Neth FM resolves law suit on Rights Issue

Monday, 2 January 2012 00:43 -     - {{hitsCtrl.values.hits}}

By S.S. Selvanayagam

The lawsuit on rights issue in respect of Neth FM is being resolved with an agreement between the both parties in dispute.

For the settlement of the lawsuit in the High Court, the petitioners Lakasia Holdings (Pvt) Ltd. and Sanka Kanchana Wasala Liyanahe of Australia had entered into agreement with the respondents Asset Radio Broadcasting (Pvt) Ltd. and its Director Nihal Seneviratne Epa.

The agreement was signed by Sudath Perera Associates for the Petitioners and Murugesu & Neelakandan for the Respondents.

Having arrived at a settlement of the lawsuit, both parties moved to Western Province High Court that the Court be pleased to accept the following terms of the said settlement and pass a decree as set out hereinafter:

The 1st Respondent Company and/or the 2nd Respondent shall purchase, from the 1st and 2nd Petitioners, the 4,600,000 shares and 400,000 shares they respectively presently hold in the 1st Respondent Company, under and in terms of Section 64 of the Companies Act No. 07 of 2007, for a total price and consideration of Rs. 92,000,000 to be payable to the 2nd Petitioner.

Out of the aforesaid price and consideration of Rs. 92,000,000, a sum of Rs. 69,000,000 to be paid by way of Bankers Draft in favour of the 1st Petitioner and Rs 6,000,000 to be paid by way of Bankers Draft drawn in favour of the 2nd Petitioners and both Drafts to be paid on or before 21st October 2011 upon the 1st and 2nd Petitioners delivering, to the 1st Respondent Company and/or the 2nd Respondent, duly executed Share Transfer Forms in such form as is required to effect the aforesaid purchase of shares. The 1st Respondent Company shall bear all stamp duties and other Government Taxes and/or levies on such transfer of shares.

(a) The parties agree that a separate Agreement has been entered into between Dell Holdings (Pvt) Ltd., a company associated with the Petitioners, and the 2nd Respondent, wherein the parties thereto have agreed to sell and dispose of within one year, certain lands in which the said parties have interests. The 1st Respondent and the 2nd Respondent agree that the balance sum of Rs 17,000,000 payable hereunder on the purchase of shares shall be paid from and out of the entitlement of the 2nd Respondent immediately upon a sale or sales under the said Agreement, and the Petitioners and/or the said Dell Holdings (Pvt) Ltd. shall be entitled to deduct and recover the said balance sum of Rs. 17,000,000 from and out of the monies thereunder, in satisfaction of the sum of Rs. 17,000,000 due to them hereunder.

(b) If the balance sum of Rs. 17,000,000 payable on the purchase of shares remain unpaid by 5 October 2012 on a sale of lands as referred to in clause 3 (a) or the said lands remain unsold the said sum shall be payable jointly and severally by the 1st Respondent Company and/or the 2nd Respondent to the 2nd Petitioner and delivered to the Petitioners’ Registered Attorneys-at-Law.

4. Upon recovery and/or delivery of the payment of the sum of Rs. 17,000,000 as aforesaid, satisfaction of decree shall be entered and the parties shall have no claims whatsoever against each other in respect of the subject matter of this Actions.

5. The Respondent Company hereby irrevocably represents to the Petitioners that after performing the foregoing agreement to purchase the shares, the 1st Respondent Company is and will be able to satisfy the solvency test, and that the 1st Respondent shall not be entitled to plead inability to satisfy the solvency test, in avoidance of the obligations undertaken hereunder.

6. The balance sum of Rs. 17,000,000 payable hereunder shall, for all intents and purpose, be treated and considered as a judgment entered of consent in favour of the Petitioners against the 1st and the 2nd Respondents jointly and severally, and in the event of the 1st Respondent Company and/or the 2nd Respondent failing to make the payment of the aforesaid sum of Rs. 17,000,000 in full as aforesaid to the 2nd Petitioner:

(a) The Petitioners shall be entitled to obtain Writ of Execution against the 1st Respondent Company and/or  the 2nd Respondent jointly and severally in a sum of Rs. 17,000,000 or, if part payments have been made, in such balance sum as may remain unpaid, together with Interest thereon at ten per centum per annum from 6 October 2012 until payment in full, without notice despite the lapse of one year from the date hereof, and shall also be entitled to recover all costs incurred by the Petitioners in executing the Decree.

(b) In the event of a default in the payment of the said balance sum of Rs. 17,000,000 in addition to the remedy provided for in 6(a) above, the Petitioners shall be entitled to have the 1st Respondent Company wound up by this Court under and in terms of the provisions of the Companies Act No. 07 of 2007, and the 1st Respondent Company and the 2nd or 3rd Respondents shall be entitled to object or to be heard in opposition of the Winding Up of the 1st Respondent Company.The Western Province High Court had earlier issued an Interim Order preventing the Asset Radio Broadcasting (Pvt) Ltd., which operates FM Radio, from issuing/registering any shares or taking any further action in connection with the rights issue of shares.

It had also issued another Interim Order preventing from in any way or manner taking any step in connection with and/or consequent to the rights issue of shares including voting and/or permitting any voting on the purported rights shares and/or from holding out in any manner whatsoever that the said shares form part of its equity capital.The Court made these orders sequent to the litigation initiated by Lak Asia Holdings (Pvt) Ltd. and Sanka Kanchana Wasala Liyanage of Kandy who is presently residing in Australia. Petitioners claimed they are shareholders of the said Company, holding together 50% of the stated capital of the Company.

They cited the Asia Asset Radio Broadcasting (Pvt) Ltd., Nihal Seneviratne Epa who is purported to be a Director and the Chairman of the Board of Directors of the Company, Lasantha Joseph Milroy Peiris and Businessmate (Pvt) Ltd. as Respondents.

They stated that Nihal Seniviratne Epa controls 50% of the capital of the Company and a former shareholder Milroy Peiris continues to be a Director of the Company. Petitioners alleged that their lawful demand to be appointed as Directors of the Company was wrongfully and unlawfully refused and not complied with.They brought to the cognisance of the Court that the Directors recently passed a resolution authorising the Rights Issue of Nine new shares for every 20 shares held at Rs. 10 per share to raise the total sum of Rs 45 million claiming to finance the proposed expansion to move forward aggressively on all fronts.

They complain that the purported rights issue of shares and the purported provisional allotment is contrary to law, wrongful, unfairly prejudicial and do not obtain in law and null and void.