Pelwatte fights back against “illegal takeover” by Govt.

Owners of the listed Pelwatte Sugar Industries Plc is fighting back against what it described as “illegal takeover” by the Government since the company’s land does not fall under the ambit of the recently-passed Revival Act, nor its assets qualify to be termed underutilised.

The PSIL also said that the 4,302 hectares of the land was leased 25 years ago, hence the provisions of the new Act are inapplicable. It said that PSIL has irrevocably and unconditionally been appointed as its agent by the Sri Lanka Sugar Corporation, for further 3,300 h.a. that was given to settlers to grow sugar cane. (These agreements have been entered on 1 April 1985 i.e. over 25 years before the enactment of the act).

As the act does not have any provisions to revoke an appointment as an agent (within 20 years or beyond), provisions of the said Act are inapplicable to the said land.

PSIL does not possess nor own 6,300 hectares that has been give to this company within 20 years prior to 9 November 2011.  “If  according to the State records the company has acquired land on lease or any other basis from the State on or after 9 November 1991, we do not have any objection of such land been taken over and that too according to the procedure outlined in the said act,” the company said.

It also emphasised that the land where the nucleus estate, settler areas, sugar plant, distillery, staff accommodation, administration buildings, etc. have been with the company since 1985 and hence clearly do not fall within the ambit of the Revival of Underperforming Enterprises and Underutilised Assets Act. Therefore any action by the State officers to ‘takeover’ is clearly illegal.

Pelwatte has made detailed representations to the Treasury, excerpts of which were filed on the Colombo Stock Exchange as disclosure under listing rules.

The company has categorically stated that its land is not underutilised nor has the company sought to increase ethanol production at the cost of the production of sugar as alleged by several persons in justifying a vesting (in the mistaken belief that the act intended or provides for to vest the land that was vested in PSIL).

Whilst the company is yet to be informed by the State on the plan of action they proposed to take after the enactment of Revival of Underperforming Enterprises and Underutilised Assets Act, several State officials had entered the premises of this company in Pelwatte, held meetings with the staff and issued ‘instructions’.

Here is the full disclosure by the Pelwatte Sugar Industries Plc Director Maximus R. Peries:

As previously reported the company is yet to be informed by the State on the plan of action they proposed to take after the enactment of Revival of Underperforming Enterprises and Underutilised Assets Act. Meanwhile, we were informed that several State officials had entered the premises of this company in Pelwatte, held meetings with the staff and issued ‘instructions’.

Therefore, the Resident Executive Director of the Company Capt. Ranjith Wettewa (SLN Retd), RSP, on behalf of the shareholders of Pelwatte Sugar Industries PLC, has communicated to the Secretary to the Treasury to inform the officials that the premises in Pelwatte have not been vested in the State, under any provision in the Revival of Underperforming Enterprises and Underutilised Assets Act. 

In his letter he has requested the Secretary to the Treasury to consider the following and to request the premises be handed back to the company as any delay will cause irreparable harm due to many reasons, most importantly delay in replanting of cane for the next season.

The applicability of the act

 

The act was passed to vest with the State any underutilised land that has been given to an undertaking within a period of 20 years prior to the date of passing of the bill.

Approximately 4,302 h.a. of the land that was leased for the purposes of Pelwatte Sugar Industries PLC has been granted on lease on 27 June 1985.

As this land has been leased to PSIL over 25 years ago, the provisions of the said act are inapplicable to the said land.

The relevant section (Section 9) from the act was quoted.

Section 9 (a) of the said proposed act defines “underutilised assets” as:

“ (9)(a) land, that was owned by the Government or a Government Agency and alienated within a period of 20 years prior to the date of the coming into operation of this act, to any person by transferring freehold or leasehold rights or through a divesture on the basis that the related operations proposed to be carried out on such land will result in generating employment, foreign exchange earnings or savings or economic activities, beneficial to the public, but where such benefits as aforesaid have not accrued, being prejudicial to the national economy and public interest;

PSIL has irrevocably and unconditionally been appointed as its agent by the Sri Lanka Sugar Corporation, for further 3,300 h.a. that was given to settlers to grow sugar cane. (These agreements have been entered on 1 April 1985 i.e. over 25 years before the enactment of the act).

As the act does not have any provisions to revoke an appointment as an agent. (within 20 years or beyond) provisions of the said act are inapplicable to the said land).

