Enjoining orders issued on sale of MTD Walkers subsidiaries

Enjoining orders issued on sale of MTD Walkers subsidiaries

Written by Staff Writer

15 Feb, 2019 | 9:27 pm

Colombo (News 1st): Reports are emerging of recovery action being taken by banks, against a listed corporate. High Court Judge R. Gurusinghe issued four enjoining orders on MTD Walkers PLC in cases filed by four private banks.

The four plaintiff banks by their petitions had claimed that MTD Walkers owed them money, taken as loans by them and had not been settled with interest to date. The banks further claim that MTD Walkers is attempting to transfer shares to third parties and the banks plea to court was to issue permanent injunctions on the defendant company.

Meanwhile, Daily FT reported that a component member of MTD Walkers PLC, Walker Sons and Company Engineers Ltd have been subject to an application of winding up over the non-payment of bills to the value of Rs. 17 million.

MTD Walkers had on its board, businessman Jehan Amarathunga as its Deputy Executive Chairman. Amarathunga was also a member of the main board of the People’s Bank and held several prominent positions within that group.

The People’s Bank had extended various facilities which at some points reached a staggering Rs. 10 billion. The MTD Walkers annual report revealed a staggering Rs. 18 billion worth of facilities from local banks.

Team News 1st raised the issue of conflict of interest situation in which a serving director of a state bank was able to oversee the granting of facilities to a listed entity in which he was a prime decision maker. Unfortunately for shareholders of these financial institutions that lent the money in good faith to these companies including the state-owned People’s Bank who chose to ignore the early warning sounded by team News 1st and instead justified the facilities and the lending and issued a press release to the effect that all lending was done considering the scope of the company’s business.

No mention was made specifically addressing the conflict of interest position, arising from the bank lending to a company where a banks director enjoyed cross-directorships.

The Governor of the Central Bank also confirmed that there was no problem for a director of a state bank to obtain a loan from the same bank. However, the creditworthiness of a person or company had to be looked into when granting loans.

Compounding matters were that MTD Walkers had on its order books several projects, where in effect the government was its customer As is revealed now, those at the People’s Bank who are responsible for evaluating and granting the facilities have clearly overestimated the company’s potential and the public money is once again at grave risk.

On July 31st, 2018, Leader of the National Unity Alliance Azath Salley noted that there is nothing the Board of Directors of People’s Bank can do about this now because it involves a friend of Malik Samarawickrema, who is Jehan Amaratunga. He added that when it was reported that this company had obtained such a large amount of money, they looked into it but it was approved by the Central Bank. He noted that this is how the people’s money is going out.

The Commercial High Court has issued a temporary restraining order blocking the sale or transfer of shares in MTD Walkers PLC and its subsidiaries. Although only four banks have gone to court, several other banks are likely to pursue MTD Walkers for their share of the monies owed.

Significant changes are likely in the offing especially to protect the employees of the company and to ensure that all statutory dues including EPF and ETF have been paid and will be paid.

The sad story of ambitious lending by the People’s Bank to a troubled business would now demand a full forensic audit including the processes that failed to nip the problem in the bud once again leaving the people of Sri Lanka fully negatively impacted financially.

Who will be held accountable?


 

 

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