- Around Rs. One billion yet to be repaid to the depositors
Repayment scheme promised before Court not complied
By Shehan Chamika Silva
Some of the Golden Key depositors allege that the government has disrespected and ignored the Supreme Court of the country by failing to honour the undertaking, which was given before the Supreme Court in August 2015, to make 41% of the repayment to the Golden Key depositors within a year.
Collapse of Golden Key
Golden Key Credit Card Company was a fully owned subsidiary of the Ceylinco group. It was incorporated in 1977 and it had pioneered the Credit Card industry in Sri Lanka. It was a major financial institution at that time in Sri Lanka backed by the Ceylinco group, which had more than 300 subsidiaries then. Owner of this group, Lalith Kotelawela was perhaps one the richest men back then.
However, this Golden Key Credit Card Company Ltd (GKCCL) was an unregistered company under the CBSL.It was doing a business of financial nature. Unlike other financial institutions and banks they were actually giving unbelievable interests for the deposits. They accepted deposits from customers at high rates of 20% - 30% p.a. and, invested them in real estate construction projects which were long-term.
People were borrowing from normal banks and putting in GKCCL to gain profits from the interest difference. They advertised openly. Nobody said anything.
It was said however that the Central Bank of Sri Lanka (CBSL) knew there was a problem that it was an unregistered financial institution and its businesses were against the prevailing rules and regulations at that time.
In 2008, Golden Key Credit Card Company Ltd was collapsed. Many contemplate the reasons as due mainly to the effects of the global financial crisis and effects of some local Ponzi schemes such as Sakvithi and Danduwam Mudalali. The Golden Key started having problems. It could not sustain the consequences. GKCCL finally was in a terrible state. People who deposited money started to withdraw.
Experts point out as the main reasons to the GKCCL's collapse were mismanagement of the company, maturity mismatch of assets and liabilities, lack of risk management policy and internal frauds by the top management.
When the GKCCL was crashed, there was Rs. 26 billion worth of deposits in it with over 9000 depositors. But the Company had only assets of around Rs. 300 million although the debt was around Rs. 26 billion. So, Rs. 25.7 billion was unaccounted for.
Recovery process of deposits
In 2009, the aggrieved depositors filed an application in Supreme Court. Their foundation on the application was that under the Article 12(1) of the Constitution all persons are entitled to the 'equal' protection of the Law and therefore the failure of the State to protect that right of them which arisen out of the collapse of the GKCCL.
On March 23, 2009 the Supreme Court allowed to proceed the application.
This Fundamental Rights Application was heard during 2009 to 2015 with Chief Justices, Sarath N Silva, Shirani Bandaranayake, Mohan Peiris and Sri Pavan. The Supreme Court also appointed a five judges divisional bench presided by the Chief Justice to hear this case. And perhaps it was one of the biggest cases that Supreme Court was involved in.
There were some views from legal experts questioning the involvement of the Supreme Court into the whole Ceylinco Group. They were of the view that these issues were commercial disputes and therefore should put into the liquidation. But, what Supreme Court's stance perhaps was that the Commercial High Court might not be able to give necessary reliefs to the aggrieved people in a high scale financial misappropriation like this, because if there was only a liquidation, then all the 9000 depositors might had to go before the Rs. 300 million assets of the company.
This might had affected the whole Ceylinco Group, because the Supreme Court was going before the Rs. 26 billion so as to ascertain where it had really lasted.
In May 11, 2009 the Supreme Court appointed a Committee of Accountants and Auditors to formulate and implement a scheme of re – payment of depositors based on a declaration of assets of the GKCCL and the Directors of GKCCL.
Amidst so many Court orders and directions some of the depositors’ money was repaid accordingly.
Government intervention to the Supreme Court case
While this process was taking place, on May 18, 2015, then Finance Minister Ravi Karunanayake and then Governor Arjun Mahendran as the chairman of the Monetary Board requested to appoint an auditor to conduct a financial and a legal audit of GKCCL to formulate a repayment plan to settle the depositors.
