Asia Capital and Japanese investors reach amicable deal

Japanese Representative Toshiaki Tanaka (left) and Asia Capital Managing Director Raju Radha

 Japanese Investors pressured to settle after years of legal and corporate turbulence 

A long-running dispute between Asia Capital PLC and its Japanese investors has come to a close following a mutually agreed settlement, marking the end of nearly five years of legal battles, restructuring efforts, and complex negotiations that reshaped the company’s trajectory. 

The settlement follows a recent development in which the Fort Magistrate’s Court discharged a criminal complaint filed by CC Trust Ltd., against Asia Capital on jurisdictional grounds, the second such discharge effectively closing criminal proceedings without any ruling on the substantive allegations. 

The breakthrough came with a negotiated settlement between Asia Capital PLC and the Japanese investors, including CC Trust Ltd., and its nominee WS Trust Ltd. Under the terms of the agreement, shares held in River House Ltd., will be transferred as full and final settlement of the outstanding obligations between the parties. Both sides agreed to resolve all claims amicably outside the framework of prolonged litigation.

The settlement is expected to strengthen Asia Capital’s balance sheet while streamlining its capital structure. Company officials described the agreement as a constructive resolution achieved through sustained dialogue and negotiation rather than courtroom confrontation. 

The dispute traces back to events prior to 2020 involving investments made by Japanese stakeholders linked to CC Trust. The investors had alleged wrongdoing by the then management of Asia Capital, claiming that funds entrusted under a shareholder arrangement were improperly handled, including the conversion of deposits from US dollars into Sri Lankan rupees contrary to agreed terms. The complaint alleged criminal breach of trust and dishonest misappropriation. Asia Capital consistently maintained that the matter was commercial in nature and subject to contractual interpretation rather than criminal liability. 

Court proceedings ultimately focused on jurisdictional issues, with the Magistrate’s Court ruling that it lacked authority to adjudicate the dispute, thereby discharging the case without determining the merits of the allegations. A decisive turning point emerged in 2020 when majority shareholder QI Malaysia initiated a comprehensive restructuring program aimed at stabilising Asia Capital PLC and resolving longstanding disputes with foreign investors. 

As part of this effort, Asia Capital Managing Director Raju Radha, together with leading investment advisory firm Frontier Capital Partners Ltd., was brought in as consultants with a clear mandate to restore operational stability and negotiate a workable settlement with aggrieved investors. 

At the time, an earlier proposed settlement reportedly contemplated the transfer of all hotel assets owned by Asia Capital PLC to the Japanese investors – a move that would have effectively rendered the company incorporeal. This proposal was alleged to have been driven by three former directors who were placed under significant pressure by the Japanese investors and their legal representatives in connection with allegations of fraud, ostensibly in an effort to mitigate their own personal litigation exposure, even at the expense of the company’s long-term viability. 

In contrast, Radha pursued sustained and challenging negotiations focused on safeguarding the company’s core assets and preserving shareholder value. These efforts ultimately led to a revised settlement structure under which only the River House Hotel was transferred as part of the resolution framework, enabling the company to avert financial collapse while progressing toward a broader settlement. 

During this period, Asia Capital faced multiple legal actions, significant financial constraints, and reputational pressures. Industry observers noted that the company was entangled in overlapping litigation and arbitration threats that complicated resolution efforts and prolonged uncertainty. Company statements indicate that Radha’s leadership strategy centred on restructuring liabilities, rebuilding stakeholder confidence, and reopening constructive dialogue with Japanese investors represented by Toshiaki Tanaka, paving the way towards an eventual negotiated settlement. 

For nearly five years, both parties remained engaged in legal and commercial disputes across multiple forums. The disagreement became increasingly complex, involving contractual interpretations, cross-border investment considerations, and competing legal strategies.

Sources familiar with the matter said the prolonged conflict resulted in significant legal expenditure for both sides, with lawyers and advisers playing a dominant role throughout the process. Analysts note that extended litigation often increases costs while delaying commercial resolution – a pattern reflected in this case. Despite setbacks and repeated legal challenges, negotiations continued intermittently alongside Court proceedings. 

Market commentators view the episode as an important lesson for cross-border investors and corporations navigating complex commercial disputes. Analysts observe that such disputes are not always suited for criminal proceedings and that prolonged litigation can significantly increase costs for all parties involved. The experience demonstrates that direct negotiation and structured settlement discussions often produce faster and more practical outcomes. Ultimately, the resolution underscores the importance of early engagement between disputing parties instead of relying solely on legal channels, which can extend conflicts for years without delivering commercial certainty.