Tuesday, 1 October 2013 00:41
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The Court of Appeal on Friday issued an Interim Order against the Central Investment & Finance Ltd. staying the operation of the Monetary Board’s directive to convert 60% of its deposit liabilities into nonvoting shares. The Court also stayed the operation of another Monetary Board directive to transfer 5% of the existing public deposits of Rs. 3.4 billion to non-voting shares.
Justice Sarath de Abrew also issued notices, returnable for 11 October, on the respondents – the Monetary Board, Central Bank Governor Ajith Nivard Cabraal, Finance Ministry Secretary P.B. Jayasundera and the Director of the Department of Supervision of Non-Banking Financial Institutions and Central Investment & Finance Ltd. (CIFL) Chairman Roscue A. Maloney and the Directors.
He made this order sequent to a writ petition filed by CIFL depositors who complained of unlawful activities in breach of the Finance Business Act.
The petitioners are seeking a writ order from Court to compel the Monetary Board, the Central Bank Governor, the Finance Ministry Secretary, the Central Bank and the Director of Supervision of Non-Banking Financial Institutions to take steps to ensure that the CIFL paid back the funds and the interest accrued there-in.
Faisz Musthapha PC with Mangala Niyarapola instructed by Derrick Samarasekara Associates appeared for the petitioners.
Petitioners said the CIFL was established in 1966 and registered and licensed by the Monetary Board.
They said the auditors in their notes revealed certain irregular dealings indulged in by the CIFL and that from February this year the CIFL had refused to release the deposits and the accrued interest payments at maturity.
The petitioners said they were deliberately and fraudulently deceived and cheated by the CIFL, which was caught up in a severe liquidity crisis.
They said the true picture of unlawful activities, which were in clear breach of the Finance Business Act, began to emerge as the depositors intervened by demanding their investments back.
The petitioners said Maloney and Directors J.G.S. Maloney and D.A. Hettiarachchi had already left Sri Lanka despite repeated assurances by the Director of the Department of Supervision of Non-Banking Financial Institutions to impound their passports.
The petitioners said the CIFL which made a profit of Rs.7.9 million on March 31 last year had reported a shocking loss of Rs. 330 million on 31 March this year.
This was posted in the company’s online network system and might have been seen by the Accounts Manager working under the Central Bank. He was directly responsible for monitoring the activities of CIFL.
The petitioners accuse the Central Bank of having failed to take prompt action to rectify the situation immediately, as a result of which the CIFL collapsed within two years.
They said it was the duty and responsibility of the Central Bank to penalise the CIFL and its Board of Directors for resorting to unlawful and illegal practices by eroding billions of rupees in investors’ money, instead of allowing the CIFL to continue operating as a registered finance company.
