Pelwatte Sugar Industries PLC is gearing for legal action about the acquisition of its business last year under terms of the Revival of Underperforming Enterprises or Underutilized Assets Act. No 43 of 2011 and shareholders have been summoned to an Extraordinary General Meeting on Aug. 18 for consultations.
The notice convening the EGM, to be held at the Institute of Chartered Accountants of Sri Lanka sets out the following resolution to be considered and passed "if thought fit.’’
"IT IS HEREBY RESOLVED that the Board of Directors of Pelwatte Sugar Industries PLC take legal advice and appropriate action as proposed by the shareholders, for purposes of
* Determining the implication of the Revival of Underperforming Enterprises or Underutilized Assets Act. No. 43 of 2011 on the Company, its Shareholders and Stakeholders;
* Obtaining relief for the Company in respect of the wrongful and unlawful appropriation of the Company’s assets by instituting action for damages or such other action as may be legally advised;
* Taking such further action to secure and prevent the assets of the Company from being disposed of.’’
Asked what strategy Pelwatte proposes to follow, Capt. D.A. de S Wickremanayake, a director of the company, said that they wish to consult the shareholders on what they should do.
"We’ve had inquiries from shareholders about their position and these matters can be discussed at the meeting,’’ he said.
However, analysts were of the view that the wording of the resolution to be placed before shareholders for their consideration clearly suggests that a legal challenge to the appropriation is being contemplated.
The Distilleries Company of Sri Lanka, several months before the government moved to take over the business, acquired the controlling interest of Pelwatte from the previous controller, Capt. Wickremanayake, who continues to retain an interest in the company.
Pelwatte’s alcohol distilling business, utilizing the molasses byproduct of sugar production, has useful synergies with Distilleries liquor manufacturing business.
Wickremanayake was then on record saying that substantial capital infusion, of the kind that the new controlling interest commanded, was necessary to turnaround the long troubled company which was the country’s biggest sugar producer privatized during the
Mr. Harry Jayawardena, Chairman of DCSL, became Chairman of Pelwatte following the change of the ownership structure. The other directors are: Messrs. M.R. Peries, Capt. R. Wettawa, Capt. K.J. Kahanda, D.A. de S. Wickremanayake, Dr. C.S. Weeraratne, D.H.J. Gunewardena, D.A.E. de S Wickremanayake and K.K.U Wijeyesekera.
At the time the so-called "Expropriation Law’’ which also took over the sugar producing business of Sevanagala Sugar Industries belonging to Mr. Daya Gamage, a UNP politician whose wife is currently a UNP National List MP, came into effect, it was stated that the time at which government land in the Moneragala district had been allocated to the company, first run by the government in partnership with Booker Tate, a global sugar giant, was anterior to the time frame applicable to the law under which the government took over its assets.
But no legal challenge on that ground was mounted then.
Asked what the position of shareholders of quoted companies like Pelwatte and Hotel Developers, owners of the Colombo Hilton, was in the context of their takeovers, Treasury Secretary P.B. Jayasundera said they may lodge compensation claims. These would be paid in terms of valuations made by the Chief Government Valuer.
He said that a notice in this regard had been published, but admitting that it may have not been noticed, he would ensure re-publication.
Dealings in the shares of both Pelwatte and Hotel Developers on the Colombo Stock Exchange have been suspended since the so-called expropriation law came into effect and shareholders have had no communication from the concerned companies until Pelwatte summoned its EGM.