In response to an article published in the January 11, 2009 edition of The Sunday Times FT which said Ferntea had gone into liquidation, the company responded by saying Suntex Ltd, the holding company within the QI Group which held the controlling stake of Ferntea, decided to wind up the company due to the previous majority shareholders of Ferntea, namely Jayantha Fernando and his family and related parties including Carmel Consolidated (a company controlled by Jayantha Fernando and his family) filing eight court cases against Ferntea, thereby creating a huge financial and management burden on the company which eventually culminated in liquidation.
Ferntea further clarified that Suntex purchased a total of 53% of Ferntea which included 48% sold by Carmel Consolidated and provided further financial support and cash infusions of approximately Rs.350 million until January 2008. Mr. Fernando continued to be Chairman until October 2006. During that period, Ferntea said the company made losses of approximately Rs.250 million.
Ferntea said that on October 23, 2007, the two major shareholders Suntex and Carmel Conslidated agreed at the District Court in Colombo to wind up Ferntea. The decision came after a year long dispute between the two parties. Around October 2006, Mr. Fernando ceased to act as Chairman but remained as a member of the board until November 2007. In a bid to put the company on track, Mr. Anura Fernando, another member of the board, took over as Chairman. However, Mr. Anura Fernando who served as Chairman for approximately a year, resigned in October 2007 citing pressures by the other major shareholder, Carmel Consolidated in the form of legal suits which demoralized staff, increased litigation fees and made the company difficult to run.
However, Chairman of Carmel Consolidated Jayantha Fernando, responding to the company statement, said Ferntea and Carmel were approached by QI/GoldQuest towards the end of 2004 and early 2005, and negotiations commenced about this time culminating in a tripartite investment agreement being entered into between Suntex International Holdings Ltd (a QI/Gold Quest associate) and Carmel Consolidated and himself. Mr. Jayantha Fernando said a due diligence was conducted by a team of foreign nationals representing QI/Gold Quest in Colombo, just prior to the finalization of the investment agreement.
He said the investment agreement dated May 3, 2005 clearly states that Ferntea undertakes to pay a sum of Rs.55 million in three installments on or before May 20 in 2006, 2007 and 2008.
This related to a loan agreement signed between Carmel Consolidated and Ferntea. Mr. Fernando said interest rates were also clearly enumerated in the agreement and an unconditional bank guarantee as security for the loan was also agreed to be given to Carmel Consolidated.
He said the conditions were never fulfilled and consequently litigation proceedings were commenced by Carmel Consolidated against Ferntea. Mr. Fernando added that the liquidation case was postponed on many occasions with the lawyers for Ferntea/QI seeking adjournments to obtain instructions from their clients who are now back in Hong Kong. Eventually, Ferntea/QI consented to liquidation.
Mr. Fernando said there were numerous violations of the investment agreement and has correspondence with QI/Gold Quest to support his contention. He added that in response to QI's claim that Ferntea could not be run because of several legal cases filed and not on account of inefficiencies by the management post removal of himself and his family, he said he was removed from all executive functions in July 2006 and not October 2006, a blatant untruth of QI/Gold Quest. He said Mr. Anura Fernando was appointed Chairman/Managing Director in July 2006.
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