Colombo Hilton Hotel Construction Fraud on Sri Lanka Government
Sri Lanka’s First Derivative Action In Law
by
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In a very strongly worded Order, the Learned District Judge of Colombo, Hon. P. Wijayaratne, inter-alia, significantly made the following observations:
the Contractors having performed a lesser volume of work, have attempted to obtain a larger sum of money... and the Plaintiff having raised the question concerning the basis for the payment of monies. ,
the other Defendants, [i.e .the Directors], as persons having connections concerning the said Hotel business, having intervened therein in such matter, acting to obtain the said monies, had not readily acted to conduct a correct examination. ,
they having prevented such correct examination, were attempting to, howsoever, effect the payment of monies. ,
they are exercising the influence, that they have gained in society, acting together with the Company, to prevent the raising of the questions concerning the matters of the work in connection with the Contracts, the Prospectus ... ,
their collaboration was adverse to the interest of the Shareholders of the Company, and that they were acting through such collaboration, in a manner amounting to defeat the interests of the Shareholders of the Company. ,
Accordingly, the present position is that the Defendants' statement, that they have performed their part of the Contracts and the willingness shown by the Company to accept the same, as set out by the Defendants, cannot be accepted as the basis for payment.... in fact, whether, as stated by the Plaintiff, this is a devious method of siphoning out, a large scale of foreign exchange from this country...The significance, that is shown herein, is that generally, the Company which has to pay money, would be raising questions, in respect of such situation, and would not allow other parties to act arbitrarily...If the position, that explains this is correct, then this actually, is an instance of acting in fraudulent collusion. ,
The Learned District Judge’s reference to persons, ‘who had gained influence society’, referred, among others, to the 7th Defendant, wrong-doer Director of Hotel Developers (Lanka) Ltd., K.N. Choksy, President’s Counsel and who at that time was an influential nominated Member of Parliament, and Senior Counsel appearing for President R. Premadasa in the Presidential Election Petition filed against him by former Prime Minister Sirima Dias Bandaranaike. ,
The foregoing ‘dicta’ by the Learned District Court Judge was after he having taken due cognizance of the facts adduced before Court, with documents demonstrating the wrong-doings by K.N. Choksy, which facts stood uncontroverted by him in Court, notwithstanding being a Defendant in the Case, whereby such facts stood admitted by him.
The fact that the foregoing ‘dicta’ referred to K.N. Choksy, was established by the subsequent futile attempt made by K.N. Choksy, himself through his Counsel in the Court of Appeal, to have such and other ‘dicta’ in the Order of the Learned District Judge expunged, which was promptly refused by Their Lordships, the Judges of the Court of Appeal.
Ironically, K.N. Choksy, in 1993 was appointed, as Minister of Constitutional Affairs of Sri Lanka by President D.B. Wijetunga, after this derivative action in law, District Court of Colombo Case No. 3155/Special was upheld on 2nd December 1992 by the Supreme Court, as a grave and serious case of fraud on the Government of Sri Lanka, endorsing the issuance of the interim injunctions by the District Court, and the Case was still pending before Court.
Subsequently in 2001, after a Special Presidential Commission warranted by President Chandrika Bandaranaike Kumaratunga, consequent to investigations carried out, with the assistance of the Criminal Investigation Department and the Solicitor General, had issued a Show Cause Notice, among others, on K.N. Choksy containing several Charges on grounds of fraud against the Government of Sri Lanka, ironically K.N. Choksy, notwithstanding my written representations decrying same, was appointed by President Chandrika Bandaranaike Kumaratunga, as the Minister of Finance of Sri Lanka, on the recommendation of Prime Minister, Ranil Wickremesinghe, Vice Chairman, International Democrat Union.
The foregoing amply demonstrates sheer contempt and disregard for the enforcement of the ‘rule of law’ against socio-politically powerful and influential persons, even in a democratic society; and on other hand, ironically giving political refuge to and shielding and protecting such persons, from the due enforcement of the ‘rule of law’ against them, by the relevant law enforcement authorities.
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‘Colombo Hilton Hotel Construction’ – ‘Fraud on Sri Lanka Government’ – ‘Sri Lanka’s First Derivative Action in Law’, startlingly unravels the major fraud on the Government of Sri Lanka by reputed multi-nationals, colluding with socio-politically influential, endeavouring to fraudulently ‘siphon out a large scale of foreign exchange on government guarantees’, , which was successfully prevented through injunctions affirmed by the Supreme Court of Sri Lanka.
‘On sovereign guarantees of the Government of Sri Lanka, the Colombo Hilton Hotel was to be constructed, equipped and furnished, on a ‘turnkey fixed price basis’ by a Japanese consortium comprising Mitsui & Co. Ltd., and Taisei Corporation, supervised and designed by Kanko Kikaku Sekkeisha Yozo Shibata & Associates, with technical assistance in planning and construction from Hilton International, United States of America, who were to operate and manage the Hotel. During construction a staged fire allegedly destroyed all plans and documents, and surreptitiously the original plans substituted, and the hotel constructed with two floors short and without the basements contrary to the original plans, based upon which Sri Lanka Government guarantees had been obtained.
‘The book essentially reveals the process of litigation by one minority shareholder, single-handedly combating socio-politically powerful influential fraudulent miscreants; lucidly narratively setting out pleadings, counter-affidavits, further pleadings, interrogatories, pre-trial processes, objections, written submissions, District and Appeal Court orders, and the landmark historic judgment by the Supreme Court of Sri Lanka, demonstrating its independence in pronouncing – ‘in the given circumstances the Government could not be indifferent’, – resulting in the Japanese multi-nationals writing-off a colossal sum of US $ 207 million in 1995.
‘This is an invaluable and indispensable research book for both academics and professionals of law, particularly on the rights of minority shareholders in corporates, and for those interested in the combat of fraud and corruption at the highest levels in a country.