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by Rodney Martinesz

The Court of Appeal has confirmed the Interim Injunction issued against the Distilleries Company of Sri Lanka, Harry Jayawardena of Stassen Exports and other defendants restraining them from voting at the Sampath Bank shareholders meeting.

The District Court Interim Injunction was obtained by the Sampath Bank Employees Union on its behalf as well as the shareholders of the Bank.

The Bench comprised Justices N. K. Udalagama and Chandradasa Nanayakkara.

Among the defendants are Sampath Bank Ltd, Milford Exports (Ceylon) Ltd., CDB Exports Ltd., Hatton National Bank Ltd., Sri Lanka Milk Foods and Smart Development (Pvt) Ltd.

The Union claimed that the 11th defendant (Harry Jayawardena) through his nominees had acquired 28% of shares of the Sampath Bank in violation of the provisions of the Banking Act and the Articles of Association of the 1st Defendant Bank.

The defendants argued that since the concept of nominee carries with it some kind of beneficial interest accruing to a person there should be evidence of accrual of such beneficial interest by 11th defendant through his nominees.

It was also argued that in the absence of any material to establish a relationship of the defendant companies that they are subsidiaries or holding companies of each other their total shareholdings in the aggregate cannot be taken into consideration in determining the question of violation of section 12 of the Banking Act.

Section 12 interalia stipulates that no person, nominee of such person shall acquire over 10% interest in a commercial bank unless approved by the Monetary Board with the concurrence of the Finance Minister.

According to the Judgement by Justice Udalagama, the stand taken by the 15th and 18th defendants in their statements of objection responding to the shareholdings given by the plaintiffs in their plaint the 15th and 18th defendants have given the breakdown of their shareholding in the 1st defendant Bank as follows:

H.N.B. 15th defendant 9.90, Smart Development Ltd. 18th defendant 4.69, (a) H.N.B. Retirement Pension Fund, (b) through Dalluwatte - 19th defendant 4.97, (c) H.N.B. W.O.P. Fund through M.U. de Silva, (d) 20th defendant 4.29, a. H.N.B. employees Provident Fund A/C No.2 4.90, Total 28.75.

"Are not these documents ex-facie evidence of violation of the Section 12 of the Banking Act by the 11th to 20th defendants in addition to the documents produced by the plaintiffs in support of their stance in the plaint?"

Have not the defendants-petitioners (15th, 18th 19th and 20th defendants) on their own showing and on their own admission of shareholdings aggregating to 28% in the 1st defendant-bank acted in violation of section 12 of the Banking Act which clearly restricts the ownership of the shares in a Commercial Bank to a limit of 10%. Unless the written approval of the Monetary Board is obtained with the concurrence of the stipulated in the section.

Have the defendants-petitioners who have confessed to acquiring of 28% of the Issued share capital of the 1st defendant-Bank exceeding the stipulated limit of 10% provided in the Section 12 of the Act, obtained a written approval of the Monetary Board with the concurrence of the minister as required by the Section?

It is my considered view that the defendants-petitioners who made a valiant attempt to controvert and repudiate the position taken by the plaintiffs have failed to provide a satisfactory and convincing answers to any of these questions.

Justice Udalagama also stated:

"The trial Judge cannot be expected to embank on anything resembling a trial of the action based on mass of voluminous of documents and conflicting evidence submitted as to the rights of the parties in order to evaluate the strength of each party's case at this stage.

All that was necessary at the stage was when interim relief by way of an interim in junction is sought the court should be satisfied that the plaintiffs have succeeded in establishing prima facie case which would meet with success at the trial. In other words the court should be satisfied that there was a serious question to be tried and the plaintiffs' case was not frivolous and vexatious.

Therefore taking into consideration all the circumstances of this case, the plaintiffs have satisfied the requirements for them to be entitled to interim relief claimed, and I see no ground in interfering with the learned Judges's order in issuing the injunction, and dismiss the application of the defendant-petitioners and cast them in taxed costs.

K. N. Choksy, PC., with S. C. Thambiah, S. Jayawardena, V. K. Choksy, K. Wijetunga, P. Gunawardena for the 16th defendant - Petitioner.

K. Kanagiswara, PC., with Anil Tittawela and A. Rodrigo for the 1st Defendants - respondents.

W. Rajapakse, PC., with G. G. Arulpragasam and K. Liyanagamage for the plaintiffs - respondents.

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