29 September, 2020

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An Open Letter To Central Bank Governor

By Nihal Sri Ameresekere

Nihal Sri Ameresekere

Nihal Sri Ameresekere

Mr. Ajith Nivard Cabraal

Governor

Central Bank of Sri Lanka

30, Janadhipathi Mawatha
Colombo 1.

Dear Nivard,

In the context of urgings by several parties in the public interest, as you are aware, a Seminar was conducted on Friday, January 31, 2014 on the subject Repetitive Debacles of Finance Companies’.

To be honest, I do not have much dealings with finance companies, except in the past, when assets of Directors were sold in one instance, and in another instance where property of an Associated Company was sold, to settle all Depositors under the supervision of the Central Bank. I am also aware of another instance, where certain Directors and Staff were sentenced to jail. Curiously, such did not occur in all instances ?

Whilst prior to the Seminar, on a mere perusal of the Finance Business Act No. 42 of 2011, I came across certain Sections, some of which I thought ought be brought to your kind attention.

1. Section 31. (6) (j)

“31. (6) (j) direct any shareholder of the finance company to divest or transfer the ownership of the shares owned by him, to a person nominated by the Board, on payment by such person of compensation as follows :-

(i)   where such shares are quoted, at the market value thereof; or

(ii) where such shares are not quoted at a price to be determined by a valuer nominated by the Board.”

Identical provisions are there in Section 36 (2) in the instance of vesting of a finance company.

I cite the following extracts attributed to me reported in the Mirror Business of yesterday February 5, 2014

“where a closely held Finance Company, with less than Rs. 350 Mn., net assets, has had market valuations of 14,000 Mn., and 33,000 Mn., in terms of Share Prices of transactions effected, cautioning the Central Bank citing the instance of National Savings Bank and The Finance deal, which was annulled due to public hue and cry.”

Would not the foregoing provisions of the law make it mandatory for the Central Bank to purchase Shares of quoted loss making finance company at such artificially and/or manipulative Shares prices ? There would be ample eminent Counsel arguing such Cases regardless of losses of public monies.

2. Sections 25 and 31 provide for the re-organization and/or re-structuring and/or amalgamation of Finance Companies under the direction and/or supervision of the Central Bank.

Whereas Chapters IX and X of the Companies Act No. 7 of 2007, which came into force on May 3, 2007, provides for companies to be re-organized and/or re-structured under judicial supervision. Hence, is this not an instance of transgression on the part of the Central Bank in taking over a judicial function, which had been debarred, as had been determined by a 7 Judge Bench of the Supreme Court in October 2002, that powers of one organ of government could not be alienated by another organ of government, read with the entrenched provisions of Article 3 and 4 of the Constitution ?

3. In contrast to the above, Section 32 providing for winding-up of Finance Companies is to be under judicial procedure as provided for in the Companies Act No. 7 of 2007, except that it is unclear, as to why the Minister has to get involved in setting out the priority of claims, when the Companies Act No. 7 of 2007 as per the relevant Schedule specifies the priority of claims under judicial supervision ?

4. The ‘definition’ of Directors in Section 529 of the Companies Act No. 7 of 2007, in reference to certain Sections thereof includes those in accordance with whose directions companies act; thereby exposing those who give directions to fall within such ambit, unless such directions given are not to an individual company, but commonly given to all finance companies as a Regulatory.

All finance companies need not be of the same size, with same parameters. Some small finance companies catering to a niche market segment could indeed be viable, whereas a crash of a large mismanaged  finance company would have detrimental effect on public confidence.

5. One cannot understand why the maximum percentage of Share Capital to be held by a body corporate and/or individual of a finance company has not been restricted yet, as in the case of banks, as provided for in Section 12 (1) (n) of the Act.

It had been disclosed in the COPE Report of June 2005, that the primary cause for the failure of finance companies had been uncontrolled / unsecured / imprudent / lending to businesses of the majority owners. This is a truism and reality even today. Should a finance company be a ‘window’ for collecting funds to finance one’s own business, particulars of which are not made known to the depositing public ?

