The Loss Making Culture of the CBSL - A Throwback (2006-2015)

 

This article is based on three final forensic audit reports, prepared by BDO India LLP for The Monetary Board of Central Bank of Sri Lanka (2019)

Forensic Audit Reveals:

 

Before 2015                                                               

Loss: 10.7 Billion                    

Under Direct Placements                                         

 

EPF loss 8.7 Billion

2007-2015

Bond Scam and Public Debt Raising 

 

When you purchase a T-Bond you are in fact lending money to the Government. Conversely, Section 2 (1) (d) of the Registered Stock and Securities Ordinance No. 7 of 1937 authorizes the Government to issue of "Securities" in the form of Treasury Bonds, for the purpose of raising Public Debt. T- Bonds are issued in Primary Market where the Central Bank of Sri Lanka (CBSL) sells the T- Bonds. The issuance of Treasury Bonds on Primary Market was done either at Auctions of Treasury Bonds or by way of the acceptance of Direct Placement.  Primary Dealers (PDs) and EPF are largely permitted to purchase Treasury Bonds at the time they are issued by the CBSL on the Primary Market.

Thus, the only Participants in the Primary Market are the CBSL, Primary Dealers and the EPF. In the year 2015, there were 16 licensed Primary Dealers. At present, there are 15 Primary Dealers. Corporate institutions and individuals who wish to purchase Treasury Bonds, can do so in the Secondary Market through Accounts they maintain with Primary Dealers. 

Importantly, Section 106 (1) of Chapter VI of the Monetary Law Act sets out the role of the CBSL as the Fiscal Agent of the Government, while Section 112 states that, the CBSL shall act as the Agent of the Government and for the account of the Government, when issuing such Government Securities.Section 113 also stipulates that the CBSL shall, as the Agent of the Government, be responsible for the management of the Public Debt. All these functions are carried out by the Public Debt Department (PDD)in the CBSL.

In 2015, there were huge public concern over the process of this issuance of T-Bonds following some alleged irregularities transpired between CBSL high officials and Primary Dealers.

After almost a year of scrutiny, the Presidential Commission of Inquiry into the Issuance of T-Bonds recommended the CBSL in its report that, it is appropriate to conduct a “forensic audit” ascertaining significant irregularities and closely examine the proceduresfollowed in the PDD and decision- making process applied for raising public debt. 

 

Final Report of the Forensic Audit on issuance of T-Bonds during the period 1 January 2002 to 28 February 2015 by the public debt department

Irregularities under Direct Placement 

·       Deviations from the laws, policies and guidelines 

The Forensic reports says that the Monetary Board has not specifically approved issuance of T-Bonds through Direct Placements to Primary Dealers (PDs) other than the EPF and “Other Captive Sources”. 

However, from February 2008 onwards, the Public Debt Department (PDD) was issuing Government securities through Direct Placements to Primary Dealers (other than EPF and “other Captive Sources”). 

This practice of PDD accepting Direct Placements from non-captive PDs was never questioned by the Monetary Board. However, it appears that the issuance was in the knowledge of the Monetary Board and the practice of accepting the Direct Placements from other than "captive sources" was continued by the PDD from 2008 onwards. (2.1.3. A, B)

·       Deviation from the approved yield rates – “loss 889 mn”

Forensic Report explains that for the period October 2012 – February 2015, yield rate structures were prepared and approved by the Deputy Governor overseeing PDD.  During this period, it was noted that 142 placements amounting to Rs. 337.30 Billion were made above the proposed yield ratesincluding the volume-based inducements. In summary, in 42 Direct Placements, a loss of Rs. 889.81 Million was caused to the Government of Sri Lanka due to the deviations in the issue rates over and above the prevailing secondary market yield rates of similar maturities. (2.1.4. A, B, F)

·       Settlement of direct placements made beyond five days from transaction date 

It was further analyzed that out of the 145 placements, 141 placements amounting to Rs. 198.72 Billion, the difference between the transaction date and the settlement date was ranging between 6-9 days. In four placements aggregating to Rs. 4.43 Billion, the difference between the transaction date and the settlement date was more than 10 days. The four placements wherein the difference between is identified as more than 10 days. (6.1.10)  

