Monday, 10 March 2014 00:03
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Issues Notice of Action on several Directors for alleged malpractices following thorough investigations
Refers suspected criminal offenses to CID
Tough regulatory action deals fresh blow to TWOD on top of 19 March deadline from winding up applicants at Commercial High Court
The Securities and Exchange Commission (SEC) has stepped up its stranglehold on the transgressing Touchwood Investments PLC (TWOD) following the completion of investigations.
Last week, the SEC informed the Commercial High Court, which is hearing a winding up case of TWOD that Notices of Action have been issued on several Directors for alleged malpractices including market manipulation via non-disclosure. Furthermore SEC has also referred the case to the Criminal Investigation Department (CID) several suspected criminal offenses by TWOD and certain Directors.
The tough action by SEC follows conclusion of thorough investigations that lasted for over six months. Among alleged incidents of malpractices are overvaluing personal properties of Directors and selling them back to the company. Matters referred to the CID also include breach of trust and misappropriation of funds.
Investigations focused on ascertaining if any offence under the provisions of the SEC Act No. 36 of 1987 (as amended) or any rules or regulations made there under or the Listing Rules of the CSE have been committed.
When contacted, SEC Officer in Charge and Deputy Director General Dhammika Perera declined to give and confirm details but admitted that Court on 6 March was notified of certain actions taken. TWOD as of Friday hadn’t made a disclosure to the market about the recent measures taken by the SEC.
The latest regulatory action by the SEC is on top of TWOD being made the first listed corporate to suffer a freeze of all non-current assets without the prior approval of the SEC till the completion of the investigations. This action in September last year was done in a bid to prevent stripping of further assets.
Nine investors of TWOD’s timber plantation schemes in late September filed a winding up application in the Commercial High Court and the company which is under a new Chairman has so far failed to live up to the promises made to the Court with regard to settlement.
The application was after investors of Touchwood were given many assurances by the company over the years. These assurances came in the form of affidavits sworn by the Directors of the company and dated cheques issued by the company which were dishonoured, proving the insolvent state of the company.
A settlement was entered into by the parties on 31 October 2013 where the company sought to be wound-up undertook to pay all the investors of the Agarwood Plantation in Thailand to whom the Harvest Agreement Certificates were issued by the company and who failed to adhere to the terms of settlement. The terms of settlement were thus amended on several occasions upon numerous assurances given by the company to settle all the creditors.
The company filed in Court, a list of investors who will be paid by the company. As stated on 25 February 2014 in Court, the company also assured the keeping of a property as security and file the relevant documents in Court on 6 March 2014 which they failed to do.
The cheques issued to the Petitioner and eight other intervening creditors, by Touchwood Investments PLC CEO Lanka Kiwlegedara from his personal bank account, were all retuned due to insufficiency of funds in his account. These cheques dated 27 February 2014 were presented in open Court to the Petitioner and the creditors by the CEO of Touchwood when the case was called on 27 January 2014.
The company requested the investors to present the cheques on 3 March 2014 despite the cheques being dated 27 February 2014. The cheques that were presented on 3 March 2014 were returned nonetheless, and no reasoning was given by the company. The day before the court date (5 March, 2014) the company filed a motion in Court stating that the cheques had been returned due to the insufficiency of funds in the bank account of the CEO as there has been a delay in the remittance of funds from the account of a foreign investor in a bank in China.
The company sought further time to honour the cheques issued and it was also stated that the CEO has requested a temporary overdraft facility from his local bank to honour the said cheques.
Commercial High Court Judge Amendra Senevirathna appreciated the fact that in any event an offence has been committed by the CEO of the company as cheques issued from his account have been returned. The next hearing of the application is on 19 March.
