Auto Company mulls legal action against ex People’s Merchant Leasing Company Chairman

For alleged default of Rs. 2.25 mn on purchase of two vehicles

BY SURESH PERERA

A leading automobile parts company is contemplating legal action against the former Chairman of a government-controlled company in the financial service industry for alleged default of Rs. 2.25 million due as final payments on the purchase of two vehicles.

Three cheques to the value of Rs. 3 million given by him to meet the due payments had bounced as the HSBC account had been closed at the time of their issuance.

The company, Japan Lanka Auto Parts (Pvt) Limited of Mirihana, Nugegoda, has already sent a letter of demand through its lawyer, Namasena Gamage, seeking payment of the money "lawfully due within two weeks".

At the time Ajith Panditaratne served as the Chairman of People’s Merchant Leasing Company PLC, he had entered into a legal contract with the company in November, 2010 to purchase two Toyota Axio motor cars for Rs. 9.2 million. He had undertaken to settle the total due amount within one year.

Although it was a raw deal, the company agreed to a time extension for settlement based on representations made by the buyer (Chairman) considering, inter alia, that he is personally very close to the top most authorities in the country and that he served as the head of a state-owned financial institution, which had secured an A+ Rating, the letter of demand stated.

It was discovered that the cheques had been drawn from the account of the Chairman’s personal assistant, and there are doubts whether such a person could maintain an account in this bank. There are also doubts whether this account was actually maintained by the Chairman himself under the name of his assistant, it further noted.

"We sent the letter of demand in October 2014, but he has still not responded to it", a senior official of Japan Lanka Auto Parts, said. "He is also avoiding answering our telephone calls".

"We are now in the process of initiating legal action against him", he noted. "We entered into a legal agreement with him based on trust, but we have been led up the garden path".

Apart from instituting legal proceedings against him to recover outstanding dues with costs, criminal action will also be filed on the dishonored cheques, the official explained.

Asked why he had defaulted on the payments, Panditaratne said he "ran into some problems which resulted in the delay". The two cars were purchased for his personal use and not for People’s Merchant Leasing Company, where he served as Chairman at the time.

He said that he had kept in touch with the company and briefed them on the developments with an assurance he will honor his commitment shortly.


"That’s bunkum. He continues to duck and our repeated phone calls are also not answered", the official interjected. "When we use a different number, he answers, but immediately hangs up saying he is busy".

"I can give a categorical assurance that I will pay back the money in the second week of January 2015", Panditaratne said. "I will call the company immediately and assure them that it will be done".

Contacted again five days after Panditaratne gave this assurance, the company official described it as "typical bluff". This is just eye wash. He didn’t call, and is not expected do so in the future either.

"We have decided to seek legal redress as this hide-and-seek game cannot be allowed to continue", he said. "We have suffered a substantial financial loss as a result".

The former Chairman, it is understood, is closely connected to the powers-that-be, which warranted his appointment to head the state-owned financial institution at the time.
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Sri Lankan stocks rise to 5-wk closing high in thin trade

Dec 26 (Reuters) - Sri Lankan stocks closed at its highest in five weeks Friday in thin trading, led by large caps such as Ceylon Tobacco Company Plc even as investors stayed away amid holiday season and political uncertainty before the Jan. 8 presidential polls.

The main stock index rose 0.63 percent, or 45.78 points, to close at 7,309.03, its highest close since Nov. 21.

The day's turnover fell to a near two-week low of 438.1 million rupees ($3.32 million), less than a third of this year's daily average of 1.43 billion rupees, stock exchange data showed.

Shares in Ceylon Tobacco Company Plc rose 3.7 percent in low trade while Sri Lanka Telecom Plc rose 2.8 percent also in low trade.

"Market turnover is up on block deal of Dialog Axiata and Lanka IOC; if you take out that the turnover is very low as many investors and stockbrokers are still on Christmas holiday," said Reshan Wediwardene, research analyst at First Capital Equities (pvt) Ltd.

Analysts said low volume trading was seen in illiquid stock.

Shares in Lanka IOC Plc rose 1.55 percent while Dialog Axiata Plc ended 0.74 percent weaker.

President Mahinda Rajapaksa's United People's Freedom Alliance lost its two-thirds majority in Parliament for the first time in more than four years after two ruling party legislators, including a cabinet minister, defected to join the opposition on Monday.

Fifteen legislators, including former health minister Mithripala Sirisena, who is challenging Rajapaksa's bid for the third term, have defected after the president announced snap elections last month. Two opposition legislators have left to join the ruling party.

