DC dismisses Nihal A’s petition seeking liquidation of Hotel Developers

The Colombo District Court on Friday dismissed the Petition filed by Nihal Sri Ameresekere seeking an order for the liquidation of Hotel Developers (Lanka) Company.

District Court Judge R.A. Ranarajah held that the Petitioner is not entitled to pursue the case further since the Petitioner is not a shareholder any more.

Petitioner Nihal Sri Ameresekere in his litigation stated that he represents as a shareholder of 70,000 shares at Rs. 10 each of the company for which liquidation is sought.

While inquiry was in progress in connection with the petition dated 17 November 2006 and made by the Petitioner, the Attorney-at-Law representing the proposed company to be liquidated Hotel Developers (Lanka) Ltd. presently known as Hotel Developers (Lanka) PLC filed a motion dated 15 March 2012 and when the case was called for hearing, the Judge issued an order to call for the case on 15 March 2012 enabling the Intervening Respondent to furnish the written submission.

The Judge in his judgement observed that under the Schedule 1 of Revival of Underperforming Enterprises and Underutilised Assets Act No. 43 of 2011of Democratic Socialist Republic of Sri Lanka was named as Hotel Developers (Lanka) Limited.



In terms of Section 2 of the said Act the assets and shares of this company belongs to the Secretary, Treasury since 11 November 2011

Further as per the Section 3(1) of the said Act (as per the cabinet decision No. 11/2181/504/132-II mt) Senaka Walgampaya, President’s Counsel, was appointed as the competent authority in connection with the above Hotel Developers (Lanka) Ltd.

Accordingly, Section 3 of this Act is applicable to all shares and assets belonging to the Petitioner and other parties in this case and it is respectfully brought to the attention that these assets and shares are now vested to the competent authority, the Judge noted.

In the judgment, it inter alia states as follows:



In the event the Court issue an order to pursue the case or to settle outstanding account and wind up the said Hotel Developers (Lanka) Ltd., it is respectfully brought to notice that the provision and the principles of Revival of Underperforming Enterprises and Underutilised Assets Act No. 43 of 2011 will be in inconsistency



Wherefore further attention is sought in connection with the Intervening Respondent that

Enforcing the Act No. 43 of 2011 and the Petitioner is no more the shareholder

The petitioner has no legal base to conduct this case before this Court

To dismiss this Petitioner’s case on these grounds

The Intervening Respondent, Secretary to the Ministry of Finance, too has filed a motion dated 15 March 2012

In Page 360 of the book titled ‘Internal Company Law in Sri Lanka’ by Ariththa R. Wikramanayake, internal dialogue in terms of Section 532 (1) Company Act 7 of 2007 was subjected for discussion.



‘The provision of the Act will not apply to winding up proceedings that have commenced before the appointed date. Such proceedings will continue in the same manner and with the same incidents as if the Act had not been enacted, and under the law which was in force at the time the proceedings were commenced.’

‘The Petitioner has filed the relevant petition on 17 November 2006. Liquidation Order was sought to the Hotel Developers (Lanka) Ltd through it. This application was made in terms of provisions of Company Act No. 17 of 1982. The Petitioner’s application for Liquidation Order which was made as per the extract of the Company Law in Sri Lanka is relevant to the Company Law No. 17 of 1982.

‘Section 257(1) Act No. 17 of 1982 reads as an application to the Court for the winding up of a Company shall be by petition, presented subject to the provisions of this section either by the Company, or by any creditor or creditors (including any contingent or prospective creditor or creditors) contributory or contributories or by all or any of those parties jointly or separately.’

Provision is available for the shareholder to make application for the liquidation. Section 248 and 249 illustrates shareholders’ extent of contribution in the liquidation process.



Section 249 contributory – it is interpreted that in this part the expression ‘contributory’ means every person liable to contribute to the assets of a company in the event of its being wound up, and for the purposes of all proceedings for determining, and all proceedings prior to the final determination of, the persons who are to be deemed contributories, includes any person alleged to be contributory.

