Financial Times

Pramuka depositors win round one
Two recent judgements by the courts have raised the hopes of consumers and small investors who rarely come out victorious in any attempt to challenge the authority of a government or the commercial clout of a big company. The first was the Appeal Court ruling against Shell that allowed Mundogas to refill empty liquid petroleum gas cylinders of other LPG suppliers, which is expected to benefit consumers by giving them more choice and helping to remove the effective monopoly of the multinational.

That ruling, as we said last week, also exposed the exploitative pricing practices of multinationals. However, the Supreme Court has re-imposed the interim order preventing Mundogas from filling the cylinders of other suppliers, on an appeal by Shell.

The second judgement was last week's ruling on the Pramuka case, also by the Court of Appeal, which issued a Writ of Certiorari quashing the decision of the Monetary Board of the Central Bank to cancel the banking licence of the Pramuka Development and Savings Bank. Four petitions had been filed by the depositors of Pramuka Bank challenging the cancellation of its banking licence by the Monetary Board. They complained that the Central Bank authorities, having failed to carry out their statutory duties, had resorted to cancelling Pramuka Bank's licence in order to cover up their lapses.

The Appeal Court said the Monetary Board appeared not to have adequately considered the option suggested by the Director of Banking Supervision of allowing another bank to take over Pramuka. This would have enabled the removal of the present directors who were responsible for the mismanagement that led to its collapse.

This is a landmark decision, which faults the Central Bank for deciding to liquidate Pramuka without considering other options. The court also issued a Writ of Mandamus on the Monetary Board ordering it to take into consideration the recommendations of the Central Bank Director of Banking Supervision before Pramuka's licence was revoked. The court said it was not satisfied with the manner in which the Monetary Board had exercised its discretion. The Central Bank Monetary Board has appealed against the ruling to the Supreme Court, seeking to set aside the Appeal Court's order.

The Appeal Court said the Monetary Board had apparently failed to consider other options allowing Pramuka to resume business before deciding to liquidate it, which should have been only the last resort. Central Bank officials have, however, said that other banks had not been willing to take over Pramuka, when discreet inquiries about the matter had been made before its collapse, such was the reputation of its management in the banking community.

The case is a good example of how the determination of small investors and consumers can bring them some relief when they have been cheated by more powerful people.

In this case Pramuka's depositors, who had formed an association to highlight their plight and seek relief, fought a grim, determined and seemingly desperate battle to save their money by trying to get the liquidation order revoked and the bank resurrected. They had even pledged not to withdraw their deposits for some time, knowing that if the liquidation went ahead they would lose everything.

The depositors did not give up, even when it appeared that theirs' was a hopeless cause and that they stood no chance against the might of the state. Organisations such as the depositors' association need to be supported. Those who brought Pramuka to its present plight still remain to be caught. The bank's former head, Rohan Perera, is still absconding abroad despite making bold statements to the media that he would return. The culprits must be caught and punished.

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