Financial Times

Commercial Bank power struggle enters round 2; CBEU to contest HNB stakes
Central Bank probe still on Harry J stake
By Duruthu Edirimuni
The Central Bank is continuing its probe on allegations that shareholders backing Harry Jayawardena had a stake in Commercial Bank in excess of the maximum limit allowed, after issuing a preliminary report clearing the deck for the powerful tycoon in his bid to seize control of Sri Lanka’s richest private bank, a top official said.

Two days after Jayawardena’s attempt to oust Mahendra Amarasuriya as chairman of the bank failed on Wednesday, Central Bank Deputy Governor W. A. Wijewardene told The Sunday Times FT that the Central Bank was continuing with the investigation.

“Our (preliminary) examinations showed there has not been a violation of law but the investigation is going on and a technical committee has been appointed to examine all the issues involved and make appropriate recommendations to the Monetary Board,” he said. Earlier in the week, K.C. Vignarajah, a shareholder who was among those who filed petitions in court seeking an order restraining Jayawardena from exercising voting rights of over 10 percent of the stake he holds, wrote to the Central Bank pleading for the regulator to intervene to ensure “the ugly face of oppressive capitalism would not be manipulated to reduce healthy competition, supply sources, and narrow choices to the consumer.”

The flurry of activity during the week as Jayawardena and Amarasuriya-led groups prepared to stall each other’s march for control of the bank culminated with an action-packed, riotous extra-ordinary meeting of bank shareholders at the Holiday Inn.

In scenes reminiscent of recent unruly scenes in parliament where jostling and opposing sides virtually came to blows, Amarasuriya won the day with his supporters filibustering the group of directors with Lakshman Fernando in the chair and not allowing him to proceed. Shareholders objected to the appointment of the pro-tem chairman and not providing adequate notice for the change of venue from the bank auditorium.

They also said Fernando had no right to postpone the meeting based on the Appeal Court verdict as that decision only limited Jayawardena’s stake for voting purposes and didn’t disallow the meeting. “In all cases we asked for a vote and this was not allowed,” said Vignarajah.As both parties flex their muscles for round two of the battle with Jayawardena by no means beaten, the Ceylon Bank Employees Union (CBEU) dropped another bombshell saying it was now planning to contest Jayawardena’s majority stake (through connected parties) at Hatton National Bank. “We are stepping into HNB next,” CBEU President M. R. Shah told The Sunday Times FT.

According to corporate lawyers possible scenarios in the future could see Jayawardena trying to vacate the enjoining order reducing his ‘combined’ stake at Commercial Bank when the Appeal Court case comes up on November 16, the eve of the presidential poll.

“I think both parties will file objections and the CBEU will move to continue the enjoining order,” one lawyer said. He said that enjoining orders are granted when there is a threat of irreparable damage to a particular issue. “If the EGM had continued, there would have been an irreparable damage and this is what the CBEU lawyer had told court resulting in an enjoining order being issued,” he said. The case could drag for months and could be a to-and-fro battle with the enjoining order being lifted giving Jayawardena-connected parties their full voting rights and the CBEU moving court once again for an enjoining order in case a fresh EGM to oust Amarasuriya is called.

Some stock brokers found it strange that Commercial Bank share prices rose on Thursday when some large parcels of 200,000 shares traded hands. LOLC had bought these two parcels of shares, brokers said.

Analysts pointed out that share prices should normally fall in an uncertain environment where there is a management crisis and battle between shareholders, although some movement could have been because the bank last week announced positive results for te latest 9-month period.

Embattled Amarasuriya, who showed relief at the end of the meeting, said he was overwhelmed by the support he had received. “I knew the employees were 100 percent behind me, but it was a surprise to see such shareholder support,” he said. He said that 98 percent of the proxies were submitted against the resolution.

Sanjiva Senanayake, representing the International Finance Corporation (IFC) stake of 14.99 percent in the Commercial Bank said that as far as the IFC is concerned, everything is working fine and they don’t want to ‘run’ the bank. “We are there as shareholders, we are not there to run the bank,” he said.

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