6. Attached is a simple format, subject to any modifications, suggested for periodic information to monitor finance companies and such disclosure alone would be an ‘inbuilt’ self-monitoring check and could also be used to educate the public depositors. – Vide Page 12 of DailyFT and Page 7 of Mirror Business, both dated February 6, 2014.

7. It is noted that Section 21 (1) (e) (i) of the Act, reiterated by Annex 1 to the Directions, Rules, Notices and Guidelines published by the Central Bank, disqualifies a person from being a Director of a finance company, if any investigation and/or inquiry is pending against such person, which is no doubt a salutory provision. To enforce such provision one would have to check with several relevant bodies conducting inquires or investigations, particularly with the recent reports of a spate of inquires disclosed to have been initiated by the SEC !

8. The COPE Report of June 2005 had extensively dealt with the Mercantile Credit Case – Vide COPE Report of June 2005

  • Mercantile Credit which had been operating under the Control of Finance Companies Act No.27 of 1979 had been issued a renewed License under Finance Companies Act No. 78 of 1988 in November 1990
  • At the very same time, it had had liquidity problems, and had requested financing from the Central Bank in November 1990 itself !
  • Monies amounting to Rs. 1,750 Mn. appear to have been advanced prior to vesting in February 1992 Mercantile Credit with the Monetary Board, whereas such advances as per the Statute could have been made only to a company already vested.
  • Questionably, such cognizable advances of public monies had been with the net worth of this company misleadingly reported as Rs. 273 Mn., whereas the corrected net worth had been negative at Rs. 124 Mn.(with Rs. 647 Mn. dues in legal actions), and only just over Rs. 100 Mn. had been recovered on these advances of Rs. 1,750 Mn., resulting in a debt of Rs. 4.7 Mn.at at 31 December 2004 (now Rs. 13,000 Mn !).
  • Furthermore, intriguingly 2 Banking Licenses had been subsequently given to the same Directors !

I was prompted to bring the foregoing to your kind attention, particularly given the fact that you endeavoured to support my actions in the public interest on the purported oil hedging deals Cases, by retaining independent Counsel, and not the Attorney General, with instructions given not to oppose my actions, in view of your apprehensions and concerns.

On the other hand, the Attorney General, whilst affirming the ultra-viries nature, illegality and fraudulency of such deals, misled the Court opposing my actions as ‘time-barred’, which as you were aware were not, and with the Attorney General furthermore pompously assuring the Court in public that he was supremely confident in successfully in defending the foreign actions against the CPC / Government, whereas the Attorney General dismally failed, thereby causing colossal losses to public funds, having thwarted my actions in my own country, which were in the offensive and not in the defensive as the above, with the Court having previously held such transactions to be ex-facie dubious. In addition to the above colossal losses, the cost of such litigation alone I believe exceeded the annual cost budget of the Attorney General’s Department !

Yours truly,

Nihal Sri Ameresekere

cc: Mr. Lalith Weeratunga, Secretary to H.E. the President – for H.E. the President to apprised, as the Minister of Finance

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Latest comments

  • 11
    1

    Dear Mr. Amarasekera,

    Are you expecting a serious response from Mr. Cabraal or did you want to expose his connivance in this matter?

    I can;t see him managing to do the former because he is not governing the CB but rather managing it for his masters!

    How else can he have the gall to claim growth rates even the Americans will envy. And they, can print dollars!!

    • 12
      1

      I doubt the poor chap can even understand it let alone send a reply !

      • 5
        1

        ….as a former CJ apparently/publicly said to the effect that even his peon was better qualified or words to that effect…

      • 1
        7

        I disagree. Both Nihal Sri and Nivard belong to the same profession and possibly taught by the same lecturers. Point I am making is that as much as Nihal Sri is capable of asking smart questions, I have no doubt Nivard will be able to provide smart answers…

        • 7
          1

          Don’t take this Nihal Sri Geeza seriously , he is another Dayan , last year this scum was busy supporting CJ’s impeachment !

  • 3
    1

    The AG was Mohan Peiris!

