SC annuls SLIC privatization

Removes Director Board:

Terminates Auditors Ernest and Young:

Wasantha RAMANAYAKE

The Supreme Court yesterday in a landmark judgment annulled the multi - billion rupee privatization of the country's state owned insurance giant Sri Lanka Insurance Corporation (SLIC) in 2003.

Court allowing the two Fundamental Rights applications filed by the employees of the Insurance Corporation and Nawa Samaja Party Leader and Presidential Advisor Vasudeva Nanayakkara held that their rights as well as that of the public had been violated by the illegal and ab-initio void privatization of the SLIC to a consortium of companies controlled by Harry Jayawardena.

The Court ordered to divest forthwith 90 percent shares of SLIC with the Treasury and restoring the ownership of all its shares to the government. The court ordered to reimburse the capital investment of six billion rupees in Treasury bonds redeemable in five years to the Milford Holdings (Pvt.) Ltd. The Court also ordered that in lieu of the the interest the Treasury was to pay Milford Holdings the profits generated during the period.

The Court further ordered that the current Director Board of the Sri Lanka Insurance Corporation Ltd., would stand removed forthwith.

The Court granted time until June 18, to the Secretary to the Treasury to nominate competent persons for the approval of the court to be appointed as the Chairman and Directors to the SLIC. In the meantime the Treasury was to make an interim arrangement.

Justice Nimal Gamini Amaratunga delivering the judgment with Chief Justice Sarath N. Silva PC and Justice K. Sripavan agreeing, observed that the government's objective to end the monopoly in the insurance industry in order to attract foreign investments had been a total failure since it was transfered to a consortium of companies controlled by one person.

The court came to the finding that the the process was manipulated by the respondnets giving advantage to 38 respondent Harry Jayawardane.

"The manner the privatization process was done shocked the conscience of the Court," Justice Amaratunga noted. He noted that the Steering committee had been illegally appointed without the approval of the Cabinet.

The court forthwith terminated the service of the auditors Ernest and Young who had served SLIC and SLICL with conflicting interests.

Justice Amaratunga commending the service the petitioners had rendered noted that it could not be valued in monetary terms and directed the registrar of the Court to issue them with free copies of the judgment.

Petitioners Vasudeva Nanayakkara and two employees R. Sarath Nandalal and Ariyawanse Bandaranayake complained to the Court that privatization of SLIC lacked transparency and was tainted with irregularities in the process causing massive losses to the Government and the public.

The petitioners cited that the 38 respondents including former Finance Minister K.N. Choksy, former Economic Reform Minister Milinda Moragoda, former Treasury Secretary Charitha Ratwatte, Distilleries Company of Sri Lanka Ltd., Milford Holdings Ltd., Greenfiled Pacific EM Holdings Ltd. D.H.S. Jayawardane and the Attorney General.

The petitioners stated that consortium of companies controlled by D.H.S. Jayawardane entered into a Share Sale and Purchase agreement to purchase 90 percent of the shares of the SLIC on April 11, 2003.

The petitioners stated that the report of the Committee on Public Enterprise (COPE) in 2007, in its report had pointed out that the steering committee appointed by the second respondent former Minister Moragoda to oversee the privatization, had been done so without the Cabinet approval.

The report also had pointed that the steering committee had appointed Pricewaterhouse Coopers (PwC) Indonesia to act as financial advisers to the Government in collaboration with PwC Sri Lanka too without the Cabinet approval. M.A.. Sumanthiran with Viran Corea instructed by Abdeen Associates appeared for the petitioner Vasudeva Nanayakkara. J.C. Weliamuna instructed by Lilanthi de Silva appeared for the employees.

Counsel Sanjeewa Jayawardane instructed by Sudath Perera Associates appeared for Milford Holdings Ltd. Nihal Jayamanne PC instructed by Sudath Perera Associates appeared for D.H.S. Jayawardane.

Deputy Solicitor General Indika Demuni de Silva appeared for the Attorney General. "When contacted for comment a spokes person for Ernst&Young said we have ceased to be auditors of SLIC with effect from the year ending 31st December 2007,"