Financial Times

Harry J checkmated
Amarasuriya wins Com Bank round 1
By Duruthu Edirimuni
The much awaited Commercial Bank EGM concluded on a turbulent but jubilant note and an unbelievable turn of events for the bank’s Chairman Mahendra Amarasuriya, against whom the stakes were piled high.

Amarasuriya, who was expected to be ousted at the special meeting of shareholders on Wednesday, had an unprecedented show of support both from the staff and shareholders at a meeting where tempers rose and opposing sides almost came to blows.

He won the first round against powerful business tycoon Harry Jayawardena after the latter’s majority stake – through other parties – was reduced when the Court of Appeal ruled against any shareholding in excess of 10 percent in the bank. HNB and Distilleries Ltd, both controlled by Jayawardene had called the meeting to remove Amarasuriya. No reasons were given in the notice calling the meeting but by early last week shareholders backing Amarasuriya had taken every step possible to defeat the resolution. That included three court actions seeking orders to reduce stakes in Commercial Bank held by Harry Jayawardene-controlled firms. However no one was in store for what happened on Wednesday apart from the fact that Amarasuriya was likely to be ousted.

By two in the afternoon, more than 1,000 people, mostly in a pensive mood, had gathered at the Holiday Inn, the venue of the EGM. Some were queuing up to the second floor ballroom. A. Tennakoon, a non voting shareholder for more than 10 years, said he wanted to attend the meeting as a show of support to Amarasuriya. “This is the first time that I am attending a Commercial Bank meeting and I hope that Mahendra Amarasuriya will retain his chairmanship, because he has not done anything wrong,” he said.
T.E. Dias, who has been both a voting and non voting shareholder for over 10 years, said he hoped Amarasuriya would continue as chairman. A host of staff members said they wanted Amarasuriya to continue as he was the great motivating factor at the bank.

By three o'clock, the whole scene had changed into mild panic, with many more shareholders gathering up near the ballroom amongst tight security and the queues piling up from the ground floor to the second floor. Others were clamouring for last minute proxies. There was tight security and shareholders with their proxies were restless as security personnel began checking identity cards. No media was allowed and around 10 security men manned the main entrance to the ballroom.

When the EGM started around 3.45 pm, long past the scheduled 3 pm, boisterous unionised staff members who were either shareholders or had proxies defended their chairman and shouted down Jayawardena’s allies when they tried to voice their opinions.

There was a lot of booing at the directors by the staff and Commercial Bank Branch Union Secretary, M. R. Shah, who could be heard through a megaphone, was very vocal and determined.

K.C. Vignarajah, another petitioner against Jayawardena’s excessive shareholding, protested against the change of the venue of the EGM. He told The Sunday Times FT that the shareholders have to be notified 21 days prior to the change of the venue. “The Companies’ Act clearly stipulates that if the agenda, venue, resolution and the time are changed, it has to be notified to the shareholders 21 days prior to holding the EGM,” he said. He said when this point was brought forward, the pro-tem chairman, B.R.L. Fernando replied saying that he had received legal opinion. “When I said that the meeting was illegal and improper, the pro-tem chairman ruled that he had obtained legal opinion. I asked Mr. Fernando whether he has a written document with the opinion, which he did not have,” he explained. Meanwhile, Desmond Fernando, President of the Bar Association, who also attended the EGM as shareholder, said that it was illegal.

Vignarajah also objected to the selected pro-tem chairman of the meeting saying such a person must be picked by the shareholders and not the directors alone. “The meeting itself has to decide who the pro-tem chairman should be,” he said. He said that the meeting clearly showed that there was no unity among the directors and some were booed by the shareholders and the staff members. “It appeared that the high standards of the Commercial Bank board had already started deteriorating because of some dissident directors and I saw that the staff had great contempt for them,” he said. “There must be a limit to a person’s ambition and it should not affect the larger interest of the society,” he added.

When the meeting was called off after objections were raised as to the convening of the meeting and also after the Appeal Court judgement was conveyed, there was pandemonium and jubilation by staff and many crowded round Amarasuriya to congratulate him. Amarasuriya who was speechless couldn’t initially comprehend what had happened with the thunderous applause of the staff and the shareholders. He at once went towards Shah and embraced him and was trying to return a good word to all who congratulated him. Visibly moved and somewhat relieved, he told the media, ‘justice has prevailed’. The directors who were present were Amarasuriya, Nihal Fonseka, B.R.L Fernando, Amitha Gooneratne, Sanjiva Senanayake, Dinesh Weerakkody, Lalin Fernando and Shelton Wanasinghe. Another director A.S. Mather was not present.

