rushed in one day. There are times in my view when a regulator may have to act quick to avert a systematic failure in financial system or to give confidence to the banking public.”
Justice Cheborion Barishaki noted in his judgment that given the uniqueness of the business in which financial institutions carry out, time is of essence in their regulation.
“on the basis of the evidence produced by BOU,I would conclude that there was reason for closure of the NBC in the public interest of achieving stability of the banking sector by maintaining good prudential control authorized by the constitution,”Barishaki noted.
“Bank of Uganda was entitled to exercise all the powers granted to it by FIA and in my view, it did so for the proper purpose of avoiding damage to the financial system which would have been occasioned by the possible collapse of NBC.”
The judge urged Nzeyi that if he thought the process of liquidating and later sale of NBC was done illegally and under irregularities, the course of action would be an application for judicial review in the High Court.
“It is for the above reasons that I would dismiss the petition with no order as to costs,” Justice Barishaki said.