Nihal’s FR Application on the Expropriation Law

49. The accumulation of funds in HDL from 31.3.1993 to 31.3.1996 by reasons of the interim injunctions obtained by the Petitioner is borne out by the following data from the HDL Annual Accounts:

50. a) Consequently on 15.11.1996, the following payments were made to Mitsui & Taisei from funds accumulated in HDL, prior to then Deputy Secretary to the Treasury, P.B. Jayasundera, 3rd Respondent and others, proceeding for the Sri Lanka Aid-Group Meeting in November 1996.

Initial Lump-sum Payment Jap. Yen 2312 m, i.e. SL Rs. 1341 m, (US $ 23.6 m)

First Instalment due on 1.7.1996 Jap. Yen 933.7 m, i.e. SL Rs. 479.8 m, (US$ 8.4 m)

 b) Thus on the insistence of the Government , a total payment of approximately US$ 32 m, was paid to Mitsui & Taisei on 15.11.1996 from funds accumulated in HDL by reason of the interim injunctions the Petitioner had obtained.

 c) Additional Interest cost of approximately Rs. 80 m, had to be paid to Mitsui & Taisei by HDL for the foregoing delayed payments, which were to have been paid, as per the Settlement Agreements of June 1995.

The grace period of one year from 1.7.1995 to 30.6.1996 was wasted and the further restructuring of HDL during such grace period was frustrated by the suspension of the Settlement Agreements by Justice Minister & Deputy Minister of Finance, G.L. Peiris, 4th Respondent.



51. a) To have built the 3rd Tower increasing the number of Hotel Rooms of the Hilton Hotel from 408 to 612 i.e. and addition of 204 Rooms, for which all provisions had already been made in the main Hotel construction, the cost estimate in 1994 was only around US$ 14 m.

 b) Hence the 3rd Tower which could have been easily built with the funds accumulated with HDL, thereby enhancing the profitability and debt-service ability of HDL.

c) Thereafter, a just and equitable settlement could have been negotiated and concluded with Mitsui & Taisei.

d) The foregoing was the correct business strategy as was suggested by the Petitioner.

e) Nevertheless, the Government insisted otherwise, and therefore the Government stands responsible for the plight the Government put HDL into, due to external pressures or otherwise.



52. a) Relying on the foregoing wrongful and unlawful conduct, and baseless and false statements of Justice Minister & Deputy Minister of Finance, G.L. Peiris, 4th Respondent, the Court of Appeal in CA Revision No. 721/98 and CA (LA) No. 177/98, taken together with other connected Applications, on 30.3.1999 made a perverse prejudicial interim order, detrimental to the interests of HDL and the Government.

 b) The Court of Appeal by the said interim order, questionably directed the continuation of the reduced unwritten-off balance Claims instalments be made to Mitsui & Taisei, in terms of the aforesaid Settlement Agreements, but restraining all other Conditions in the Settlement Agreements, without having taken cognisance of the fact that the Commercial High Court had already entered Decrees on the basis of the conditions in the Settlement Agreements.

 c) The foregoing perverse interim order of the Court of Appeal resulted in all the balance 14 payments to be made to Mitsui & Taisei, causing grave loss and jeopardy to HDL and the Government, and resulting in HDL’s present financial predicament.



53. On the foregoing Judgment of the Court of Appeal, Special Leave to Appeal was granted by Your Ladyships’ Court on 16.12.1999 in SC (LA) Nos. 116 and 177/99 on the following questions.

    Had the Court of Appeal erred in law by dismissing the Applications at the conclusion of the Hearing into the grant of interim relief?

    Had the Court of Appeal misdirected itself by dealing with the main Applications, when the records clearly shows that it was only the Application for interim relief which was being considered? (Emphasis added)

    Had the Court of Appeal misdirected itself in presuming that one Order would be made in the Revision Application and the Leave to Appeal Application, and that the said Order would be applicable to other Applications, when in fact it had only been agreed, that Order in respect of interim relief in one Revision Application would apply to other Revision Applications?



56. a) Special Leave to Appeal having been granted by Your Ladyship’s Court against the aforesaid perverse Judgment of the Court of Appeal, Your Ladyships’ Court endeavoured to bring about a settlement.

b) In such circumstances Reports had been furnished through the Attorney General to Your Ladyship’s Court prepared by a Committee appointed by the Secretary, Ministry of Finance, which Committee was reconstituted at the request of the Petitioner by the Secretary Ministry of Finance & Secretary to the Treasury, P.B. Jayasundera, 3rd Respondent by Letter date 23.8.2004.

c) Consequently, upon a Cabinet Appointed Negotiating Committee (CANC) having been appointed, Proposal for re-structuring HDL, submitted on 11.7.2005 to the Secretary, Ministry of Finance & Secretary to the Treasury, P.B. Jayasundera, 3rd Respondent, the same had been forwarded by Letter dated 14.7.2005 to then Attorney General, K.C. Kamalasabayson, P.C., in conformity with suggestions made by Your Ladyship’s Court.

d) The aforesaid CANC Proposal in July 2005 had, inter-alia, stated thus:

 “i) Without the proposed financial re-structuring, HDL as per projections made, would continue to operate at cognisable Losses, accumulating an estimated Defaulted Debt to the Government of Rs. 9,300,000,000/- by 31.3.2010.”