Secondly they also sought for the Supreme Court approval to give a time bound repayment plan to be implemented under the CBSL, and therefore to conclude the ongoing FR application.
What the Monetary Board of the Central Bank actually undertook to pay was the 41% of the deposit value of deposits after deducting payments already made on a time scale.
However, speaking to the Dailymirror Senior Counsel Heejaz Hisbulla who appeared on behalf of petitioners since 2013 in the Supreme Court said that, at that moment he had requested the Court to looking into the undertaking more, since the case itself was the only way that depositors could get a relief.
According to Mr. Hejaaz, thereafter, Chief Justice Sri Pavan had also looked into the fact that whether there was an actual approval from the Cabinet to repay such amount.
However, the Attorney General was of the view at that time that the undertaking was a legitimate one.
Consequently, on August 4, 2015, the long run case of Golden Key depositors in the Supreme Court concluded after six years, based on the undertaking given by the Monetary Board of the CBSL, Secretary to the Treasury, then Finance Minister and then Governor of the CBSL.
The undertaking of the government was to pay,
· Deposit holders with a deposit value of less that Rs 2 Million – 41% of their deposit value within a month. This repayment was done within one month after the termination of the FR application.
· Deposit holders with a deposit value of more than Rs 2 Million and less than Rs 10 Million – 41% of their deposit value within two months. This was also repaid within two months time after the undertaking.
· Deposit holders with a deposit value of more than Rs 10 Million – 41% of their deposit value within a year. On the contrary, this repayment was not done within a year as undertook before the Supreme Court.
According to the depositors of more than Rs. 10 million worth deposits, the CBSL had failed to make repayments, which were supposed to be made within a year from August 4, 2015 as undertook before the Supreme Court by the CBSL and the Treasury until November 2016.
Then, as a consequence, those unpaid depositors filed another application in the Supreme Court saying that by failing to comply with the undertaking, the Monetary Board of the Central Bank of Sri Lanka and its members, the Governor of the Central Bank of Sri Lanka, the Minister of Finance and the Secretary to the Treasury had disrespected the Supreme Court and had obstructed the justice process.
This application was brought by the depositors in November 2016 as a contempt of Court matter.
"After we filed a contempt case in Supreme Court against those Government institutions, Attorney General appearing said that due amount will be paid soon and they then started repaying the due amount to the rest of the depositors who had deposits above Rs. 10 million with the GKCCL", Counsel Hejaaz Hisbulla.
Depositors suspicious on rest of the repayment
However, still some of the depositors claim that approximately another Rs. 1 billion (Rs. 1000 million) had to be paid to the depositors by the government but no single payment was made for 13 months.
"According to our information, they are going to seek more time to repay this due amount or may be trying to avoid setting the rest of the money to the depositors, as they have already disregarded the undertaking they gave before the Supreme Court that 41% of the all deposits will be paid within a year" Counsel Hejaaz said.
Further he explained, "In my opinion this Golden Key incident shows how the Central Bank of Sri Lanka and its former Governors mainly Ajith Nivad Cabraal and Arjun Mahendran had failed to manage the institute. Earlier, due to the mismanagement of the CBSL, huge amount of public money was misappropriated during the Golden Key incident. And now again public money is used to repay the depositors yet failing to execute it properly even with complying what they have undertaken before the Supreme Court"
· ‘Our Fundamental Rights petition was terminated due to this government’s promise. We agreed to do so because government pledged to repay 41 per cent of our deposits within a year. This promise only covered 41 per cent. What about the rest of 59 per cent and the interests for our money. Yet, we agreed to the government because they promised to repay them within a year’
· ‘We heard that the government is going to increase the Parliamentarians’ salary. Don’t they should first settle our repayment respecting the Supreme Court’
· ‘Since 13 months we have not been paid. Our request is at least to make these payments in monthly instalments’
· ‘In the contempt case, Attorney General and CBSL officials appear as respondents, but there is no representative on behalf of the Treasury. Only the Attorney General responds to our demands not the Treasury’
