The revival of the state-acquired Celestial Residencies, one of the premier iconic properties of collapsed Ceylinco group of companies, under the troubled Revival of Underperforming Enterprises and Underutilized Assets Act has turned into a mess, due to the wrong company being listed in this law.
The owning company of Celestial Residencies is Ceylinco Homes International Lotus Tower with its main shareholders being Ceylinco Homes International, Ceylinco Capital Investment (a subsidiary of troubled Shriram Capital Management), and Ceylinco Insurance, Ceylinco Homes International, sources close to the owning company, said.
According to the Act, the government acquired Ceylinco Leisure Properties Ltd which has nothing to do with Ceylinco Homes International Lotus Tower, the owning company of Celestial Residencies.
This is the fourth such issue the government is facing over, what lawyers say, is a badly-crafted law. Pelwatte Sugar earlier objected to the take-over on the grounds that its lease agreement doesn’t fall within the ambit of this law; Chalmers Granaries was never vested or alienated by the state while Lanka Tractors is not owned by the state but is a public company.
Under the latest crisis, the payment of compensation for creditors, contractors and those who paid advances to buy super luxury residential apartments will become a major problem as their dealings had been with Ceylinco Homes International Lotus Tower -- not Ceylinco Leisure Properties, a senior official of the Finance Ministry said.
A top official of Ceylinco Group said Ceylinco Homes International Lotus Tower has pre sold about 82 apartments and those who have purchased the units have paid on average two thirds of the cost.
He revealed that the company owes close to Rs 3 billion in a secured loan to Seylan Bank and a similar amount is owed in advances to apartment buyers.
Asked about the legal implication of the wrong company being listed in the law, opposition parliamentarian Wijedasa Rajapaksa said the government would have amend the schedule of the Act in Parliament to overcome this mess.
It has to sort out all the legal problems and carefully inspect the documents because the Ceylinco group had a very complicated and diversified company structure, he added.
The senior Finance Ministry official said the move made by a consortium led by Sri Lanka Insurance Corporation to take over Celestial Residencies – which was reported in the Business Times on December 25-with an initial investment of Rs. 6.8 billion has been suspended pending the resolution of the ownership issue.
The group had planned to resume construction work on Sri Lanka's tallest building at 45 stories, where a funding shortage had halted work. The project is sited on a prime 262 perch seafront property in the capital’s main business and entertainment district of Colombo.