·      ISINs (International Securities Identification Number) offered in direct placements without conducting auctions – “loss 800 mn”

It was further identified in the Report that out of 431 issuances of Treasury Bonds through Direct Placements during this review period, 94 placements amounting to Rs. 55.15 Billion were made over and above the prevailing Secondary Market yield rates of similar maturities resulting to the loss of Rs. 0.81 Billion to the Government. (6.2.9) 

 

·      Same ISIN offered to same PD at different prices on the same transaction date and same settlement date – “loss 53 mn”

The Forensic report also had noticed that in 54 instances the Direct Placements accepted from same PDs on same transaction date having same settlement date and same ISIN were made at different prices (6.3.1).   Out of the above 54 issuances, 16 placements amounting to Rs. 8.47 Billion were made over and above the prevailing Secondary Market yield rates of similar maturities resulting to a loss of Rs. 53.37 Million to the Government. (6.3.6)

·       Same ISIN offered to different PD at different prices on same date – “loss 835 mn”

It was also noticed in the report that in 207 instances the Direct Placements accepted from different PDs on same transaction date having same settlement date and same ISIN but were made at different prices. (6.4.1). Out of the above 207 issues, 80 placements amounting to Rs. 63.49 Billion were made over and above the prevailing Secondary Market yield rates of similar maturities resulting to loss of Rs. 835.49 Million to the Government. (6.4.5)

·       Lack of formal announcements for direct placements 

The report says that, unlike the formal announcements made for issue of Treasury Bonds under the Auctions, there were no announcements made regarding the issue of Treasury Bonds through Direct Placements during this period.

‘It can be concluded that a definite system for inviting bids from PDs for Direct Placements was not available in the PDD Operations Manual of PDD and all PDs were not given equal opportunity to participate in the Direct Placement’. (9.1.2. B)

It was also stated that there was no definite system for identification and selection of the PDs for issue of T- Bonds through Direct Placements. The PDD Operational Manual states that “Front Office communicates with relevant institutions to make arrangements for placements”. (9.1.2. A)

  

Total Loss through Direct Placements to the Government during 2005-2015

During the review period, 4,670 Direct Placements transactions were made by PDD pertaining to the Period 1 January 2005 to 28 February 2015. (2.3.5). 

‘Based on comparison of the issue rates of Direct Placements and Base rates on transaction dates, the after-tax issue price was lower than the Base Price calculated in 1,105 Direct Placement transactions and the same has resulted in loss of Rs. 10.47 Billion to the Government of Sri Lanka during the period 1 January 2005 to 28 February 2015. (8.2.8)

 

Mr. Ajith Nivard Cabraal (Former Governor, 2006-2015)

Mr. Ajith Nivard Cabraal was the former Governor of the CBSL and Chairman of the Monetary Board from July 2006 till January 2015. “It was mentioned in PCOI report and as noted during the public domain searches that the relatives of Mr. Ajith Nivard Cabraal held influential positions in Primary Dealers and/ or related company of Primary Dealers, during his tenure as a Governor of the CBSL.” (11.1.4)

 

 Irregularities in Primary Dealers during 2002-2015 (11.1.9)

 

·       Acuity Securities Limited 

“Out of the total placements made to Acuity Securities Limited during the Review Period, 80% of the said placements were made in the year 2013 – 2014 itself. It was observed that the placements during the period 2013 – 2014 were made at a higher rate due to which the CBSL incurred a loss of around Rs. 60 Million.” It was also noted that “Acuity, is promoted as an equally owned Joint Venture between DFCC and HNB. During the year 2014, Mr. Ravindra Balakantha Thambiah was associated with DFCC as a Director and Mr. Amal Cabraal joined HNB as a Director in April 2014.”

·       Commercial Bank of Ceylon 

“A significant increase in the value of placements made to Commercial Bank of Ceylon was noted from Rs. 3.55 Billion in 2008 to Rs. 25.11 Billion in the year 2009. During 2009, Mr. Nihal Fonseka and Ms. Siromi Noel Wickramasinghe were associated with Commercial Bank of Ceylon.”

