Financial Times

Harry J to be sued by director-buddies
By Duruthu Edirimuni
Three directors of Milford Exports (Ceylon) Ltd have decided to go to courts against powerful businessman Harry Jayawardena who is the company’s Managing Director, seeking to liquidate the company and all its associate firms, after negotiations between lawyers of the two parties failed to resolve a dragging dispute out of courts.

V.P. Vittachi, Chairman of Milford Exports, holding company of the Distilleries Company of Sri Lanka (DCSL), which in turn holds Aitken Spence, Milford Holdings and Sri Lanka Insurance Corporation (SLIC) and the two main directors, Rajpal Kumar Obeysekere and Zaki Alif have decided to file action against Jayawardena latest by mid next month, informed sources said.

The sources, who declined to be named, said this decision had been debated for several weeks before a firm stand was taken soon after Jayawardena last week called two extra ordinary general meetings on behalf of Milford Holdings, which also bought Lanka Bell last year. This was a similar strategy he used and failed in the now-famous Commercial Bank EGM last year.

“The EGMs were called on two days – February 21 and 22 -- which was a very sudden decision and Vittachi and Obeysekere could not participate. On the 21st, it was the EGM of Milford Holdings and the next day was the shareholders meeting to issue shares to DCSL and regularise its loan amounting to Rs.2.188 billion,” one source said. He said that Jayawardena borrowed this money from DCSL without board approval and also without a security, which is illegal. “Jayawardena wanted to increase the authorised share capital of Milford Holdings to Rs.10 billion and transfer the loan amount to DCSL, but nothing was mentioned about the interest accrued on the borrowed money. This really angered the three directors and they decided to go to courts,” he explained.

The Sunday Times FT exclusively reported the fallout between Sri Lanka’s most powerful business tycoon and his close buddies in its January 15, 2006 edition. “The trio -- V.P. Vittachi, Chairman Stassen Group and its two main directors, Rajpal Kumar Obeysekere and Zaki Alif who with Jayawardene left the old Consolexpo state company to set up Stassen, is accusing their ‘old pal’ of arbitrary and impulsive decision taking and contemplate taking him to court if he doesn’t agree to an out-of-court settlement. Contd. on page 13

The settlement offer worked out by lawyers is being kept a secret but it’s only a matter of time before the two groups’ part company, The Sunday Times FT learns. The trio and Jayawardene are not on talking terms,” that report said.
The following week we reported that the DCSL managing director had rejected the offer.

Jayawardena owns 60 percent of Milford Exports, with Vittachi, holding 20 percent and directors Obeysekere and Alif owning 15 percent each. “The three directors want him to buy their shares over and they say that he can afford to do so, but because of his vindictive nature he does not want to,” the source said.

He also said the directors were very angry when Jayawardena started referring to himself as the Chairman of DCSL. “He is not the chairman, but the managing director and Vittachi holds the chairmanship of the company. He ran adverts in newspapers calling himself as the chairman last year and he was throwing his weight around. This was one of the boiling points for the three directors to gang up against him,” the source said. He said the other directors are accusing Jayawardena had bought Aitken Spence, Sri Lanka Insurance Corporation (SLIC) and Lanka Bell without board approval.

Senior officials closed to Jayawardene refused to comment when asked about the allegations. The DCSL chairman was also not available for comment.
Liquidation of a company, according to legal sources, can take place “whereby a company is prepared for dissolution involving cessation of its operations, realisation of its assets, payments of its debts and distribution of any balance to its shareholders. Winding up may be compulsory by court order or on the application of certain persons on certain grounds.”

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