Much ado about nothing?
Some minority shareholders raised questions about the furore over Harry Jayawardena holding a stake in excess of 10 percent in the bank but the lack of objections to the International Finance Corporation holding 15 percent. This, however, was done with special permission from the Central Bank.
They also asked who would compensate a shareholder forced to divest any excess holding in a bank if he suffered a loss on the sale at the market price.
They also said that although Amarasuriya maintains that no reason has been given for demanding his removal as a director of Commercial Bank, the members of the boards of Commercial Bank and DFCC Bank had objected to him raising questions about shareholdings in his recent letter to the Central Bank.

In that letter Amarasuriya objected to DFCC Bank continuing to have a stake in Commercial Bank as there was a conflict of interest for DFCC Bank now has a commercial banking arm competing with Commercial Bank. His fellow directors however objected to him writing to the regulator without board approval.

Appeal Court rules in favour of union
The Appeal Court overruled a District Court order rejecting the enjoining order sought by four shareholders who are also members of Ceylon Bank Employees Union (CBEU) to stop business tycoon Harry Jayawardena acting directly or indirectly from voting at the Commercial Bank EGM. The order was given just as the EGM got started on Wednesday.

After the District Court dismissed the CBEU request, the unionists immediately filed a fresh appeal in the Appeal Court challenging the District court order.
Senior Counsel Faisz Musthapha appearing for the petitioners said the order was erroneous as the District Judge, K. H Sumithrapala had not made even a passing reference to the Banking Act or to the Sampath Bank order.

The appeal was heard before Appeal Court judges, Justices Andrew Somawansa and L. K. Wimalachandra. Counsel Upul Jayasuriya supporting the CBEU members said that it was important to issue an order soon, because the EGM was taking place at the time of the case proceeding.

Earlier Colombo District judge K. H Sumithrapala refused an enjoining order against Harry Jayewardene saying there was no prima facie case against the defendants. Jayawardene was represented by President’s Counsel K. N. Choksy PC and his team.

The Court of Appeal issued a stay order until November 16 and ordered to communicate the order over the telephone to the necessary parties – in view of the meeting being held at the same time.

Central Bank urged to step in again
A top shareholder, who helped restrain business tycoon Harry Jayawardene from seizing control of Commercial Bank, has urged the Central Bank to call on the group seeking to oust Mahendra Amarasuriya as chairman of the bank to “back off.”

In a letter sent to Central Bank governor Sunil Mendis, two days before Amarasuriya got a reprieve after shareholders backing the latter forced the EGM to be postponed, K.C. Vignarajah said it was the duty of regulators to ensure “the ugly face of oppressive capitalism would not be manipulated to reduce healthy competition, supply sources, and narrow choices to the consumer.”

Vignarajah, also a shareholder of Jayawardene-controlled companies, Distilleries, HNB and DFCC), said the tendency to have extensive control of three of the top well performing local private banks by a few is clearly unacceptable; especially in the banking and financial services sector it could easily degenerate into a mafia like control of the economy.

He said the Commercial Bank under the eminent leadership of Mr. Mahendra Amarasuriya, has prospered extremely well and shown tremendous success in Sri Lanka and abroad. “Even the new capital adequacy rules, suddenly imposed by Central Bank has already been very easily met,” he said, adding that it was unhealthy for the Sri Lankan economy and national interest, if a very small group of persons with material shareholding in competing banks manipulated the flourishing independent Commercial Bank.

“The Central Bank must genuinely try ‘in the interests of a safe, sound and stable banking system and fair competition prevailing in the banking industry……”, to ensure that Commercial Bank does not also fall into the sphere of influence and / or control of Mr. Harry J’s group of SL Insurance, Distilleries, HNB, DFCC, DFCC Vardana Bank, etc.”

Vignarajah said Mr. Harry Jayawardene has to be admired as a superb entrepreneur who has made a tremendous success of Stassens and Milford Groups, Distilleries, etc. and through their success bought into the control of Aitken Spence Group, Sri Lanka Insurance Group, plus a host of other companies.

“However there are question marks on his handling of some companies like Madulsima Plantations. His success overall is matter of pride to the shareholders of those successful companies, perhaps as much as Mr. Mahendra Amarasuriya’s success and international image is a source of immense pride to numerous ordinary shareholders of Commercial Bank like me,” he said.

Back to Business