·       First Capital Treasuries Limited 

“In the years 2008 and 2009, a significant amount of investment was made by First Capital Treasuries Limited amounting Rs. 20.51 Billion in 2008 to Rs. 19.98 Billion in 2009. It was also noticed that the First Capital Treasuries Limited made the highest investments in Treasury Bonds through Direct Placement among non-captive PDs in 2008 and 2009.”

***The Forensic Report (11.1.9. D.) further says that “based on the above facts, it may be noted that the increase in issuance of Treasury Bonds through Direct Placements to above identified PDs and resulting loss was at a circumstance when the identified individuals were associated with identified PDs. 

However, the documentary and digital evidences reviewed and limited number of voice recordings of dealer rooms of PDs did not suggest that the relationships and / or associations identified above have led to the Direct Placements being made at the higher yield rates. (11.1.9. D.)

No voice recording system in PDD 

The Report says that, the facilities for recording of calls or the call logs were not installed in respective offices and dealing rooms of the PDD to authenticate the negotiations between the officials. Also, the facilities for keeping a video record of the activities performed by the various divisional officials of the PDD were not available during the Review Period. (9.1.2.D)

 

Digital forensic reveals deletion of files

The Forensic Report also says that in the case of Dr. M Z M Aazim (Assistant Governor), the confidential list of devices to be procured for digital imaging was originally sent on 18 June 2019 and subsequently, the “.ost file” was found to be deleted on his device. 

“It raises a concern if there was any potential leak of confidential communication between BDO India and the CBSL. Further, Dr. M Z M Aazim received a Memo on 21 June 2019 from the Governor of the CBSL mentioning that the electronic device issued to him would be obtained by the Forensic Auditors for a digital image. However, the procurement of his device was delayed and procured on 25 June 2019 due to his official commitments.” (10.3.1. G)

Report says that “It cannot also be construed that the deletion activity was performed by officials other than those, who these devices were assigned-to. Despite the active denial / rejection by the selected officials, of having performed the deletion activity, the possibility of deletion of the data files by the users themselves cannot be ruled-out.” (10.3.1. G)

 

Final Report of Forensic Audit on primary and secondary market transactions of EPF during the period from 1 January 2002 to 28 February

 

THE EPF LOSS under direct placements during 2007-2015was 8.7 BILLION

 

·      Lower yield rate offered by the PDD to the EPF in direct placements 

During the review, it was noted that the PDD offered lower yield rate to the EPF (2.15). In 46 out of 203 instances the PDDoffered yield rate was lower than the previous ‘Auction Weighted Average Yield Rate’. Due to lower yield rate, the EPF had incurred loss of Rs. 256.37 Million. (2.16)  

In 94 out of 346 instances, the PDD offered yield rate was lower than the Secondary Market yield rate. Hence, due to lower yield rate, the EPF had incurred loss of Rs. 8,716.48 Million. (2.17)  

Minutes of the Monetary Board meeting of 7 October 2008 stated that “...Issuing Treasury Bonds to EPF and other captive sources at an interest rate 5 basis points above the Secondary Market rates through private placements.”. (2.19). 

However, during the period 2008 to 2011, the EPF yield rate was significantly lower in comparison to the Secondary Market yield rate even though the Monetary Board has approved the issue of Treasury Bonds to the EPF and other captive sources at an interest rate of five basis point above prevailing the Secondary Market yield rate. “It is evident that the PDD has not offered the prevailing market rate to the EPF”. (2.20)

 

·      EPF Loss in Secondary Market was 620 million

In 177 out of 651 purchase transactions, the purchase price of the EPF was higher than the Secondary Market price resulting in loss of Rs. 620.81 Million. (2.38). 

Investments made during 2014contributed 91.03% of the total loss incurred by the EPF amounting to Rs. 565.15 Million. The difference between the purchase yield rate and prevailing Market yield rate was ranging between 1 to 80 basis points. (2.39). 

It was noted that the loss from transaction with PTL, PABC and WTL in 2014 amounts to approximately Rs. 321 Million (52% on the overall loss for the period) with the variance in the yield rate ranging from 4 to 80 basis points. (2.40)  

By Shehan Chamika Silva

“COLOMBO PORT CITY ECONOMIC COMMISSION BILL” : Determination of the Supreme Court

The Supreme Court has examined that except for the specific provisions and clauses set out in the table following the rest of the clauses of the Bill are not inconsistent with the Constitution. 

