CA refuses to issuance of notices sought by Sevanagala Sugar

By S. S. Selvanayagam

The Court of Appeal yesterday (22) refused to the issuance of notices sought by the Sevanagala Sugar Industries Ltd against purported move to take over of its factories and the lands leased out to it.

The Bench comprising Justices W. L. Ranjith Silva and A. W. A. Salam yesterday pronouncing their decision held that they are of the view that the Petitioner Sevanagala Sugar Industries Ltd is not entitled for the issuance of notices in respect of its Writ petition and dismissed the application.

Petitioner Sevanagala Sugar Industries Ltd cited Prime Minister M. D. Jayaratne, Members of the Cabinet of Ministers, the Cabinet Secretary and the Attorney General as Respondents.

Romesh de Silva PC with Nihal Fernando PC, Sugath Caldera and Eraj de Silva instructed by Paul Ratnayake Associates appeared for the Petitioner. Deputy Solicitors General Shavindra Fernando and Sanjay Rajaratnam and Senior State Counsel Nerin Pulle appeared for the Attorney General.

The Petitioner statee on 8 December 1989, the Sri Lanka Sugar Company Limited was established for the purpose of taking over the business, assets and liabilities of the Sri Lanka Sugar Corporation.

It divested its different projects such as Sevanagala, Hingurana and Kantalai to separate limited liability companies under the privatisation programme initiated by the Government of Sri Lanka namely, Sevanagala Sugar Industries Limited, Hingurana Sugar Industries Limited and Kantalai Sugar Industries Limited.

In all the said converted companies, the Treasury Secretary initially held 100% of its shares and subsequently divested same to the public.

As such an extent of 489.864 hectares of land allocated to Sevanagala project and possessed by of the Sri Lanka Sugar Company Limited was taken over by the Sevanagala Sugar Industries Limited.

In pursuance of the privatisation of the Sugar Industry, in January 2002, the Public Enterprise Reform Commission called for proposals to purchase 90% of issued capital of the Petitioner Company.

The Petitioner states that Daya Apparel Exports (Private) Limited, having being the successful bidder, on June 20, 2002, entered into a Share Sale and Purchase Agreement with the Government acting through the Treasury Secretary, whereby the Daya Apparel Exports (Private) Limited invested Rs. 550 million to purchase 90% of the issued shares in Sevanagala Sugar Industries Limited and since then has invested in excess of Rs. 2 billion in the development of said Sevanagala Sugar Industries Limited.  The GOSL shall ensure that the Mahaweli Authority will enter into a formal lease agreement with the Company for a period of 50 years from the closing date within two years from the closing date.

In July 2002, the Petitioner commenced operations at the Sevanagala Sugar Factory relying on the representations and undertaking made by the government the fact that the Mahaweli Authority of Sri Lanka (MASL) would enter into a formal lease agreement with the Petitioner within a period of two years ‘from the closing date’.

The Petitioner lamented the MASL and/or the Government acting through the Treasury Secretary failed and/or neglected to enter into the said Lease Agreement as undertaken by the Agreement but sought to evict the Petitioner from the said land and the Petitioner filed a Writ application before the Court of Appeal.

The Petitioner stated notwithstanding the fact that the Government had failed to honour its contractual obligations, the Petitioner continued to invest large sums of money.

The Petitioner states on 8 April 2011, the President executed a lease in favour of the Petitioner for the said lands for a period of 50 years.

It further stated the draft Lease Agreement was sent to the President in November 2010 and was signed in April 2011.

The Finance Minister, on the advice of the Ministry Secretary, had presented the Bill titled “An Act to provide for vesting in the State in the National Interest, identified underperforming enterprises or underutilised assets; To appoint in respect of each one or more underperforming enterprises or underutilised assets a Competent Authority; to provide for their effective management, administration or revival through alternative utilisation and the payment of compensation in respect thereof; and to provide for matters connected therewith and incidental thereto” was presented to the Cabinet as an ‘Urgent Bill’ on the advice and/or direction of the said Ministry Secretary.

 The Petitioner claimed the Bill was drafted by a private firm of lawyers contrary to the norm where Bills are drafted by the Legal Draughtsman’s Department.

The said Bill was forwarded to the Supreme Court under and in terms of Article 122 of the Constitution for a determination.

The Supreme Court made a determination and forwarded it as required in terms of the Constitution stating that the Bill was consistent with the Constitution.

The Petitioner bemoaned the Finance Minister and the Cabinet acting under the misdirection and/or misrepresentation of facts by the Ministry Secretary has deemed it lawful to take over the Enterprises and Assets morefully listed in the Schedules to the Act on a purported unilateral decision in violation of the principles of Natural Justice.

The Petitioner states that the Petitioner has leasehold rights to the assets/property set out in the schedule hereto and the Petitioner states that the Petitioner carries on the business of inter alia manufacturing sugar and sugar-based products on the said land.

It claimed the property and/or “assets” set out in the schedule in the Bill are not underutilised assets within the meaning of the said Act.

It alleged no explanations were called from it and/or it was not afforded a hearing prior to the conclusion that the said assets are underutilised assets within the meaning of the said Act.

It complained the Act passed, has unilaterally, arbitrarily and capriciously decided without any hearing whatsoever being given, that the purported underperforming enterprises and underutilised assets owned by companies referred to in the 1st and 2nd Schedule of the Act, should be taken over in terms of this Act.

The Petitioner Company is not underutilised as falsely alleged by the Finance Ministry Secretary, it contended.

Having expended large sums of money in developing the land, investing in plant and machinery, and the Petitioner being granted a lease for a period of 50 years from April 2011, the Petitioner has a legitimate expectation that the Petitioner will be permitted to carry out its business without interruption and/or interference and/or being acquired for extraneous reasons, it underlined.