“ii) If, Settlement of pending Litigations cannot be concluded, and the proposed Financial Restructuring on the lines given above not given effect to immediately; then there would be no other option, but to wind-up HDL, transferring the Hotel Building to the Government, which owns the Land, and the Government settling Mitsui & Taisei the balance Loans under the State Guarantees; and setting-off the value of the Hotel Buildings against the defaulted owings by HDL to the Government.”

“iii) The foregoing has been set out without prejudice to the rights of the Government to take warranted action.”

e) Consequently, Secretary, Ministry of Finance & Secretary to the Treasury, P.B. Jayasundera, 3rd Respondent caused the Cabinet Memorandum titled ‘Resolution of disputes relating to Hilton Hotel Project’ dated 5.10.2005 to be submitted through the then Minister of Finance, Sarath Amunugama, M.P., which was approved by the Cabinet on 13.10.2005.

58. a) Since the aforesaid settlement suggested by Your Ladyship’s Court did not materialise, the Petitioner, as warranted, on 17.11.2006 filed an Application in D.C. Colombo Case No. 217/CO to wind-up HDL, in view of its bankrupt position.

 c) In the given facts and circumstances of HDL, Section 219 of the Companies Act No. 7 of 2007, which came into force on 3.5.2007 mandated the winding-up of HDL, and made the Directors personally liable for the debts of HDL, for having opposed the winding-up of HDL.

d) In addition, Section 375 of the Companies Act No. 7 of 2007 prohibits the fraudulent trading by a Company, making Directors personally liable for its debts.

e) Section 382 of the Companies Act No. 7 of 2007 empowers the Attorney General to criminally prosecute Directors of a Company in such circumstances.

As per the definition of Directors specified in Section 529 of the Companies Act No. 7 of 2007 in respect of certain specific provisions therein, particularly Sections 187, 188, 189, 190, 197, 374, 375, including also Sections 191 to 195, persons in accordance with whose directions or instructions, Directors of a Company would act, are also deemed to be Directors of a Company.

    Hence, the Government Directors of HDL, appointed by the Minister of Finance, 1st Respondent, who exercised the management control of the HDL Board, with the Government being a 64% Shareholder of HDL, who opposed the Winding-up of HDL and acted in blatant violation of the Companies Act No. 7 of 2007 are personally liable for the debts of HDL, which is to the Government i.e. the public.



59. a) In circumstances of serious loss of capital, where 50% of the Share Capital of a Company is eroded, in terms of Section 220 of the Companies Act No. 7 of 2007, the Directors are bounden in duty to call for an Extra-ordinary General Meeting, to inter-alia explain the extent of losses, causes therefor, and steps being taken to recoup the losses.

 b) In the case of HDL, the entire Share Capital had been eroded, but nevertheless its Directors had failed to comply with the mandatory provisions of Section 220 of the Companies Act No. 7 of 2007.

 c) Section 187 to 190 of the Companies Act No. 7 of 2007 stipulates the ‘Duties of Directors’ and Section 188 thereof prohibits a Director from acting or agreeing to act in contravention of any provisions of the said Act.

    Hence, the Government Directors of HDL, appointed by the Minister of Finance, 1st Respondent, who were in control of HDL are guilty of having acted blatantly in violation the provisions of the Companies Act No. 7 of 2007.

60. a) Cabinet Memorandum dated 5.10.2005 approved on 13.10.2005 (X31) had given approval to a CANC Report, which had, inter-alia, recommended that if HDL was not restructured, it should be wound-up.

 b) Suppressing the foregoing, Secretary, Ministry of Finance & Secretary to the Treasury, P.B. Jayasundera, 3rd Respondent, had caused the Minister of Finance, 1st Respondent, to submit Cabinet Memorandum dated 21.1.2007 to oppose the winding-up of HDL and to indicate to Court, as an option, to re-structure HDL. Cabinet Approval was granted on 26.1.2007

 c) Secretary, Ministry of Finance & Secretary to the Treasury, P.B. Jayasundera 3rd Respondent wrongfully and unlawfully intervened by Motions dated 10.5.2007 and 7.12.2007 through State Attorney, as an ‘Intervenient-Party’, without having first had and obtained the permission of Court to have done so, to oppose the winding-up of HDL, blatantly contravening the provisions of the Companies Act, admittedly as advised by the then Attorney General C.R. de Silva P.C., 5th Respondent.

 d) Former Attorney Generals C.R. de Silva P.C. 5th Respondent and Mohan Peiris P.C., 6th Respondent, appearing for the State continued to oppose the aforesaid Winding-up, contravening the mandatory provisions of the Companies Act No. 7 of 2007, which came into force on 3.5.2007.