The Supreme Court has also determined that upon the amendments suggested by "the determination of Court" being affected, the Bill and its provisions will cease to be inconsistent with the Constitution. 

Earlier, the Petitioners were of the view that the proposed Bill’s provisions and clauses in particular, Clauses 3, 4, 6,7, 9, 16, 23, 24, 26, 27, 28, 30, 31, 32, 33, 34, 35, 36, 55, 58, VII, Part VIII, Part IX, Part X, Part XI, Part XII, Clauses 62, 63,64 and/or Part XVI and/or Part XVI 65, 66, 68 and 73, are inconsistent with one or more of Articles 1, 2, 3, 4, 5, 12(1), 12(2), 14(1)(g), 14(1)(h), 17, 33,75, 76, 126,140, 141,148 and Article 154(G) of the Constitution of Sri Lanka.

 

Inconsistent clauses and provisions according to the Supreme Court	Whether it can be approved by a special majority or approved by the people at a referendum	The proposed amendments by the Supreme court to cease the inconsistencies and pass with a simple majority
Establishment of the Commission 3(4) The Commission shall be responsible for preparing, developing, amending, updating, publishing and enforcing all Community Rules and Development Control Regulations applicable within the Area of Authority of the Colombo Port City.	Inconsistent with Article 76 read with Article 3 and 4 of the Constitution.    Could be validly passed with a Special Majority (As per Article (84(2)) and by the people at a Referendum(Article 83)	Delete the word "for" and substitute therefor the words "to facilitate"  Delete the words "and Development Control Regulations"
Establishment of the Commission 3(5) The Commission shall, in the exercise, performance 20 and discharge of its powers, duties and functions, where so required by the respective written laws applicable to any Regulatory Authority, obtain the concurrence of the relevant Regulatory Authority in respect of the subjects vested in or assigned to, such Regulatory Authority and to the extent specifically provided for in this Act:  Provided that, the concurrence of the relevant Regulatory Authority sought shall be limited to the implementation, within the Area of Authority of the Colombo Port City, of the respective written laws applicable to such Regulatory Authority.	Inconsistent with Article 12(1) of the Constitution.      Could be validly passed with a Special Majority (As per Article (84(2)).	Add the words "by the Commission" after the word "implementation"
Establishment of the Commission 3(6) The relevant Regulatory Authority from whom such concurrence is being sought by the Commission, shall as soon as practicable in the circumstances, as a matter of priority, provide such concurrence to the Commission.  3(7) Nothing in this Act shall, unless otherwise specifically provided for in this Act, be deemed to restrict in any way the powers, duties and functions vested in such Regulatory Authority by any written law in relation to the Area of Authority of the Colombo Port City.	Inconsistent with Article 12(1) of the Constitution.      Could be validly passed with a Special Majority (As per Article (84(2)).	3(6)- Delete the words "provide such concurrence" and substitute therefor the words "communicate its decision"  3(7)- To be shifted after Clause 73 of the Bill and re-numbered as Clause 74. The new Clause 74 will now read as follows:  "Nothing in this Act shall, unless otherwise specifically provided for in this Act, be deemed to restrict in any way the powers, duties andfun"ctions vested in such Regulatory Authority by any written law in relation to the Area of Authority of the Colombo Port City."
Powers, duties and functions of the Commission  6(1)(b) to facilitate and exercise overall regulatory supervision and control over all investments and businesses in and from the Area of Authority of the Colombo Port City, in terms of this Act, with the concurrence, of the relevant Regulatory Authority, as the Commission considers necessary: Provided that, the concurrence of the relevant Regulatory Authority sought shall be limited to the implementation, within the Area of Authority of the Colombo Port City, of the respective written laws applicable to such authority.	Inconsistent with Article 12(1) of the Constitution.      Could be validly passed with a Special Majority (As per Article (84(2)).	Delete the word "overall" Delete the words "as the Commission considers necessary"
Powers, duties and functions of the Commission  6(1)(u) to prepare, develop, amend, update, publish and enforce all Community Rules and Development Control Regulations as may be prescribed for applicability within the Area of Authority of the Colombo Port City	Inconsistent with Article 76 read with Article 3 and 4 of the Constitution.    Could be validly passed with a Special Majority (As per Article (84(2)) and by the people at a Referendum(As per Article 83)	Insert the words "enforce the" before the words "Development Control Regulations"
