Claims regarding Hotel Developers Lanka Ltd. (HDLL)

1. Introduction

Mr. Nihal Sri Ameresekere, a Professional Consultant, had been a main Promoter, Director and Subscriber of Hotel Developers (Lanka) PLC (HDL), which had promoted and developed the Hilton Hotel, immediately after the ethnic riots of July 1983.

1 (a) Upon having discovered a fraud in the construction of the Hilton Hotel, Mr. Ameresekere, as a Shareholder of HDL, had filed in 1990 a derivative action in law, in the right and on behalf of HDL, D.C Colombo Case No.3155/ Spl, preventing any payments being made to the Japanese Consortium, Mitsui & Taisei, who constructed and developed the Hilton Hotel, as and by way of Loans to HDL, which had been guaranteed by the Government.

2. Subsequently, in the context of Japan at that time having been the major aid provider to Sri Lanka, the Secretary to the Treasury and the Hon. Attorney General had intervened with Mr. Ameresekere urging that his Cases be amicably settled.

3. Accordingly, draft Settlement Agreements had been formulated by the Hon. Attorney General, in concurrence with the Treasury, and which had been forwarded to Mr. Ameresekere in June 1993. These Settlement Agreements, on the insistence of Mr. Ameresekere, had provided for defaulted interest for 9 years on these Japanese Loans and 30% of Loan Capital to be written-off, with the balance unwritten of Loans to be re-scheduled over period 13 years at 6% p.a.

4. For such benefit gained by the Government, as the Guarantor of the Loans, the Government had agreed to adequately compensate Mr. Ameresekere for his professional time and efforts, and to afford him representation on the Board of Directors of HDL, as per the Clauses in the draft Settlement Agreements.

5. The Settlement which had been initiated during the tenure of President R. Premadasa had been endeavored to be concluded in 1994 by president D.B. Wijetunga, together with Hon. Attorney General and Mr. Ameresekere. However, with the Japanese Consortium having insisted upon Promissory Noted from the Government, in addition to the Government Guarantees, Mr. Ameresekere had declined to conclude the Settlement.   

6. Thereafter in June 1995, the Settlement Agreements on the lines of the above drafts, had been executed, with the Hon. Attorney General having approved the same, after having adduced and obtained approval therefore from the Special Presidential Commission inquiring into this fraud, and with Cabinet Approval.

7. On the insistence of Mr. Ameresekere, the Japanese Consortium had agreed to write-off 10 years’ defaulted interest and 30% of Loan Capital, and to reschedule the balance un-written of Loans over a period of 16 years, at a reduced rate of interest, and had agreed to receive Promissory Notes from HDL, and not from the Government, which conditions were further improvements on those in June 1993.

Thus by the Settlement entered into in June 1995, the Japanese Consortium wrote-off Jap. Yen 17,586 Mn., i.e. then US$ 207 Mn., / SL Rs. 10,200 Mn., on the Government Guarantees, and re-scheduled the unwritten-off balance over a further period of 16 years up to 2010 (originally fully payable by 1999) at a reduced rate of interest of 5.25% p.a. (originally of 6.00% p.a.), with a grace period of one year, to further financially re-structure HDL.

8. In view of the immense benefit gained by the Government, as had been contained in the draft Settlement Agreements of June 1993, the Government had agreed to compensate Mr. Ameresekere for his professional time and efforts, and to afford him representation on the Board of Directs of HDL, as per the Clauses in the signed Settlement Agreements of June 1995.

9. The compensation to be paid by the Government for Mr. Ameresekere’s professional time and efforts for the write-offs, reductions and re-scheduling of the Government Guaranteed Loans had been agreed to determined by an independent financial/merchant banking institution, in terms of a Schedule to the signed, Settlement Agreements. Apart from the financial claims Mr. Ameresekere has requested 3 board members to be nominated by him to the HDL Board. To settle that matter amicably he has agreed to one seat to be nominated by him in the HDL board.

10. As noted in several communications sent by Mr. Nihal Sri Ameresekere, he has contributed towards resolution of HDLL related issues. Attention is drawn to the report dated 19.07.2006 titled — “Report on the amount payable to Mr. Nihal Sri Ameresekere for the services rendered buy him re – Hotel Developers (Lanka) Ltd.” (HDL) – Examination of the MBSL Report and updating thereof for discussions with the Government by Jayaweera & Co., Chartered Accountants.

11. After a several endeavors towards reaching a settlement, Mr. Ameresekere by his letter dated 12.12.2014 addressed to Mr. Lalith Weeratunga, Secretary to the President Mr. Mahinda Rajapaksa and copied to Dr. P.B. Jayasundera Secretary to the Treasury and General Manager - Bank of Ceylon, has confirmed that he is agreeable to a full and final settlement of Rupees Three Hundred Million (Rs.300 Mn.) against his claims with Rs. 100 Mn. Thereof being immediately advanced as an Overdraft Facility through the Bank of Ceylon.

12. In this background, the Treasury by a letter dated 15.12.2014, has communicated to the General Manager Bank of Ceylon with a copy to Secretary to the President and the Competent Authority that the Treasury has no objection in granting an advance of Rs.100 Mn. to Mr. Ameresekere in view of the proposed final settlement in lieu of the all claims with respect to HDL, which may be finalized in consultation with the Competent Authority appointed under the Revival of Underperforming Enterprises or Underutilized Assets Act No. 43 of 2011 and that the final claim amount will be remitted to him upon the finalization of the claims. This without hesitation would certainly have had the concurrent approval of then President, Finance Minister, Mahinda Rajapaksa.

13. As this is a matter that is pending with regard to HDLL which is an enterprise that has vested with the Government in terms of Revival of Underperforming Enterprises or Underutilized Assets Act No.43 of 2011. In this backdrop and considering the fact that Mr. Ameresekere’s claims are on account of services rendered with regard to Hilton Hotel this matter was deliberated by me and Secretary to the Treasury with officials.

14. Until a final decision was made to honor the undertaking given to Mr. Ameresekere, Rs.100 Mn. overdraft facility was augmented by further Rs.125 Mn. in June 2015.

15. Having deliberated the merits of Mr. Ameresekere’s total claim it appears that reaching a finalization on this long drawn matter, on the basis of a Full and Final settlement would be beneficial, since HDLL could then proceed with its activities as a business enterprise, free from this long drawn compensation payment committed by Mr. Lalith Weeratunga, Secretary to the President, Mr. Mahinda Rajapaksa. The value of the write-off and rescheduling of the balance by Mr. Ameresekere amounts to Rs.86,750 Mn.

16. Approval

As such approval of the Cabinet of Ministers is sought;

(i) To proceed with a settlement noted above as confirmed by Mr. Ameresekere, having paid a total of Rs.300 Mn. plus the interest up to date of the cabinet decision of the overdraft facility granted (Rs.225Mn.) to Mr. Ameresekere, on the basis that it will be the full and final settlement while also undertaking that Mr. Ameresekere would not seek any further redress in any court or forum in this regard.

(ii) To direct the Direct General National Budget Department to provide necessary allocations for the above (i) payments.