Commercial High Court issues interim injunction against MTD Walkers, parent blocking share transfer

Commercial High Court Judge M. Ahsan R. Marikar last week issued an interim injunction against MTD Walkers and its parent company MTD Capital Bhd. of Malaysia, in action initiated by People’s Bank, following a corporate disclosure being been made by MTD Walkers to the Colombo Stock Exchange on 9 September that MTD Capital Bhd. intended to transfer its majority shareholding in MTD Walkers to a third party.

People’s Bank presented the application before Court on the basis that MTD Walkers and its subsidiaries had obtained substantial facilities from People’s Bank and that an approximate sum of Rs. 7.3 billion remained due to People’s Bank. It argued that this amount may not be recoverable from MTD Walkers and its subsidiaries if the majority shareholding at MTD Walkers was transferred to a third party.

In its complaint People’s Bank also took up the position that there were already several pending cases instituted against MTD Walkers by several financial institutions including People’s Bank, which had lent substantial sums of money to MTD Walkers and its subsidiaries, and that enjoining orders had been obtained or were still in force in the said cases. 

People’s Bank also maintained in its complaint that given that there had been no effort by MTD Walkers to settle the sums owed to it, the transfer of the majority shareholding of MTD Walkers to a third party would inevitably cause immense loss and damage to People’s Bank. The bank added that several corporate guarantees had been given to People’s Bank by MTD Walkers as means of security for loans obtained by its subsidiaries.

People’s Bank also very clearly set out in its complaint that its intention was not to interfere with the operations of MTD Walkers and that it would consent to the transfer of the majority shareholding if a reasonable means of repayment was proposed to the bank by MTD Walkers or its parent company. People’s Bank also brought to the court’s notice that a similar enjoining order had already been issued by the Commercial High Court on 26 September 2019 against MTD Walkers and MTD Capital Bhd. in a case instituted by Commercial Bank on the basis of the fact contained in the corporate disclosure of MTD Walkers dated 9 September 2019.

People’s Bank in its application also named the Colombo Stock Exchange as a defendant in the application merely for the purposes of notice.

Judge Marikar, in the first instance by an order dated 23 October 2019, issued an enjoining order against MTD Walkers Plc and its parent company preventing the transfer of the majority shareholding of MTD Walkers Plc or the change of the ownership structure of MTD Walkers until such time as People’s Bank was consulted and an accepted settlement plan was proposed to People’s Bank in respect of the outstanding sums owed.

Pursuant to receiving notice of the plaintiff’s application, the defendants MTD Walkers and MTD Capital Bhd. filed objections to the plaintiff’s application to obtain interim relief. Pursuant to this, the parties filed their respective written submissions in respect of the interim injunction sought by People’s Bank in its complaint.

Accordingly, Judge Marikar, through an order dated 20 February 2020, upon consideration of all material placed before him and the submissions of parties, granted an interim injunction until the hearing and final determination of the case against MTD Walkers Plc and its parent company, preventing the transfer of the majority shareholding of MTD Walkers Plc and or change of ownership structure of MTD Walkers until such time as People’s Bank was consulted and an accepted settlement plan was proposed to People’s Bank in respect of the outstanding sums owed.

The case has been fixed for 1 June, when MTD Walkers and its parent company MTD Capital Bhd. of Malaysia will file a response in court.

MTD Walkers, which is engaged in multidisciplinary activities in Sri Lanka, has of late been at the centre of major controversy against a backdrop where both the company and its subsidiaries had obtained significant borrowings from many financial institutions and is unable to complete repayment.

People’s Bank was represented by President’s Counsel Dr. Harsha Cabral, along with Nishan Premathiratne and Nadun Wijayasriwardena on the instructions of Julius and Creasy.

MTD Walkers and MTD Capital Bhd. were represented by Suren De Silva on the instructions of DL and F De Saram.

The Colombo Stock Exchange was represented by FJ and G De Saram.