Commission to function as a Single Window Investment Facilitator in relation to the grant of any registration, license, authorization or other approval in terms of this Act  30(1) Subject to Part VII, Part VIII and section 33 of this Act, the Commission shall be the Single Window Investment Facilitator responsible for the consideration and determination, in an expeditious and coordinated manner, whether to accept or reject for good reason, any application made to the Commission for a registration, license, authorization or other approval as may be necessary, to engage in any business in, to invest in, to reside in, to be employed in, or to visit, the Area of Authority of the Colombo Port city.	Inconsistent with Article 14(1)(h) of the Constitution.      Could be validly passed with a Special Majority (As per Article (84(2)).	Delete the words "or to visit".
30(3) first and second provisos 30(3) The Commission shall obtain the concurrence of any relevant Regulatory Authority in the process of granting such registration, licence, authorization or other approval, where so required by the respective written laws applicable to such authority, in respect of the subjects vested in or assigned to, such Authority and to the extent specifically provided for in this Act:  v Provided that, the concurrence of the relevant Regulatory Authority sought shall be limited to the implementation, within the Area of Authority of the Colombo Port City, of the respective written laws applicable to such authority:  v Provided further, the relevant Regulatory Authority from whom such concurrence is being sought by the Commission, shall as soon as practicable in the circumstances, as a matter of priority, render such concurrence to the Commission.	Inconsistent with Article 12(1) of the Constitution.      Could be validly passed with a Special Majority(Article (84(2)).	Clause 30(3), first proviso Add the words "by the Commission" after the word "implementation"    Clause 30(3), second proviso -Delete the words "render such concurrence" and substitute therefor the words "communicate its decision"
33(1) The Commission, as the Single Window Investment Facilitator shall accept an application for and facilitate the processing of, any visa, entry permit or work permit, and other approvals as may be required by an authorized person, any consultant of,or any person specially authorised by an authorised person or an employee of an authorised person, and a person who intends to engage in business, to invest in, to reside in, to be employed in, or to visit the Area of Authority of the Colombo Port City, as may be necessary.	Inconsistent with Article 14(1)(h) of the Constitution.      Could be validly passed with a Special Majority(Article (84(2)).	Delete the words "or to visit"
37(1) An authorised person may, subject to the applicability of all written laws for the time being in force and regulations which may be made hereunder, in the national interest and in order to safeguard the interest of the domestic economy, apply to the Commission for an authorisation to engage in business in Sri Lanka, with a citizen of Sri Lanka or a resident, who is engaged in business in Sri Lanka, outside the Area of Authority of the Colombo Port City.  (2) The Commission having considered such request, may in the national interest, in the interest of the advancement of the national economy, and while ensuring the interest of the domestic economy, issue such an authorisation, in such mannerandsubjecttosuchconditionsasshallbeprescribed.	Inconsistent with Articles 12(1) and 14(1)(g) of the Constitution.      Could be validly passed with a Special Majority(Article (84(2)).	However, the said inconsistency will cease if a new sub-clause is added to Clause 37 of the Bill restraining such authorised person making use of any exemptions or incentives granted under this Bill when conducting business outside the Area of Authority of the Colombo Port City to the detriment of similar businesses conducted outside such Area of Authority but within the territory of Sri Lanka
A citizen or a resident of Sri Lanka, may utilize facilities or services within the Area of Authority of the Colombo Port City  40 (2) Any levy as may be required to be paid by a citizen of Sri Lanka or a resident on goods purchased at retail facilities as set out in subsection (1), when leaving the Area of Authority of Colombo Port City, shall be as prescribed.	Inconsistent with Article 14(1)(h) of the Constitution.    Could be validly passed with a Special Majority(Article (84(2)).	Delete the words "when leaving" and substitute therefor the words "to be taken out of'
