Janaka Ratnayake withdraws HC case against The Finance

Monday, 29 November 2010 01:45 -     - {{hitsCtrl.values.hits}}

By S.S.Selvanayagam

Former Chairman of the Merchant Bank of Sri Lanka (MBSL) Janaka Ratnayake last Friday (26) withdrew his pending High Court case which restrained The Finance Compay (TFC) proceeding with the proposed share issue.

The Petitioner Ratnayake withdrew his legal action through his instructing attorney-at-law Moahan Balendra sequent to the request made by the Director of the Department of Supervision of Non-Bank Financial Institution of the Central Bank.  

The Colombo High Court had on 10 November issued an Interim Order restraining the respondents from granting approval for the waiving off of the pre-emptive rights of holders of voting ordinary shares and workers shares (non-voting shares) to a new issue of shares in respect of The Finance Company Plc.

High Court Judge Rohini Walgama had also issued the Interim Order restraining the private and/or the issue of up to One hundred million non voting ordinary shares to fixed deposit holders and/or the issue of up to 40 million ordinary voting shares through public subscription or otherwise at the Extraordinary General Meeting of The Finance Company which had been scheduled to be held on 11November pending the hearing and determination of petition filed by Janaka Ratnayake.

The Director of the Department of Supervision of Non-Bank Financial Institution in his letter to the petitioner Ratnayake stated that the direction of the Monetary Board to recapiltalise the TFC was issued taking into consideration its deteriorating financial conditions and the resultant adverse impact to the interests of its depositors and other stakeholders and the stability of the financial system of the country in general.

He made the request to petitioner Ratnayake to consider the withdrawing the pending court case before the HC in the greater interests of the depositors of the TFC.

On this request, the petitioner moved to withdraw his application without prejudice to his rights as a shareholder of the respondent Company.

Petitioner Janaka Ratnayake in his litigation cited Ceylinco Investment Company Ltd, J.L.B.Kotelawala, Secille P.Kotelawala, Sanka Wijesinghe, A.P.G.Karunathilake, and The Finance Company as respondents.

M.A.Sumanthiran with Niran Anketell and J.Arulananthan instructed by Moahan Balendra had appeared for the petitioner.

The petitioner is the Chairman of the Merchant Bank of Sri Lanka (MBSL). There was the collapse of the Ceylinco Group of Companies. The Central Bank invited the MBSL to step in and deal with the management of some of these Ceylinco Group of Companies that were ailing based on the performance of the petitioner and the MBSL.

In the process, the MBSL accepted it and had turned the Ceylinco Savings Bank into a profitable institution. Thereafter Trillium Residences and City House and Real State Company sought the petitioner’s assistance. The Petitioner and the MBSL took them over and managed those as well.

In respect of Ceylinco Investment Company Ltd and The Finance Company, the petitioner owns 500,000 shares in the Ceylinco Investment Company Ltd. That amounted to 46.35% and the Merchant Bank owns an equal amount of shares — another 46.35%.

Subsequently, several matters are pending in the Supreme Court in Fundamental Rights Applications reports as to what he was doing with regard to managing these ailing companies.

On 6 August, the Supreme Court made order cancelling the issue of 500,000 shares belonging to the MBSL and petitioner in Ceylinco Investments Ltd. The Attorney General has gone into this affair and found that it was an illegal transaction and that the transaction was cancelled.

On the application of parties, the Supreme Court issued order on petitioner Janaka Ratnayake that he should not serve in any of the Boards of the Ceylinco Group of Companies nor on the Board of Merchant Bank in view of the said transaction which the Attorney General had gone into and which has been found to be fraudulent.

This order was suspended by the Court on the basis that the petitioner was not a party nor was he ever heard.

In the meantime, there is an Extraordinary General Meeting called for on 11November by The Finance Company where the petitioner is to convert depositors’ deposit to the shareholdings to issue 100 million non-voting ordinary shares and 40 million ordinary voting shares.

The Ceylinco Investment Company of which the petitioner has 46% shares, owns 36% of The Finance Company shares. If the resolutions granting approval for the waiving off of the pre-emptive rights of holders of voting ordinary shares is passed, the petitioner alleged that the shares would reduce to 4%.

The petitioner stated that the Ceylinco Investment Company is acting on the basis that the petitioner and the MBSL who together hold more that 85% shares are not shareholders on the basis of earlier Supreme Court order which has later been suspended.

The Petitioner is seeking the stay the passage of these resolutions on the basis that the petitioner is a shareholder of the Ceylinco Investment Company.