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Thursday, 14 March 2019 00:32 - - {{hitsCtrl.values.hits}}
Mahenthiran Subramaniam, Amirtha Gowrie Mahenthiran, Nirja Mahenthiran and Javier Ewing, shareholders of Built Element Ltd., recently instituted two actions before the Commercial High Court in respect of Built Element Ltd., a company with a total asset value of Rs. 7 billion which is engaged primarily in the manufacture of asbestos cement roofing products. The AC roofing products produced by Built Element are primarily sold through Mascons Ltd.
The above Petitioners instituted a derivative against Built Element Ltd. before the Commercial High Court on the basis that monies had been siphoned out of Built Element Ltd. by Sashitharan Ganeshan and Sathiamoorthy Hari Darshan who function as Joint Managing Directors of the Company. The Petitioners maintained that the Joint Managing Directors of Built Element Ltd. (Sashitharan Ganeshan and Sathiamoorthy Hari Darshan) who de facto control the day to day operations of Built Element Ltd. were responsible for serious discrepancies in the Audited Accounts of Built Element Ltd. for the financial year 2016/2017. The Petitioners maintained that these discrepancies included a sum of Rs. 158 million in the finished goods inventory and a further sum of Rs. 45 million due to an unexplained increase in the cost raw material for the month March 2017. The Petitioners thus informed Court that they verily believed that the sums of Rs. 158 million and Rs. 45 million had been siphoned out of Built Element Ltd. by Sashitharan Ganeshan and Sathiamoorthy Hari Darshan. Accordingly the Petitioners urged Court that the Petitioners be allowed to bring action for and behalf of Built Element Ltd. in the event that Built Element refuses to sue and recover the aforesaid sums from Sashitharan Ganeshan and Sathiamoorthy Hari Darshan. Thus, Court on hearing this case in the first instance issued notice of this action on Built Element Ltd.
In a separate connected case instituted against the Company and the Joint Managing Directors the Petitioners asserting the same facts maintained that Sashitharan Ganeshan and Sathiamoorthy Hari Darshan (the Joint Managing Directors of the Company) had violated the Articles of Associations of Built Element Ltd./the Companies Act No. 7 of 2007 and that there was an imminent threat that Sashitharan Ganeshan and Sathiamoorthy Hari Darshan would commit further acts in violation of the same. Thus, the Petitioners filed a case in terms of Section 233 of the Companies Act No. 7 of 2007 seeking orders restraining Sashitharan Ganeshan and Sathiamoorthy Hari Darshan from any acts in violation of Articles of Associations of Built Element Ltd./the Companies Act No. 7 of 2007.Accordingly, the Commercial High Court in the first instance by Order dated 7 December 2018 issued an interim Order against the Joint Managing Directors of Built Element Ltd. preventing them from engaging in any acts in violation of the provisions of the Companies Act No. 7 of 2007 and the Articles of Association of Built Element Ltd.
Furthermore, the Petitioners further moved that court direct the Registrar of Companies to appoint one or more investigative officers to conduct an investigation in to the affairs of Built Element Ltd. under and in terms of Section 173 of the Companies Act No. 7 of 2007 and report back to court within two months. The Petitioners urged that the investigative officer/s during the course of their investigation look into matters such as specific bank accounts maintained by the company, purchase of raw material by the company, the cash flow statements of the company and the stock count of goods produced by the company. Thus, court issued notice on the Registrar of Companies of this case and issued a further Interim Order restraining the Joint Managing Directors of the Company from interfering in the said investigation in the event of such investigation being effected.
The Respondents in both cases thereafter appeared before the Commercial High Court on 6 February 2019 where the Respondents moved to file their respective Statements of Objections and the 2nd to 3rd Respondents in the case filed in terms of Section 233 of the Companies Act No. 7 of 2007 reserved their right to file an Application to vacate the Interim Orders granted against the 2nd to 3rd Respondents. Both cases were accordingly fixed for 5 April.
These cases were filed in the background where Mahenthiran Subramaniam, Amirtha Gowrie Mahenthiran had also initiated Case No. HCC 31/2018/CO in May 2018 against Mascons Ltd. (an affiliate of Built Element Ltd.) and several others. The Petitioners through their Petition specifically drew the attention of the Court to dealings between Mascons and one of its associate companies, Sealcore Stainless Steel Industries Ltd., whereby through certain practices the de facto management of Mascons (Sivamohan Sathiamoorthy, Sathiamoorthy Subramaniam) was utilising the company for the sole benefit of Sealcore. The Petitioners stressed that these acts were troubling, given that Sivamohan Sathiamoorthy and Sathiamoorthy Subramaniam also function as Directors of Sealcore, in which a large portion of the shareholding is held by Sivamohan Sathiamoorthy, Sathiamoorthy Subramaniam and members of their immediate family. Thus in Case No. HCC 31/2018/CO court in the first instance issued several Interim Orders against Mascons and Sealcore. However, due to the management of Mascons failing to comply with the Order of the Commercial High Court contempt proceedings are pending against the management of Mascons which now include Sashitharan Ganeshan and Sathiamoorthy Hari Darshan.
The Petitioners were represented in Court by Dr. Harsha Cabral, President’s Counsel, who appeared with Counsel Nishan Premathiratne, Nadun Wijayasriwardena and Migara Cabral on the instructions of Julius and Creasy Attorneys-at-Law.