  • 2
    2

    When all the political drama is over and the countries history written it will the Professionals who were participants or mere advisors to the drama who will be held accountable. The politicians may be just sent home by the voting public and they too will blame the professionals. Cabraal a very proud and prestigious product of the Institute of Chartered Accountants of Sri Lanka should always rember that whatever he does. There should be no masters for him they should all be just clients.

    • 6
      2

      “Cabraal a very proud and prestigious product of the Institute of Chartered Accountants of….”

      Is it correct that he holds a record of 13 attempts before qualifying
      as a C.A????

      • 6
        1

        [Is it correct that he holds a record of 13 attempts before qualifying as a C.A???? ]

        Now I know how Sri Lanka’s gets its record braking GDP number’s. Thanks punchinilame

        • 8
          1

          That too, a local CA; Not one of the four internationally recognized FAASB Accounting bodies. Doesn’t that account for the current state of our economy? Local formula for the local situation. God forbid anymore damage to the country by this Ponzi master.

      • 2
        7

        As an Accountant and a batch mate of Cabraal I wish to correct some of the statements. I can confirm that he got through all his exams first go!!
        Cabraal was a very smart student.

        Lets be honest and not spread untruths, we may all respectfully disagree with the way the economy is being handled or the Central bank data etc etc but spreading untruths is not good.

      • 3
        7

        It is amazing how such diabolical untruths are freely traded amongst ignorants on these pages…

        An Eisenhower Fellow and a past President of the Institute of Chartered Accountants of Sri Lanka, not only did he passe all his exams first time, he was also the prize winner in final examinations. These are facts.

      • 1
        0

        Punchinilame
        your statements did have a ripple effect on Mr Cabraal’s colleagues. Let us not forget that his academic credentials and achievements (both negative and positive) are not important but his integrity is paramount to save the economy.

  • 1
    0

    yet another open letter!

    • 5
      0

      The way open letters are circulating it is time we had a new cabinet minister for Open Letters.

  • 10
    0

    People who write such long convoluted letters have never worked in a business or a government office! If this is an example of the way business is done in SLK, then God help SLK!

    Managers at any level do not read this sort of thesis at their office. They end up in File 13, under the desk.

    I don’t think that this long letter has been ever sent. It was written to off load the gentleman’s troubled mind.

    The only way to get Cabraal’s attention is to send him a court summons with a short sharp and concise lawyer’s letter. The writer should take his case to the court first, if he thinks Cabraal has been negligent in serving his duty at his post.

    People at the top have their own course and agenda. You have got to have an enormous momentum to impact them and dislodge them from their trajectories.

    Sorry to he hard on you Sir, but that’s the reality.

  • 5
    0

    Finance Companies, Insurance Companies and even Banks are being used by individuals, corporates and even the Govt to bankroll their activities. Even Private Commercial Banks have now been brought under the ambit of Govt control through EPF, ETF shareholdings and CBSL regulations.

  • 6
    0

    Dear Mr. Amarasekera,
    Right thinking all citizens of this country are very proud of you & your actions. When it comes to crooks like.. (we all know who they are), just request letters would not have any effects, you need to force them to do by taking them to courts. But then again, some times ours judges also regime’s stooges. But we can’t give up, lets keep fighting for justice.

  • 6
    0

    Dear Sir,
    As I am not an academic, I got a fair Knowledge and understanding What you have Said in your informative Open letter.
    But I have doubt of the Central bank governor and His looting Masters of Public coffers,The Djaha JARAPASSA CLAN will not give a reply,
    Because They will not and cannot understand the content of your letter as they only understand Cheating,looting and lying to the masses of Sri Lanka and the world.

  • 4
    0

    Good try Mr. Amerersekere to hold accountable the Chief architect of major ECONOMIC CRIMES in Sri Lanka, Nivad Cabraal, including lotting of EPF and ETF funds. But this is way above the head and interest of that cunning and unethical accountant clown at the Central Bank.
    I note you have copied your missive to the regime’s CHAOS SPECIALIST – Lalith Weeratunge, Secretary to Mahinda Rajapaksa, who promised CHAOS if the Rajapakasa regime is head ACCOUNTABLE for its corruption and crimesby the international community!
    What a sad and hopeless situation. So let’s pay for mother Lanka!
    As you may have guessed the CHAOS-THREAT POLICY if the Mahinda Rajapaksa family is held accountable is the Rajapaksa Brothers and Sons’ NO-EXIT STRATEGY to DIVIDE, DISTRACT and RULE Lanka by turning it into another Syria and unleashing the Sinhaia BBS to attack Muslims, Christians and Tamil minorities..