Political analysts see a tight race between Rajapaksa and Sirisena, whose New Democratic Front has promised to eliminate rampant corruption and reduce prices of essential goods and fuel by cutting taxes.

Rajapaksa said on Tuesday he would ensure good governance and media freedom if he bags a third term.

Net foreign inflows into stocks were 192.9 million rupees, extending net inflows to 21.83 billion rupees so far this year, exchange data showed. 

($1 = 131.99 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Biju Dwarakanath)

East West Properties buys 36 million shares of Weligama Hotel Properties

East West Properties PLC is to purchase 36 million ordinary shares of Weligama Hotel Properties Limited at Rs. 09 per share.

The total value of this major transaction is Rs. 324 million.
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Pelwatte Sugar under liquidation

Sri Lanka's first Colombo Stock Exchange- listed sugar growing and manufacturing company Pelwatte Sugar Industries PLC is under liquidation.SJMS, Joint Liquidators, in a filing to the Colombo Stock Exchange dated December 18, 2004, under the topic Commercial High Court of Western Province Colombo Case No: HC (Civil) 46/2012/CO said: We refer to your letter dated 05-12-2014 and the discussion your officers had with us previously regarding the above company and wish to confirm you that the above said company is presently under winding-up as per the order made by the above said Court with effect from 12-03-2013. A certified copy of the said Court Order is sent herewith as requested.

Under present status of the liquidation of the company, SJMS has told the CSE:

a. Vesting of company assets in the State:
The leasehold land obtained by the company from the State was vested in the State with effect from 11.11.2011 under the provisions of Revival of Under performing Enterprises or Under-utilized Assets Act No. 43 of 2011. However, as per the information furnished by the former management of the company the Competent Authority (CA) appointed under the said Act has taken over the entire assets of the company and its business operations, prior to the winding up order was made by the Court. The inventory of the assets taken over by the State has not yet been furnished to us by the CA.

Since most of the assets of the Company and its business operations were not vested in the State under the said Act, we have requested the Competent Authority – the Secretary of the Ministry of Sugar Industries, to provide us the inventory of the assets vested in the State under the provisions of the said Act and to handover the balance assets not vested in the State, to us. We have not received any response in this regard up to date from the Competent Authority, despite several reminders.

b. Claim submitted to the Compensation Tribunal:
Liquidators have submitted their claim for compensation on behalf of the Company under Liquidation, the Compensation Tribunal appointed under said Act. The claim was based on the market value of the company shares and the creditors' liability of the company as at the relevant date, as the entire assets of the company and its business operations were taken over by the competent authority.

However, the tribunal was of the view that they have no mandate to assess the compensation as claimed by the liquidators since what was vested under the said Act was only the leasehold land held by the company.

Under these circumstances, the Liquidators have requested the Chairman of the Compensation Tribunal to refer the matter to the Attorney General and seek his advice in this regard.

Even though a Meeting in this regard was convened by the AG's Department in April 2014, unfortunately it was postponed indefinitely.

c. Creditors & Shareholders Claims received by Liquidators:
Consequent to the publication of Notices of winding up of the Company and our appointment as the liquidators, number of Creditors and shareholders of the Company have submitted their claim against the Company to us.

Any shareholder of creditor of the company who has not yet submitted his or her claim could submit his/her claim to the liquidators.

However, the settlement of the claims will be made in accordance with the provisions of the Companies Act No. 07 of 2007 depending on the amount of compensation to be awarded by the compensation tribunal.

All these matters have been reported by us to the winding up court regularly, SJMS has told the Colombo Stock Exchange.

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Bonanza for senior citizens! 280,000 retirees to get 12% interest on FDs tax free

By Menaka Indrakumar

Ceylon Finance Today: Over 280,000 senior citizens would be benefitting from a government announcement that fixed deposits worth more than Rs 2.5 million maintained at State banks by senior citizens, will receive an increased 12% interest rate and that earnings would be interest free.

This is a Budget 2015 proposal and would be implemented with effect from 1 January, Deputy Secretary to the Treasury Dr. Suren Batagoda told Ceylon FT yesterday. "There will be 280,000 senior citizens who will be getting an added interest which will also be tax free, he said.