Further the company does not enjoy any tax or neither other incentives at present nor the Government of Sri Lanka has given any guarantee to a third party on behalf of the assets of or on any amount payable by the company. Further the company by its operation has saved foreign exchange both by producing massive volume of sugar during the 25 years and also saved foreign exchange by locally producing ethanol. The provision of employment by the company was so much that majority of the population in the Buttala area depend on the company directly or indirectly for their livelihood.  Even if one is to assume that is not the case to according to the Section 9 (b) of the Act only the land that is given on or after 9 November 1991 can be taken over if these conditions prevail, and hence the land that is entered by the state officials are definitely do not fall in to this category.

Relevant section (Section 9) from the Act was quoted.

Section 9 (b) of the said proposed act defines “underutilised assets” as:

(9) (b) land owned by a person that had been granted within a period of 20 years prior to the date of the coming into operation of this Act, either, any tax incentives under any law relating to the imposition and recovery of any tax, incentives under the Board of Investment Law or regulations framed there under, or any Government Guarantee, on the basis that the related operations proposed to be carried out connected thereto will result in generating employment, foreign exchange earnings or savings or economic activities, beneficial to the public but where such benefits as aforesaid  have not accrued, being prejudicial to the national economy and public interest;

Therefore, the Executive Director has said in his letter that it is abundantly clear in terms of the said proposed act, the only the lands if any, that were owned by the Government or a Government Agency and alienated within a period of 20 years prior to the date of the coming into operation of this act now owned or possessed by PSIL could be vested in the Secretary to the Treasury. Hence we stated that the land with PSIL outside of the said 20-year period clearly falls outside of the ambit and purview of the said definition of ‘Underutilised Asset’.

He has also emphasised that to the best of our knowledge PSIL does not possess nor own 6,300 hectares that has been given to this company within 20 years prior to 9 November 2011.  We further said that if  according to the State records the company has acquired land on lease or any other basis from the State on or after 9 November 1991, we do not have any objection of such land been taken over and that too according to the procedure outlined in the said act.

He also emphasised that the land where the nucleus estate, settler areas, sugar plant, distillery, staff accommodation, administration buildings etc. have been with the company since 1985 and hence clearly do not fall within the ambit of the Revival of Underperforming Enterprises and Underutilised Assets Act. Therefore any action by the State officers to ‘takeover’ is clearly illegal.

Underutilisation

He has also pointed out in his letter that the land is not underutilised, nor the company has sought to increase the ethanol production at the cost of the production of sugar as alleged by several persons had justified a vesting (in the mistaken belief that the act intended or provides for to vest the land that was vested in PSIL).

Production data from the period of April 2011 to 9 November 2011 was provided as below.

Cane crushed in MT    Sugar produced in MT    As a % of MTT of cane crushed     MT of molasses    As a % of MT of cane crushed

330,393    28,860    8.7    16,231    4.9%

His letter mentioned that the outturn of the ethanol (3,690,000 litres) based on the MTs of cane crushed is 11.1%.

The Executive Director says in his letter that the company believes that the alienation of the said lands owned by the State (more than 20 years ago) and the land PSIL acting as agent of Sri Lanka Sugar Corporation (since 1985, more than 20 years ago) that the said land is adequately utilized and has produced sugar and ethanol and therefore, the said lands could not have been included as underutilised assets in terms of the definition set out in Section 9 of the said proposed Act.

He has further said in spite of the position that is very clearly explained in (1) and (2) above, if State officials proceed to ‘takeover’ or occupy the lands assuming to be illegally ‘vested’ with the Secretary to the Treasury on the disguise of provisions of the said proposed act, which are very clearly inapplicable, or under any other pretext, it would be illegal, unreasonable, arbitrary action and it would be contrary to the scope of the said act and specifically to Section 9 of the said Act, and intention of the legislature in enacting the said act. It will therefore be a blatant violation of the rights that are assured by the Constitution of Democratic Socialist Republic of Sri Lanka to the company and its share holders.

He also has stated that, any such illegal ‘takeover’ of leased assets of a publicly listed company for over 25 years will be an embarrassment to the Government and also internationally to the country as a whole. It would therefore be immensely detrimental in the promotion of listed and other investments in the country in order to create employment opportunities.

He had therefore requested the Secretary to the Treasury to instruct the State officers that have entered the premises of this company in Pelwatte and have assumed ‘control,’ to refrain from acting illegally and not to hinder the management of the company by the Executive Director who was appointed by a legally constituted board of a listed company and immediately leave the premises.

He also requested to inform the officials who have entered the factory illegally that they will be held responsible for any loss of stocks or movable or immovable assets, loss of production capacity, losses due to delays in replanting, etc. and any other losses that will be incurred by the shareholders of this public listed company.

The letter was also copied to the Government Agent – Hambantota, the Assistant Government Agent – Hambantota, Senior Superintend of the Police – Monaragala and to the Manager – HRD Pelwatte facility.