    • 5
      0

      Is it the same Lalith Weeratunge who was depositing the ‘Helping Hambantota’ Tsunami funds into someone’s personal bank account?

      If so, copying the letter to him would be like the proverbial ‘pouring water on a duck’s back’.

      In any event Cabral is hardly one to even respond to the letter, let alone make any meaningful actions because of it. And is this the same Cabral who was involved in some Pyramid scandal prior to being appointed Gov of the CB??

      Sounds like a veritable ‘den of thieves’!

  • 1
    0

    Welcome to Sri Lanka a land like no other.

    I a simple layman fail to understand how in the recent past some directors of a failed finance company served rigorous imprisonment while these days they seem to enjoy total freedom.

    Another thing I fail to understand is how a finance company can fail suddenly in this day and age ( like the most recent one )when they are supposed to be regulated and supervised very stringently by the bank supervision dept.of the Central Bank.Did they not see the signs?or are they so totally incompetent?or DID THEY WILLINGLY AND KNOWINGLY CONNIVE WITH THE DIRECTORS OF THAT COMPANY TO DEFRAUD THE POOR INNOCENT PUBLIC?.

    Should they not be held accountable? I AM AT A LOSS

    We should be thankful that at least one professional has seen it fit to address this problem while the rest of them seem to be in the slumber of their own comfort zone.

    • 1
      0

      Do agree with you.The best deterrent is to jail the defrauders. But then,to do that, the legal process must be flawless and the rule of law must prevail. The fact that laws are openly flouted and/or dismantled by the government is a clear pointer to the intentions of the politician. It is unfortunate that the judiciary is colluding in this effort.So also are the senior public administrators. When there is no means available for the citizen to correct this position the ultimate action left will be the physical elimination of the miscreants.

  • 7
    1

    Your open letter to this idiot should have sought his (and his wifes) professional advice on setting up ponzi schemes and shaky /shady finance deals. As for his knowledge of economics, all he knows is that it is something that comes from his other end when he opens his mouth to talk on the subject. Useless misfit and the country gone to the dogs with him.

    • 1
      0

      His wife is a Tamilian from Jaffna.

      • 3
        0

        “His wife is a Tamilian from Jaffna”
        No wonder he is taking her advise to run the CB using Suruttu Kade tactics.

  • 3
    1

    I have been investing in sri lanka since 2003, not a large amount of money say around 600000 / USD, after This CB Cabrall failed my friend on CIFL guarantees that he has given to all deposit holders, ill never invest in sri lanka and planning to bring money back to Australia asap, these guys are bunch of crooks that has no qualifications to run sri lankas financial institutes, what a shame, what we have done to deserve this

  • 5
    1

    and I have been investing in sri lanka since 2003, not a large amount of money say around 600000 / USD, after This CB Cabrall failed my friend on CIFL guarantees that he has given to all deposit holders, ill never invest in sri lanka and planning to bring money back to Australia asap, these guys are bunch of crooks that has no qualifications to run sri lankas financial institutes, what a shame, what we have done to deserve this

    • 1
      0

      if you think you were wronged by the CB or the Governor, you should take them to court. For a significant amount less than USD 0.6M, I am sure a competant firm of lawyers in SL will be willing to represent you….My gut feel is your whinge is yet another case of “Rawlai-Kendai”.

  • 1
    0

    He is a good brain. Whatever it is lets give him the credit due to the poor devil.

    Look at Raj Rajaratnam in comparison!

    School dropout, boat people, billionaire, criminal, prisoner!!

    Is NC a foreigner?

    • 0
      0

      Small cunning and wiry.Doesnt look like a foreigner to me. But must be from Kallathony origins. Chettiar or something like that.

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