CB and the controversial Gazette of 1 January 2015 – The plot thickens

By Janitha Devapriya

The controversial Gazette of 1 January 2015 which became the hotly-discussed topic after it was highlighted during the proceedings of the Presidential Commission of Inquiry on the bond ‘saga’ of 27 February 2015, drew reactions and comments from a wide range of observers having a keen interest in the matter. 

It prompted the Central Bank to issue a special communique to reassure the market and the general public that the bond issues covered by the said Gazette are valid and no one should entertain any qualms about the bonds in their possession or those who are dealing with them.

The Central Bank’s statement went on to say, “Accordingly, the CBSL reiterates the view that it has been in compliance with the intent of the said provisions of the RSSO (Registered Stocks and Securities Ordinance No. 7 of 1937). The CBSL assures the general public that the Treasury bonds issued on behalf of the Government of Sri Lanka have full legal authority and effect.”

A careful reading of the particular section of the ordinance which states, “Section 4. (1) The Minister in charge of the subject of Finance shall, in respect of each loan to be raised under this Ordinance, specify by Order published in the Gazette—

(a) the sum of money to be raised by that loan;

(b) the modes of raising the loan and the manner in which such loan is to be raised;

(c) the rate of interest payable on the loan or the method of determination of the rate of interest payable;

(d) the dates on which interest on the loan shall be payable;

(e) the rate at which, and the periods at the end of which, appropriation out of the Consolidated Fund and assets of Sri Lanka shall be made as a contribution to the sinking fund established for the purpose of redeeming that loan and the date from which such contributions shall commence;

(f) the date of redemption of the registered stock or securities to be issued for the purpose of raising that loan”,

The section is quite emphatic that the prescribed execution is predefined or before the issue of debt instruments pertaining to the stipulated loans by the use of terms, ‘Minister in charge of Finance shall’, ‘to be raised’, ‘is to be raised’, ‘interest payable’ and ‘shall be payable’ (future tense) and the section does not envisage any instance where the notification follows the prescribed activity. 

In other words, the relevant section does not cover a ‘post operation’ situation in respect of Government borrowings through the issue of Treasury bonds. Section 4 (1) is precise and there is no ambiguity.

Under the circumstances, how can the Central Bank state that it has been in compliance with the intent of the said provisions of the RSS Ordinance? Besides, what authority does the Central Bank possess to interpret an Ordinance, Act of Parliament or a Bill or even a section or a clause thereof, which is rightfully coming within the ambit of the Courts? In addition, how can a newspaper or website advertisement substitute the import of the Gazette notification prescribed in Section 4 (1) of the ordinance? The Central Bank therefore appears to have overstepped its duty and authority.

The communique is silent about the delay in publishing the Gazette and provides no explanation as to how former President Rajapaksa’s signature by way of a rubber stamp or otherwise appeared on the Gazette notification dated 1 January 2015 printed and published in November 2016. President Rajapaksa has denied his signature and thus made the said Gazette notification invalid. This may possibly make the bonds issued under the said invalid Gazette, whether ‘pre or post operation’, illegitimate. 

President Rajapaksa had stated that he would go to courts on the matter. It would be very revealing if it happens. Nandalal Weerasinghe, a Deputy Governor of the Central Bank, has stated to another weekend newspaper that the Gazette in question had not been signed by the former Finance Minister nor the current Minister but President Rajapaksa’s name appears in the notice. This makes the said Gazette invalid beyond doubt. He claims that there has been at some point an oversight in following the proper procedure by Central Bank officials. Who are these officials? Can Deputy Governor Weerasinghe distance himself from this Central Bank blunder? Is he trying to pass the buck to the present Governor or another Deputy Governor? Where is the collective management responsibility?

It appears that the Central Bank is now trying to apportion the blame on the Government Printer. 

President Rajapaksa has commented to the same weekend newspaper that the Gazette had been published long after the date and he did not sign it. He sees this as a diabolical attempt to mislead the public and palm off the Yahapalanaya Government’s crooked bond issues on him. 

Dinesh Gunawardena stated to the same newspaper that they reject the comments of Finance Minister Karunanayake and called for a special debate on the matter and went further in calling for the resignation of Karunanayake. This is more like ‘Koheda yanne? Malle pol’ (Q: Where are you going? A: There are coconuts in the bag).

Therefore, the Central bank will be required to answer many more questions on this issue.