Harry Jayawardena’s Melstacorp Ltd on Friday as promised withdrew its case in the Appeal Court against the Securities and Exchange Commission (SEC) over a mandatory offer issue but broke another promise – an assurance that it would abide by a March 5 ruling. Earlier Melstacorp by its letter dated June 28th had made an application to the SEC seeking a settlement agreeing to unconditionally follow the determinations of the SEC dated March 5 and to withdraw the writ application filed by them against the SEC, if the SEC would consider withdrawing the action filed in the Colombo Magistrate’s Court against the company and its Board of Directors.
A week after the Magistrate’s Court case and Melstacorp’s assurance made in court, the company has written to the SEC saying according to fresh legal advice they have no obligation to fulfill the March 5 SEC ruling. “After making all these promises (to court), Harry Jayawardena comes up with a new tactic,” one SEC source said. Informed sources said the SEC has also been under pressure from ‘higher authorities’ for pursuing with the Magistrate’s Court case. The SEC had charged Melstacorp together with Milford Exports (Ceylon) Ltd and Distilleries Co. for failing to declare a mandatory offer after they purchased 36.27 per cent of voting rights of LMF on or around September 13, 2011, thus violating the SEC Takeovers and Mergers Code.
Melstacorp was also charged with buying another parcel of LMF shares without having made a mandatory offer. The company challenged the SEC ruling through the Appeal Court but later, during the Magistrate’s Court hearing, agreed to abide by the SEC decision. It was then decided that Melstacorp will withdraw the Appeal Court case and make the mandatory offer under stipulated conditions. The SEC on its part agreed to withdraw the Magistrate’s Court complaint based on that assurance. However while withdrawing the case on Friday, the issue still remains uncertain as Melstacorp is not about to follow the SEC ruling, which would mean the Magistrate’s Court case would continue. Last week, Mr Jayawardena and five other directors were released on Rs 2 million personal bail each by the lower court. Meanwhile pressure is mounting at the SEC over its probes and investigations into various stock market deals. “Morale is also low because of the uncertainty,” the source said. There were also unconfirmed reports of attempts to remove acting Director General Hareendra Disa Bandara and replace him with SEC Investigations Director Dhammika Perera.