     ‘In terms of Rule 11 of the Supreme Court (Conduct of and Etiquette for Attorneys-at-Law) Rules 1988, an Attorney-at-Law is prohibited from accepting any professional matter, which would involve him in the commission or in the furtherance of the commission of an offence.’

 e) Then Attorney General Mohan Peris, P.C., 6th Respondent by Letter dated 16.9.2010 called for a Meeting to explore the possibility of a Settlement. Nevertheless, no such discussion took place.

    In the given facts and circumstances, it is indeed appallingly that HDL is Scheduled as an ‘Underperforming Enterprise’ due to protracted litigation prejudicial to the national economy and public interest. If such be the case, then the former Attorney Generals C.R. de Silva, P.C., 5th Respondent and Mohan Peiris, P.C., 6th Respondent, appearing for the State, stand responsible and liable for having continuously opposed the aforesaid Winding-up of HDL contravening the provisions of the Companies Act No. 7 of 2007 and having caused the judiciary to have kept the Winding-up Application pending now for 5 years; with intimation of a possible settlement.

    Had the former Attorney General Mohan Peiris, P.C., 6th Respondent been instrumental, in any manner, whatsoever or howsoever, in the act of including HDL under Schedule 1 to the Law, for the Shares of HDL to be vested in the State then it would be a great travesty of justice.



63. a) The Capital of the Loans advanced by the Government to HDL, as disclosed in the Petition in H.C. (Civil) W.P. Application No. 52/2011/CO as set out below, had amounted to only Rs. 4,435,986,893/-

 b) No re-payments, whatsoever, have been made to the Government by HDL on account of either any Interest or Capital.

 c) The aforesaid Balance Sheet of HDL as at 31.3.2010 had included interest at the aforesaid rates, compounded annually. (i.e. at a simple average interest of 13.0% p.a.)

 d) Section 5 of the Civil Law Ordinance mandates that the Interest shall not exceed the Capital.



64. a) In terms of Section 364, read with Section 277 of the Companies Act No. 7 of 2007, no interest is payable by and/or chargeable from HDL, after the Petition for Winding-up of HDL had been presented on 17.11.2006.

     In terms of Section 277 of the Companies Act No. 7 of 2007, the winding-up of a Company shall be deemed to have commenced at the time of presentation of the Petition for winding-up.

c) Hence, no interest is chargeable by or payable to the Government by HDL after 17.11.2006.



65. Therefore, the interest stated in the HDL Accounts of 31.3.2010 is wrongfully and unlawfully overstated.



68. a) Just prior to the aforesaid Bill tabled in Parliament on 8.11.2011, the Deputy Secretary to the Treasury, obviously with the concurrence and agreement of the Secretary, Ministry of Finance & Secretary to the Treasury, P.B. Jayasundera, 3rd Respondent, had issued a Letter dated 10.5.2011 (included in X36) to HDL requiring the outstanding payments, wrongfully and unlawfully claimed to be Rs. 12,098 m, to be paid within a period of preferably 2 years.

b) Hence, HDL and/or any one or more of its Shareholders were entitled to raise investments and to repay the Government its lawful dues, as demanded to be paid within the period of 2 years.

 c) Had the Secretary, Ministry of Finance & Secretary to the Treasury, P.B. Jayasundera, 3rd Respondent been instrumental, in any manner, whatsoever or howsoever, in the act of including HDL under Schedule 1 to the Law, for the Shares of HDL to be vested in the Secretary to the Treasury then it would be a great travesty of justice.



69. a) Upon having been informed that HDL of which the Petitioner is a Shareholder / Stakeholder, had been included in the Schedule to the aforesaid Bill, the Petitioner having returned to the island on Friday, 4.11.2011 filed on the very next working day 8.11.2011 (7.11.2011 being a public holiday) an Application No. 52/2011/CO to be made by his Company, Consultants 21 Ltd., under and in terms of Part X of the Companies Act No. 7 of 2007 in the High Court (Civil) of the Western Province, Colombo, demonstrating that there was prevalent ordinary and regular law for a rearrangement and compromise of HDL.

c) HDL being governed by the Companies Act No. 7 of 2007 ought be restructured and developed in terms of the ordinary and regular law viz the provisions of the Companies Act No. 7 of 2007, under the supervision of the judiciary, as per the aforesaid Application No. 52/2011/CO made to the Commercial High Court (“X38”), and not secretly away from the public glare, behind closed doors.