Grant of exemptions or incentives to Businesses of Strategic Importance  52(3) Upon a business being so identified as a Business of Strategic Importance, exemptions or incentives as provided in this Part may be granted thereto, in so far as it relates to its operations in and from the Area of Authority of the Colombo Port City. In the case of tax related exemptions, such exemptions may be granted, either in full or part, and from all or any of the enactments set out in Schedule II hereto.  {Schedule II - ENACTMENTS FROM, OR UNDER, WHICH EXEMPTIONS OR INCENTIVES MAY BE GRANTED} READ WITH CLAUSES 52(5) Regulations may be made prescribing any further guidelines as may be necessary on the grant of exemptions or incentives, as provided for in this Part of this Act.  71(2) (p) specifying for the purposes of section 52, any further guidelines on the grant of exemptions or incentives to a Business of Strategic Importance. (clause 71 – The President or Ministry in consultation with the Commission regulations may be made on what matters)	Inconsistent with Article 76 read with Article 3 and 4 of the Constitution.    Could be validly passed with a Special Majority(Article (84(2)) and by the people at a Referendum(Article 83)	52(3) - Add the words "in accordance with the Regulations made under this Act... " after the words "granted thereto "    52(5) - Delete in its entirety and replace with the following:  "(5) Regulations may be made prescribing guidelines on the grant of exemptions or incentives, as provided for in this Part of this Act."
Details of Businesses of Strategic Importance to be specified by Order (following Clauses 53 (2)(b) and (3)(b)) The President or in the event that the subject of the Colombo Port City is assigned to a Minister, such Minister, may, having considered such recommendations, and having regard to the national interest or in the interest of the advancement of the national economy, in consultation with the Minister assigned the subject of Finance, take such steps as are necessary to inform the Cabinet of Ministers, of  53(2) (b) the specific enactments from those listed in Schedule II to this Act, that are proposed to be exempted from being applicable to such Business of Strategic Importance and any other incentives,   Within two weeks from the date on which the Cabinet of Ministers approves the designation of a business as a Business of Strategic Importance and the granting of the exemptions or incentives so approved, the President or in the event that the subject of the Colombo Port City is assigned to a Minister, such Minister shall, by Order published in the Gazette, specify  53(3)(b) the specific enactments from those listed in Schedule II to this Act, that are exempted from being applicable to such Business of Strategic Importance and any other incentives granted;	Inconsistent with Articles 148 and 76 read with Article 3 and 4 of the Constitution.    Could be validly passed with a Special Majority(Article (84(2)) and by the people at a Referendum(Article 83)	53(2)(b) - Delete the words "the specific enactments from those listed in" .and substitute therefor the words "the specific exemptions from those enactments listed in"  Delete the words "exempted from being"      53(3)(b) - Delete the words "the specific enactments from those listed in" and substitute therefor the words "the specific exemptions from those enactments listed in"  Delete the words "exempted from being"
Commission may seek the concurrence of the Condominium Management Authority  55 (2) The Condominium Management Authority, shall as a matter of priority in the circumstances, provide such concurrence to the Commission.	Inconsistent with Article 12(1) of the Constitution.      Could be validly passed with a Special Majority(Article (84(2)).	Delete the words "provide such concurrence" and substitute therefor the words "communicate its decision"
Commission to seek concurrence of the Security and Exchange Commission  58(1) Where the concurrence of the Securities and Exchange Commission is sought by the Commission, Securities and Exchange Commission shall as soon as practicable in the circumstances, as a matter of priority, render such concurrence to the Commission.	Inconsistent with Article 12(1) of the Constitution.      Could be validly passed with a Special Majority(Article (84(2)).	Delete the words "render such concurrence" and substitute therefor the words "communicate its decision"
Powers of the Estate Manager  60(c ) to facilitate the collection of area related taxes and levies imposed by the Commission within the Area of Authority of the Colombo Port City, as authorised by this Act, and collect fees and charges for services provided within the Area of Authority of the Colombo Port City, including management fees, utility charges, vehicle parking charges, user fees and such other fees or charges from authorised persons, employees of authorised persons, residents, occupiers and visitors within the Area of Authority of the Colombo Port City;  and 60 (f) to collect on behalf of the Commission, the local rates, taxes, levies and such other charges imposed by the Commission and applicable within the Area of Authority of the Colombo Port City, and credit the total of the sum so collected to a bank account as directed by the Commission;	Inconsistent with Article 148 of the Constitution.      Could be validly passed with a Special Majority(Article (84(2)).	60(c ) - Delete the word "taxes" and substitute therefor the word "rates"      60 (f) - Delete the word "taxes" and substitute therefor the word "rates"
