SC to evaluate investment agreement progress of Ceylinco F&G Companies

By Lakmal Sooriyagoda 
The fundamental rights petition filed on behalf of the depositors attached to Ceylinco F&G Companies has been taken up before the Supreme Court, in order to evaluate the progress regarding the investment agreement. 

The purpose of calling this case before the Supreme Court was to bring the attention of the court to the matters that have arisen out of and in relation to the Investment Agreement dated 30/04/2021, entered into between ZRA Holdings and the fifth respondent F&G Property Developers (Private) Limited and the sixth respondent F&G Real Estate Company Limited and the delay in the depositors receiving the money that they lost, which had been deposited in these two companies. 

“The first ball was a no ball,” said senior counsel Ian Fernando, appearing for the Independent Association of Depositors, taking cognisance of the fact that the impugned bank accounts were opened by the directors of ZRA, without the mandate of the current board of directors of the fifth and sixth respondent companies, wherein the ZRA Holdings officials had acted in contravention of the terms of the investment agreement in question. 

It was revealed that the accounts to which the bank draft was to be created were ‘Temporary Accounts’ opened by the officials of ZRA Holdings, before being eligible to be appointed as the board of directors of F&G PDL, which gave rise to doubts concerning the bona fide status of ZRA Holdings. 

On the previous court date, the court recognised that there is a ‘bottleneck’ concerning the payment that is to be made by ZRA Holdings to the fifth and sixth respondents in terms of the Investment Agreement. Hence, the court directed the director of the Supervision of Non-Bank Financial Institutions Department of the Central Bank of Sri Lanka (CBSL) to submit a report considering to what extent the terms of the Investment Agreement had so far been respected by the relevant parties and to determine whether there are any legitimate concerns pertaining to the payments that are to be duly paid by ZRA Holdings to the fifth and sixth respondents.  

The court further directed the director of the Supervision of Non-Bank Financial Institutions Department of the CBSL to advise with regard to the mode of payment and the distribution of the proceeds to settle the depositors, once the payments are duly made. 

Faiszer Musthapha PC appearing for the fifth and sixth respondents asserted that ZRA Holdings had acted in a manner that is inconsistent to the terms and conditions set forth by the Investment Agreement and hence, there cannot be any settlement at this critical juncture, considering that the actions on the part of ZRA Holdings (Pvt.) Ltd had caused to rapidly deplete its faith on ZRA Holdings (Pvt.) Ltd.  

Furthermore, the counsel remarked that he was in any event highly unsatisfied with the progress of the steps taken by ZRA Holdings.

However, Priyal Wijayaweera PC appearing on behalf of ZRA Holdings (Pvt.) Ltd made the counter assertion that his client has complied with the due procedure pertaining to the terms of the Investment Agreement.

The director of the Non-Bank Financial Institution of the CBSL has filed a report relating to the matter raised by this court on the said date. In paragraph two of the said report, the director of the Supervision of Non-Bank Financial Institutions Department of the CBSL had suggested that the investor (ZRA) should pay the consideration applicable for the first and second tranches through bank drafts in favour of F&G PDL and F&G RECL. It is also suggested that a new bank account for the respective entities be opened with the consent of all parties.

 
The Supreme Court directs the investor as well as the two companies to decide the terms under which the bank account be opened and the investor is directed to ensure that the payments are made without further delay.