This is not about the AGM of the Ceylon Chamber of Commerce (CCC) on Monday but the day John Keells Chairman Susantha Ratnayake, in the eye of a storm (third from right and seen with other officials), took over as Deputy Vice Chairman of the CCC. It was on the same morning that Chief Justice Sarath N Silva and two other judges delivered the stinging judgment on LMSL. The Chief Justice, who was due to attend the CCC AGM as chief guest, didn't turn up as he was indisposed. Pic by J. Weerasekera.

Directors of under-fire John Keells Holdings (JKH) have been called for an emergency board meeting to discuss the Supreme Court judgement which severely criticised the 2002 Lanka Marine Services Ltd (LMSL) privatisation.

“The chairman Susantha Ratnayake has called a board meeting,”Deva Rodrigo, a non-executive director, told The Sunday Times FT, without further comment.

Despite efforts by the group to maintain a brave face after the damning judgment by the court, pressure was mounting for more accountability and action against the board and its current chairman, Susantha Ratnayake. JKH is Sri Lanka’s biggest, listed conglomerate. S.C. Amarasinghe, a JKH shareholder from Jaela, wrote to Mr Ratnayake, who the court established had acted in collusion with Treasury Secretary Dr. P.B. Jayasundera in working against the public interest, saying that “… the chairman at that time (Vivendra Lintotawela) along with the board of directors did not exercise due diligence in the domain of business ethics and good governance and the extent of your collusion that existed between your organisation and PERC is now out in the open and well and truly nailed by the Supreme Court judgement.”

A copy of the letter was sent to The Sunday Times FT, among other individuals. Mr Amarasinghe also said the company should fully explain to shareholders what steps are being taken to rectify the situation. JKH, a day after the judgement, informed shareholders of the court ruling, listed out sections of the verdict that impacted the company and said it was “reviewing its options available to ensure the continuity of business at LMSL and was also assessing the financial impact of Monday’s Supreme Court judgement on the two entities.”

There has been no official comment or statement from the company -- which has extensive interests in transportation, hotels here and in the Maldives, and food and beverages, -- since then. A senior source at the JKH board said on Wednesday that work continues without any major changes. “We are batting along … nothing has changed,” he said, adding: “I can’t comment further because it’s a Supreme Court judgement.”

Rumours and speculation on the fate of the company and its directors spread across Sri Lanka’s corporate boardrooms this week after the scathing judgement by Supreme Court Chief Justice Sarath N. Silva with two other judges agreeing, where it was declared that the privatisation of LMSL was illegal, unlawful and arbitrary. It was the worst criticism levelled at Sri Lanka’s biggest corporate group and raised serious questions about governance, transparency and accountability.

Officials at the Securities and Exchange Commission (SEC) were perturbed over the movement of the JKH stock which gained for many days before falling on Friday, unusual for a company that is seen as negative for most investors. SEC officials said they were checking some of the transactions to ensure they were ‘clean’. In another reflection of concern, the Sri Lanka Insurance (SLI) stock came down as investors anticipated that a similar Supreme Court case against privatisation at the Harry Jayawardena-led company would meet with the same fate.

Rating agency, Fitch said JKH's high levels of short-term liquid assets and cash (Rs 12.6 billion) and the resulting cash return from such assets (Rs 2.08 billion) provide comfort for JKH's (Fitch) ratings. “These assets act as a buffer against the negative effects on LMSL.”

However a broker raised another issue –reputational risk- that could impact on the company. ‘Disclosure of fraudulent activity or improper business practices at a firm may damage the firm’s reputation, thereby driving away customers, shareholders, and counterparties,” he said explaining the definition. (See page 4 and the website www.sundaytimes.lk for more details on this story)