Tuesday Jul 07, 2026
Tuesday Jul 07, 2026
Monday, 6 July 2026 05:18 - - {{hitsCtrl.values.hits}}
Petitioners appeared before the Commercial High Court last week seeking leave to bring a derivative action against the Board of Directors and external auditors of National Development Bank (NDB), arguing that it was lack of due oversight, and not just the fraud itself, which caused the bank’s losses.
President’s Counsel Faiszer Musthapha, appearing with Shaheeda Barrie, Dayasiri Jayasekara, Mehran Careem, N. Arulpragasam, and Dithya Senaratne, told Court that proving fraud was not even necessary to establish liability.
He said receivables tied to CEFT transactions rose roughly eight-fold in two years, from about Rs. 1.4 billion in 2023 to over Rs. 12.2 billion in 2025, a pattern he argued experienced bankers and auditors should have caught. The fraud, he said, totals approximately Rs. 13.2 billion, about 15.3% of the bank’s Rs. 86 billion net asset base.
Musthapha argued that a derivative action was the only route available, since the Board would not sue itself or the auditors it appoints.
He also questioned the independence of NDB’s forensic audit, noting the Audit Committee Chair’s past ties to PricewaterhouseCoopers (PwC) Sri Lanka, which has since been absorbed into Deloitte, the firm now conducting that review.
Evidence from the bank’s own IT department showed staff could log into colleagues’ accounts from personal laptops, pointing to a password-sharing culture the Board failed to control despite having a Code of Conduct on paper.
Musthapha further argued the bank’s public assurance that its position “remains strong and stable” was undercut days later by a Fitch Ratings downgrade, citing weak internal risk controls.
He argued the Board breached its statutory duties of care and good faith under Sections 187-189 of the Companies Act, while auditors face parallel obligations under Section 163.
The matter remains before the Commercial High Court and will resume on 8 July.
President’s Counsel Romesh De Silva with Niran Anketell appeared for the Directors. President’s Counsel Ali Sabry appeared for the Auditor. President’s Counsel Dr. K. Kanag-Isvaran appeared for the bank.
