Colombo District Court issues enjoining order restraining Tourism Development Authority

Thursday, 18 June 2020 00:15 -     - {{hitsCtrl.values.hits}}


  • Dispute over cancellation of lease agreement signed for resort in Yala with Lanka Realty Leisure – successor to Ascot Leisure

Colombo District Court Judge Amali Ranaweera has issued an enjoining order against Sri Lanka Tourism Development Authority (SLTDA) preventing it from cancelling the lease agreement with Lanka Realty Leisure Ltd. for a resort in Yala.

The enjoining order was to prevent SLTDA from cancelling the lease and if such steps have been already taken to make such action null and void ab initio and prevent the SLTDA from granting the rights of the land mentioned in the Lease to another 3rd Party.In their plaint, Lanka Realty Leisure (formerly known as Ascot Leisure Ltd.) stated it entered into a lease with SLTDA (the Defendant) by Lease Agreement No. 117 dated 13 May 2014 attested by P.D.I.S. Punchihewa Notary Public for a period of 99 years.

The lease was granted to the plaintiff company after an extensive and rigorous screening process, where the Government at that time decided that after the end of a 30-year war that the Yala Palapatuna area should be developed and interested potential investors were given an opportunity.

Subsequently after the Plaintiff Company fulfilled its obligations in the preliminary period as set out in the lease, final approval to commence construction was granted on 16 April 2016 and eventually complete construction within a period of two years from that date, subject to the terms of the lease, where extension of such period was possible.

In September 2017, there was a takeover of the holding company, Ascot Holdings PLC (now known as Lanka Realty Investments PLC) by a group of foreign investors, who are now managing the group. Due to a fraudulent share transfer during the takeover, interim injunctions were filed in case No: HC (Civil) 07/2018 CO against the respondent companies Ascot Holdings, Ascot Leisure, and Fairway Holdings Ltd., with regard to the purported transfer of shares. 

This prevented the company from pursuing ordinary functions and even routine matters such as filing of the annual return was delayed. Hence, it was advised to defer commencement of the project until this issue was resolved. 

The situation was duly informed and explained to then Chairman Kavan Ratnayake by discussion on 6 April 2018 and letter also dated 6 April 2018 along with a copy of the court proceedings and by letter dated 5 June 2018. 

Subsequently the case was settled by both parties, and by letter dated 11 April 2019, the situation was informed to then Chairman Kishu Gomes.

As no written response to any of the correspondence was received, the Plaintiff Company was under the impression that an extension to complete the project was acknowledged.

Furthermore the Easter attacks occurred in April 2019, which among other matters caused irreparable harm and damage to the country, especially the tourist industry. The Government through the Central Bank granted moratoriums for the businesses to survive.

Much to the Plaintiff Company’s dismay, a letter dated 13 November 2019 was posted on 15 November 2019, a day prior to the Presidential Elections (which was only received by the Plaintiff on 28 November 2019), without any communication or even an attempt to hold a meeting. 

SLTDA resorted to such devious means of usurping its foreign investors, at a time when Sri Lanka is trying to raise its head in the aftermath of the Easter attacks in April 2019. It is also pertinent to note that the Board of Directors of the SLTDA was not constituted during this period.

No purported letters sent by the SLTDA were ever received by the Plaintiff Company.

The Plaintiff Company was shocked and perturbed that the SLTDA, which is the apex Government body for the development of the Tourism Industry in Sri Lanka, would seek to act in such an unreasonable and irrational manner, by purportedly seeking to ‘treat the project as abandoned’ and attempting to retrospectively ‘take over possession … with effect from 4th November 2019’ as per their letter dated 13 November 2019.

The company had a meeting with Cabinet Minister for Industrial Exports and Investment Promotions, Tourism and Aviation Prasanna Ranatunga on 13 December 2019 and was introduced to the new SLTDA Director General Chandani Werapitiya.

Subsequently, a cordial meeting was held at the SLTDA office on 16 December 2019 with Chandani Werapitiya General, along with Assistant Director – Legal Inoka Punchihewa. 

The Plaintiff Company has made an initial investment of about approximately Rs. 30 million as a premium and all lease rentals up to 31 December have been made. 

Although it had requested an urgent meeting with the present Chairperson, it was finally given an audience only on 3 February.

Plaintiff believes that the matter was to be resolved and settled in its favour, however it has learned that the SLTDA has once again unlawfully decided to purportedly terminate the lease.

When the SLTDA realised that the Plaintiff Company was ready to commence the project and decided that the way forward would be to amicably settle the matter, the SLTDA Chairperson did not wish the Plaintiff to go ahead with the project, and may have an ulterior motive in actively pursuing the SLTDA to terminate the said lease.

The Plaintiff has reliable information to show that the SLTDA has fraudulently taken steps to execute a deed of cancellation without the consent of the lessee (the Plaintiff Company). In such circumstances, such a deed of declaration is bad in the eyes of the law. This is further enhanced by the fact that the country is just emerging from effects of the COVID-19 lockdown and the SLTDA is still adamant to prevent investors from commencing projects, the Plaintiff said.