Four more banks obtain enjoining orders against MTD Walkers

Four leading Banks in Sri Lanka, namely Bank of Ceylon, People’s Bank, Sampath Bank PLC, and Nations Trust Bank PLC, this week sought for Enjoining Orders against MTD Walkers PLC, a listed company engaging in infrastructure-related businesses including civil engineering, heavy engineering, electrical engineering, pile construction, power generation, real estate development, marine engineering and trading of heavy equipment and in multidisciplinary engineering activities in Sri Lanka and Maldives.

This is in addition to a similar action by Commercial Bank, Seylan, DFCC and NDB.

In the case of the Plaintiff Banks (BOC, PB, SP and NTB) was that MTD Walkers PLC, through its numerous subsidiaries and its own debenture issue, had borrowed money amounting to a total exposure of approximately Rs. 13 billion from the four Plaintiff Banks. Thereafter by a corporate disclosure made to the Colombo Stock Exchange, it was revealed that MTD Walkers PLC being the 100% owner of Walkers Shipyards Limited, Northern Power Company Ltd., and Colombo Fort Heritage Company Ltd., intended to transfer 100% shares of the said companies to MTD Capital Berhad, the parent company of MTD Walkers PLC based in Malaysia.

The Plaintiff Banks further brought to the attention of the Commercial High Court that such transfer, especially in the circumstances that the consideration for the sale of the subsidiary companies not being for the benefit of MTD Walkers PLC, being transferred to a Company in Malaysia, would cause a serious depletion of assets of MTD Walkers PLC, creating an imminent threat to the stability of MTD Walkers PLC and its group of companies. 

Furthermore, it was submitted that such transfer would be illegal, having no avail in law owing to the violation of the Land (Restrictions on Alienation) Act No. 38 of 2014 (as amended), Rule 9.4.1 of the CSE Listing Rules, and not satisfying Section 185 of the Companies Act No. 7 of 2007, and MTD Walkers PLC’s attempt to transfer would defraud the shareholders. And thus, in such circumstances if the transfer is effected, the Plaintiff Banks would be unable to recover the amount due bAy MTD Walkers PLC and its subsidiaries to recover from MTD Walkers PLC.

The Learned High Court Judge, Honourable Mahanil Prasantha De Silva, being satisfied with the Plaintiffs’ cases, granted Enjoining Orders restraining MTD Walkers PLC from acting or giving effect to the transfer of shares, as announced to the Colombo Stock Exchange.

The Colombo Stock Exchange, Central Bank of Sri Lanka Bank Supervision Department Director, Securities and Exchange Commission of Sri Lanka, and the Registrar General of Companies, which are regulatory bodies of MTD Walkers PLC, were also named as Defendants merely for the purposes of giving notice to them. In addition, Bank of Ceylon also obtained an Enjoining Order against Northern Power Company Ltd. where Northern Power Company Ltd. had directly borrowed from Bank of Ceylon.

The Plaintiff Banks were represented by President’s Counsel Dr. Harsha Cabral, along with Nishan Premathiratne, Nadun Wijesriwardena, Janith Fernando and Chamaka Ambagahawita, Attorneys at Law on the instructions of Messrs. Julius and Creasy.

The matter is to be called on 25 February.

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