The Bench comprised Chief Justice Shirani A. Bandaranayake and Justices K.Sripavan and Chandra Ekanayake.
Petitioners are also seeking the Supreme Court to direct the Attorney General for a full criminal investigation on the alleged fraud and alleged market manipulation with the said funds.
Free Trade Zone and General Services Employees’ Union, Ceylon Bank Employees’ Union, Inter Company Employees’ Union, Jathika Sevaka Sangamaya, Lanka Jathika Estate Workers’ Union, Commercial and Industrial Workers Union, Federation of Media Employees’ Union, Independent Port Employees’ Union, Insurance Employees’ Union, United General Employees’ Union, and Ceylon Estate Staffs’ Union are the Petitioners.
They cited the Monetary Board of Sri Lanka, its Chairman cum the Governor of Central Bank Ajit Nivad Cabraal, Finance Ministry Secretary Dr. P.B. Jayasundera, Members of the Monetary Board Nimal Welgama, M. Ramanathan and Neil Ajantha Umagiliya, as well as the Commissioner General of Labour Pearl Weerasinghe, the Securities and Exchange Commission, and the Attorney General as Respondents.
J.C. Weliamuna appeared for the Petitioners. Senior State Counsel Sahida Barrie appeared for the Monetary Board of Sri Lanka.
Petitioners are asking the Court to make an appropriate order directing the Respondents not to invest the EPF funds in any company and banks except in blue chip companies.
They are seeking the Court to declare that the policy to invest of any percentage of the EPF can only be made with proper consultation process with employees of trade unions and the full disclosure of the details of the investments.
There are seeking the Court to direct that all equity investments in banks be immediately withdrawn and appropriate order be made restraining the Respondents from making any such investments in banks in future.
They are asking the Court to declare that the purported change introduced by any one or more of the Respondents in the Disclosed Investment Policy is invalid in law and is null and void.
Petitioners state the EPF is the foremost employment-related social security system to secure superannuation benefits to persons employed in the private and the corporate sectors through a private contribution fund. The finances for the fund are received jointly from employee and employer based on the principle that superannuation is the joint responsibility of both the employees and employers.
The objective of creating the EPF was solely for the purpose of superannuation benefits for its members, they state. It was based on the principle that all benefits accruing to the EPF should accrue and/or be able to accrue to the benefits of its members, they add.
Therefore, the EPF cannot endeavour to obtain any benefit that will not accrue to or pass on to its members, they maintain. Thus the Monetary Board is strongly required to act as the custodian of the EPF funds and is legally and morally bound to ensure that the operation of the funds are within the legal framework, they point out.
This is because the funds lying to the credit of the EPF are remittances of earnings belonging to its members and thereby becoming “real savings,” they state.
According to the Central Bank Annual Report of 2011, the EPF has a total of about 13.6 million accounts, of which 2.3 million are active, they assert.
In mid 2012, it was revealed in Parliament and the media that a certain percentage of the funds of the EPF had been invested in companies which were not blue chip companies and in addition, it was revealed that the EPF had invested in equities in companies listed even in the Diri Savi Board (the secondary board of the Colombo Stock Exchange), which consists of companies that are considered obviously less stable for investment of EPF funds with regard to liquidity and frequency of reporting, they add.
Petitioners state they caused a diligent survey and found that the Monetary Board had for some reason resorted to an inexplicable investment pattern without full disclosure. They allege there were no disclosures of detailed information at least in the annual reports of the EPF.
There is a stark difference in the eligibility criteria in investing, they charge. The EPF fund as at the end of 2010 was Rs. 899.7 billion. The funds invested in equities are at the end of 2010 was Rs. 43.6 billion as there was a sudden increase of 345% in equity investments from Rs. 9.8 billion in 2009, they brought to cognisance.
The practice of investing the funds of EPF have resulted in a clear conflict of interest and/or insider dealing, they charge. Contrary to the disclosed policy and the best interest of the EPF members, any one or more of the Respondents have also manoeuvred the funds gaining control of private banks by securing control of the shareholders and thereby appointing directors, the allege.
The conduct of the Respondents clearly demonstrates that the finances of the EPF are at risk and are being abused for a collateral purpose, demonstrably outside the purpose of such equity investments as envisaged in the Investment Policy of 2002, they blame.
It transpires from the speech of the Deputy Finance Minister that the Respondents have, purposely without any authority whatsoever and without ensuring the best interest of the contributors of the fund, changed the disclosed policy where the standard of transparency and good governance requires such policy, they stress.
Since the decision of the Board to invest in equity of companies other than blue chip companies listed on the Colombo Stock Exchange, the EPF funds were utilised to artificially raise the share prices of such companies which enabled certain shareholders of such companies to sell their shares at the artificially high prices, they incriminate.
The method is prohibited practice world over and is more popularly known as the “pump and dump” method, they describe.
The emerging evidence on the use of the EPF funds by the Monetary Board demonstrates that the funds thereof were in certain instances used for market manipulation, they indict.