Offences – 68(1)(f) and 68(3)(a) Notwithstanding the provisions contained in any 10 other written law, any person who, within the Area of Authority of the Colombo Port City– 68(1) (f)contravenes or fails to comply with any rule, code, direction or guideline made or issued in terms of this Act, commits an offence and shall be liable on conviction after summary trial before a Magistrate, to a fine of not less than rupees one million and not more than rupees five million or to imprisonment for a term not less than three months and not more than two years, or both such fine and imprisonment and the court may take into consideration the grave nature of the offence committed, in fixing the amount of such fine or the period of such imprisonment.  68 (3) (a) Notwithstanding the provisions contained in any other written law, any person who contravenes or fails to comply with any provision of this Act or any regulation, rule, direction, order or requirement issued or imposed thereunder commits an offence under this Act and shall be liable on conviction after summary trial before a Magistrate to a fine of not less than rupees five hundred thousand and not more than rupees one million or to imprisonment for a term of not less than three months and not exceeding one year, or to both such fine and imprisonment.	Inconsistent with Article 76 read with Article 3 and 4 of the Constitution.    Could be validly passed with a Special Majority(Article (84(2)) and by the people at a Referendum(Article 83)	68 (1) (f)- Delete in its entirety   68 (3) (a) - Delete the words "rule, direction, order or requirement issued or imposed"
Regulations 71(1) The President or in the event that the subject of the Colombo Port City is assigned to a Minister, such Minister may, in consultation with the Commission and any relevant Regulatory Authority as is considered necessary, make regulations in respect of all matters for which regulations are required to be prescribed or authorised by  this Act to be made.	Inconsistent with Article 12(1) of the Constitution.      Could be validly passed with a Special Majority(Article (84(2)).	Delete the words "as is considered necessary"
Without prejudice to the generality of powers conferred by subsection (1), regulations may also be made in respect of all or any of the following matters:–    71(2) (l) specifying for the purposes of section 40, any levy as may be required to be paid by a citizen of Sri Lanka or a resident on goods purchased at retail facilities within the Area of Authority of the Colombo Port City at the time of leaving the Area of Authority of the Colombo Port City, and the procedure applicable to the conversion of payments made by a citizen of Sri Lanka or resident when using retail facilities or services at restaurants, cinemas, entertainment facilities, shopping facilities, or parking facilities, within the Area of Authority of the Colombo Port City, into any other designated foreign currency;	Inconsistent with Article 14(1)(h) of the Constitution.      Could be validly passed with a Special Majority(Article (84(2)).	Delete the words "at the time of leaving the Area of Authority of the Colombo Port City"
71(2)(p)  specifying for the purposes of section 52, any further guidelines on the grant of exemptions or incentives to a Business of Strategic Importance;	Inconsistent with Articles 148 and  76 read with Article 3 and 4 of the Constitution.    Could be validly passed with a Special Majority(Article (84(2)) and by the people at a Referendum(Article 83)	delete the words "any further"
Interpretations “Regulatory Authority” includes the Monetary Board of the Central Bank of Sri Lanka, the Registrar- General of Companies, the Director-General of the Central Environmental Authority, the Controller of Immigration and Emigration, the Director- General of Customs, and such other regulatory authority or approving authority, and in whom the powers, duties and functions relating to the respective subjects which are dealt with in this Act are vested in or assigned to, in terms of any applicable written law to the extent provided in this Act. The relevant Regulatory Authority shall be limited to the implementation of the respective written laws applicable to such authorities, within the Area of Authority of the Colombo Port City;	Inconsistent with Article 12(1) of the Constitution.      Could be validly passed with a Special Majority(Article (84(2)).	Delete the words commencing from "to the extent" to "Colombo Port City"  Present Clauses 74 and 75 be re-numbered as Clauses 75 and 76 respectively

 

 

  By Shehan Chamika Silva