The Plaintiff is the shareholder of the company which is sought liquidation, it could be opined that he could be the contributory in that circumstances



The Draft Bill of Revival of Underperforming Enterprises and Underutilised Assets Act No. 43 of 2011was passed in Parliament. When taking into consideration Section 2(1) Schedule 1, the proposed liquidating company should be identified as an Underperforming Enterprises. Accordingly, shares of the proposed liquidation company were vested to the Secretary to the Treasury.  The relevant date to activate the act on the proposed liquidation of the company by the Secretary to the Treasury was since 11 November 2011.

Then the Petitioner was not the shareholder of the proposed company to be liquidated. Since the Petitioner is not the shareholder the Petitioner is not a contributory while liquidating it. Petitioner has not contributed to the subject matter of the case and not acted accordingly.



While submitting written submission on the proposed liquidation:

‘Some of the Respondents have taken up the position that the relevant date for the determination of status/Locus standi is the date of institution of proceedings, that is litis contestation

The principle of litis contestation is applicable only in adversarial litigation, where party A files action against party B, based upon a cause of action as contemplated by the Civil Procedure Code.



However it is submitted that winding up proceedings are not based upon a cause of action but are sui generis proceedings which are not adversarial, whereby the Petitioner invokes the jurisdiction of Court to wind up a company. Winding up proceedings are in fact between the Petitioner and the winding up Court and are not adversarial. Accordingly the principle of litis contestation  would not apply

In any event, in several special types of proceedings including Rei Vindicatio actions and actions for winding up it has been specifically held that the Plaintiff/ Petitioner MUST retain the character in which he invokes the jurisdiction of Court, right until the end of such proceedings in order to obtain relief by Court.’



It is well-established that in proceedings for winding up the Petitioner must maintain the character in which he filed the application right throughout. For the purpose of brevity the principle as enunciated in Palmer’s Company Law (24th edition) in dealing with just equitable winding up in England and Wales is set out for the consideration of Court.

In considering whether it is just and equitable to wind up a company the Court must have regard to the facts existing at the time of the bearing of the Petition, and not to those existing at the time the petition was presented’

The Court has satisfied with the above facts and taken steps to issue order accordingly

Reasons are brought up stating that the application caused to issue the Order was in conflict with Section 375 of Civil Procedure Code. If supplementary application is made for the case it should be made through Petition and the Affidavit. Reasons are shown that since this has not occurred in the relevant application it has to be rejected from the beginning.



Edirisinghe vs Wimalawardane and another 2002 (3) SLR held Balapatabendi J said that ‘the object of civil procedure is to prevent civil proceedings from being frustrated by any kind of technical irregularity, or lapse which has not caused prejudice or harm to a party. (Vide the decision of Distilleries Co. Ltd Vs Kariiyawasam)



In the same case Nanayakara J said that as Chief Justice Abraham remarked in the case of Velupillai v the Chairman, District Council Jaffna ‘that Court of Law is a Court of Justice and it is not an academy of law should be always uppermost in one’s mind. The Court should not approach the task of interpretation of a provision of law with excessive formalism and technicality. The Code of Civil Procedure provides a series of rules designed to facilitate the orderly and impartial conduct from the stage of drafting of the pleadings until the judgment and execution of decree. Therefore, the rules of procedures have been designed and formulated to facilitate due administration of justice.’



The Court noted that subsequent to the above discussion it is found that the application for the reason to conduct inquiry is associated with defects. It is not found that the Petitioner is prejudiced as a result of the relevant motion. Accordingly, the primary objection is dismissed.



The Court ruled that since the Petitioner is not the shareholder of the proposed liquidation company any more, petitioner could not be considered as a shareholder and held that the Petitioner is not entitled to pursue the Case further since the Petitioner is not a shareholder any more.