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| Thursday, 3 July 2003 |
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by Wasantha Ramanayake The Court of Appeal yesterday removed the cancellation of the licence of Pramuka Bank by the Monetary Board of the Central Bank. Justice K. Sripavan issued a writ of certiorari quashing the cancellation of the licence to Pramuka Savings and Development Bank (PSDB) effected on December 19, 2002. He further issued a writ of mandamus on the first respondent Monetary Board of the Central Bank (MBCB) to consider several options recommended by the fourth respondent, Director Banking Supervision in her post-suspension examination report on the PSDB and to take such appropriate steps as provided by law. Delivering the judgment Justice Sripavan observed that on November 21, fourth respondent submitted a report to the MBCB on the post-suspension examination report setting out several options available in terms of Section 76 N of the Banking Act which would enable the first respondent MBCB to permit the bank to resume business. In terms of the said report liquation of the bank should be resorted to only if all other options to revive the PSDB failed. According to the said report, the most preferable course of action suggested by the Director Banking Supervision was for the MBCB to require the present shareholders to transfer their shares to another bank or banks that consent to the arrangement. This option, had the advantage of enabling the removal of the present directors who have been responsible for mismanagement of PSDB. Justice Sripavan stated that the court did not dispute that the first respondent MBCB had the discretion in the matter. He observed that court could examine whether the discretionary power was used properly, fairly and according to the rules of reason and justice. "No substantial evidence had been placed before the court to establish that the first respondent considered any of the options. The decision of the MBCB dated November 21, 2002 only sated that the MBCB considered the report and discussed the options currently available and directed the Central Bank to update the information on its findings and to consult a lawyer experienced in corporate matters and report further to the MBCB." He observed that it only appeared that first respondent invited the members of the Board of Directors of the PSDB and gave an opportunity, on December 13, to respond to the findings of the examination conducted by the Central Bank. The response of the Board of Directors was that they did not have proposals.The Judge further observed that it was futile to invite proposal from the same Board of Directors when the suggestion by the fourth respondent was to reconstitute the Director Board. The Judge stated that as submitted by the counsel for petitioners, the depositors in this case, there was not an iota of suggestion that several options suggested by the fourth respondent received attention of the first respondent. On the contrary a decision was taken to reject them all and petitioners had been led to believe that first respondent arrived at the decision to cancel the licence and to wind up its affairs after considering the said report. He further pointed out that"no reason what so ever were given as to why the MBCB rejected the options suggested by the Director Supervision even if they were considered." The Judge stated that it was impossible to determine whether or not the MBCB in fact considered options in the absence of the reasons and failure to give adequate reasons amounted to a denial of justice and was itself an error of law. "The reasons must not only be intelligible but should deal with the substantial points which have been raised, the Courts have treated inadequacy of reasons as an error on the face of the record so that inadequately reasoned decisions could be quashed even if the duly given reason was mandatory." Around 236 petitioners, who were depositors of the PSDB in four separate applications cited MBCB, Central Bank Governor A.S. Jayawardane Deputy Governor P.M. Nagahawatte, Director Banking Supervision P.P. Sirisena and PSDB as respondents. Petitioner complained that 1-4 respondents having failed to carry out their statutory duties had resorted to cancelling the licence of the PSDB in order to cover up their lapses in failure to take action under the Banking act for collateral purposes. M.A. Sumanthiran and Viran Corea appeared for petitioners. Deputy Solicitor General Saleem Marsoof with Senior State Counsel Nihal Jayawardena and State Counsel Arjuna Obeysekera appeared for the first respondent MBCB. K. Kanag Ishwaran PC appeared for 2,3 and 4 respondents. |
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