He also said that Rs 30 billion was allocated in Budget 2015 for this purpose and if the need occurred, the government will increase the amount. The Finance Ministry also requests senior citizens to inquire from banks about their eligibility for this benefit.
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We will replace Port City with Western Province Metropolis – Ranil

By Skandha Gunasekara and Shaahidah Riza

Ceylon Finance Today: Opposition and UNP Leader Ranil Wickremesinghe said Tuesday that a government under him as Prime Minister would halt the port city which had been envisioned by the Mahinda Rajapaksa Government and replace it with a much larger 'Mega-polis' that would encompass the Western Province in its entirety.


Addressing the business forum, 'Lets Unite' held at Cinnamon Lakeside, Wickremesinghe alongside and Common Presidential Candidate Maithripala Sirisena addressed corporate leaders and senior business officials on the policies of a possible Sirisena Government would adopt.
The establishment of a 'Megapolis' was first suggested in 2002-2003, and the Port City was a small part of it. The 'Megapolis' project would transform the entire Western Province into a fully developed modern city."

He went on to say that the Port City project would not be stopped but halted temporarily.
"We haven't completely scrapped the Port City project. However, if we come to power we will first take into account the environmental impact report, as well as a feasibility study before we go further with the project." Wickremesinghe observed.

Wickremesinghe stressed, that environmental impact of any project was of vital importance when considering its implementation and that a Sirisena Government would take global warming into serious consideration. "We are looking into sustainable development. Global warming is a grave issue and we are seriously considering its impact on our economy. We will go green. The world is pivoting towards sustainable energy and development."

The Leader of the Opposition went on to say that feasibility of any project proposed by a government headed by Sirisena, would be taken into account citing the heavy debts incurred by the nation for the construction of the Hambantota Harbour and the Mattala Airport.

"Feasibility of any project will be of paramount importance. The country has billions in debt as a result of projects taken up without proper consideration," he noted.
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Issuer Rating of Orient Finance revised to [SL]BB+: outlook revised to stable

ICRA Lanka Limited, a wholly owned subsidiary of ICRA Ltd, a group company of Moody’s Investors Service, has revised the Issuer rating of Orient Finance PLC (OFP) to [SL]BB+ (pronounced SL double B plus) from [SL]BBB- (pronounced SL triple B minus)1 . The outlook on the rating has been revised to stable from negative.

ICRA Lanka’s rating revision follows the continuous weakening in OFP’s key performance indicators. The company’s asset quality deteriorated significantly during the current financial year, with gross NPAs increasing to about 9.7% in Jun-2014 before moderating in Sep 2014 to about 8.5%, it continues to remain significantly higher than the systemic levels. The above had a cascading effect on the profitability of the company, with PBT/ATA2 moderating to 2.3% for FY20143 (1.2%, provisional in H1FY2015) as compared to 6.3% in FY2013, as the provision costs witnessed a steep increase. ICRA takes note of the robust growth in the company’s portfolio, with overall portfolio growing at 33% in FY2014 (36%, annualized in H1FY2015); consequently, the company’s gearing increased to 4.5 times in Mar 2014 (5.3 times provisional in Sep 2014) vis a vis 3.3 times in Mar 2013.. The rating continues to derive strength from the financial, operational and management support that OFP is expected to receive from the Janashakthi group. The rating also factors in the experienced and professional management team coupled with the improvements in overall risk management systems by the company in the recent past.

ICRA Lanka however believes that the impact of the above could be observed in a gradual manner and the key performance indicators are expected to remain under pressure till then. ICRA Lanka also notes that OFP’s liquidity position has weakened in the recent past due to increase in the share of fixed deposits (FDs; about 54% of the borrowing in Sep 2014 vis a vis 21% in Mar 2014) and higher concentration towards shorter term fixed deposits (about 63% of FDs Maturing in less than one year period as in Sep 2014) in its funding mix leading to high near term Asset-Liability mismatches. The key rating sensitivities for OFP, going forward, would be to improve its liquidity profile by diversifying its funding, arresting incremental slippages and to make effective recoveries, which in turn would result in a gradual improvement in the key profitability indicators.

OFP’s core lending operations continue to be focused on auto financing (approximately 83% of total portfolio). Factoring, being the second largest product segment, accounted for approximately 16% of the company’s total portfolio as of end Sep 2014. Pawning (introduced in FY2013) accounted for less than 1% of OFP’s total portfolio. The company has discontinued its equipment finance division due to high portfolio losses in this segment. ICRA Lanka notes the company’s strategy is to focus on higher end auto financing and factoring going ahead in order to improve the overall quality of the portfolio. OFP’s auto financing.
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