News
Ministers of Justice and Health on collision course with association of banks
Wijeyadasa pushes for suspension of Parate executions:
‘Country paying heavy price for not having proper tax regime, favourable treatment to some’
By Shamindra Ferdinando
Justice, Prisons Affairs and Constitutional Reforms Minister Dr. Wijeyadasa Rajapakse, PC, has assured the local business community, troubled by parate executions, that laws will be brought in to regulate the practice. The Justice Minister said he would work with Health Minister Dr. Ramesh Pathirana to convince the Cabinet-of-Ministers to change the law.
The assurance was given at a meeting held at the Jasmin Hall, BMICH, where the former President of the Bar Association explained how the law meant to recover unpaid loans and interest thereon was brazenly abused.
The gathering was told that approximately 1,400 businesses were already in distress, especially in Colombo, due to the one-sided swift action taken by banks to recover unpaid loans by seizing and auctioning mortgaged properties without taking into consideration the political-economic-social crisis caused by the 2019 Easter Sunday attacks, followed by the Covid-19 pandemic and the subsequent economic crisis.
Minister Rajapakse said that either the existing law, the Banking Act no 30 of 1988, had to be overhauled or a new Act introduced to prevent the further deterioration of the economy.
Parate execution can be carried out only by the licensed commercial banks of Sri Lanka.
Following Dr. Rajapakse’s declaration, the Sri Lanka Banks Association (SLBA) stressed that the banks exercised what the Association called their legally-enshrined right to parate execution as a last resort. The Association declared that the overarching objective was to protect depositors’ funds that had been lent to borrowers.
The Association emphasised that the parate execution remedy is aimed at recovering mortgaged assets from willful defaulters and businesses that were no longer viable.
The SLBA, which represents all the licensed banks in the country, pointed out that banks have extended moratoriums on debt repayment for a long period exceeding 48 months in some cases, and that in instances of willful default by borrowers, the banks owe a duty to their depositors’ whose funds are at risk, to recover the debts overdue and minimize the losses on loans granted.
Legal sources pointed out that the association never bothered to issue statements when huge amounts of money recklessly lent and overdue from top end borrowers were written off as bad debts.
Minister Rajapakse told Friday’s meeting that before the change of government, in 1977, only the Bank of Ceylon, People’s Bank and State Mortgage and Investment Bank were empowered to carry out parate executions. However, subsequently private banks and financial institutions, having made representations to the then President, secured parliamentary approval to join the club.
The government disregarded the concerns expressed by the Bar Association at that time, the Justice Minister said, alleging there had been many instances of misuse at the expense of the clients experiencing financial difficulties.
Valuable properties that had been seized under parate execution had been bought for a song and then sold keeping a huge profit margin, the Justice Minister said, asserting that a deeply flawed law caused injustice.
Dr. Rajapakse warned unless the continuing manipulation of the law wasn’t stopped through an amendment to the existing Act or by introducing a new Act, the banks, too, would have to face far reaching consequences. The significant depletion of industrial and commercial borrowers under the dire current circumstances and significant weakening of the client base as a whole could have a negative impact on the entire banking system, the Justice Minister warned.
The President’s Counsel also questioned ‘irrevocable power of attorney’ that lenders obtain from borrowers over mortgaged properties while declaring his intention to bring in necessary amendments to restore public confidence in the system. The Minister pointed out that the ‘irrevocable power of attorney’ couldn’t be done away with. “This is wrong and not practiced anywhere in the world,” the outspoken Minister said.
The government couldn’t forget that a section of the business community had been subjected to such unfair practices at a time the people were burdened with taxes and faced further increased levies, such as VAT from January 1, 2024. How could one do business under such difficult circumstances, the Dr. Rajapakse asked?
The MP, who had first entered Parliament, back in 2004, on the then PA National List, found fault with successive governments for failing to adopt a proper tax policy. Declaring that once adopted a particular tax regime should be in place for at least a decade, lawmaker Rajapakse pointed out how the country suffered for want of proper tax strategy.
The Minister told The Island that the way governments had handled the economy was questionable and those responsible owed the country an explanation and apology. Dr. Rajapakse questioned the utter failure on the part of the Central Bank to recover the loans granted to various failed finance companies. “I raised this issue in Parliament recently but unfortunately those responsible are yet to take tangible measures in this regard,” Dr. Rajapakse said.
Referring to a declaration he made in Parliament on November 15, this year, Dr. Rajapakse said that Mercantile Credit, one of the beneficiaries of government grants, was yet to pay back Rs. 30,000 million it owed to the Central Bank.
The Minister said so during the debate on the Second Reading of Budget 2024.
“It is a massive borrowing by a single entity that is more than what his Ministry’s vote amounts to,” Dr. Rajapakse said. Those behind the scheme hadn’t been punished, the Minister charged.
“No shipment for 10 days; seas off western coast will become rough by April end”
Education Secretary of the Frontline Socialist Party (FSP) Pubudu Jayagoda says the Indian company which secured a tender to supply coal for electricity generation this year has delivered only 13 of the 25 shipments required and no vessel has arrived in Sri Lanka for the last 10 days or so.
Jayagoda said so while addressing the media during a protest held in Colombo yesterday.
Jayagoda said the Indian company Trident Chemphar, which secured the tender to supply 25 coal shipments for 2026, had placed the country’s coal stocks at risk.
Although all 25 coal shipments are required to be unloaded before the end of April, only 13 vessels have arrived in Sri Lanka so far, according to Jayagoda. He also claimed that no shipment had arrived during the first week of March, adding that coal vessels had not arrived for about 10 days.
Jayagoda warned that the situation could endanger the country’s energy supply as the seas off the western coast usually turn rough by the end of April, disrupting unloading operations.
According to Jayagoda, a report submitted by the Public Utilities Commission of Sri Lanka to the Parliamentary Oversight Committee on infrastructure and strategic development, power cuts may become necessary from August even if the country falls short of five shipments unless electricity is generated using costly diesel-powered thermal plants.
Jayagoda also alleged irregularities in the tender process, claiming that the government had changed tender specifications and delayed the tender process by about four months, possibly to allow the Indian company time to register and secure performance guarantees.
He further alleged that the coal supplied by the Indian company was substandard.
Jayagoda questioned why the tender had not been cancelled despite several shipments allegedly failing to meet quality standards and why no investigation had been launched.He asked why legal action had not been taken against the company despite supply disruptions.
The US Department of State has said that Washington respects Sri Lanka’s sovereignty in handling matters relating to the Iranian warship IRIS Bushehr and its crew, according to agency reports, quoting a State Department Spokesperson. He has said the final decision regarding the vessel, its crew and the rescued Iranian sailors rests with Sri Lanka in accordance with its domestic laws and international legal obligations.
The statement follows comments by Foreign Minister Vijitha Herath that Sri Lanka was looking after 32 sailors rescued from the Iranian frigate IRIS Dena under Colombo’s international treaty obligations.
The frigate was sunk by a US submarine off Sri Lanka’s southern coast on Wednesday during escalating hostilities involving the United States and Iran.
Sri Lanka’s Navy conducted rescue operations, following the incident, recovering 84 bodies.
Asked whether Colombo was under US pressure not to repatriate the Iranian sailors, Herath said Sri Lanka had taken all actions in accordance with international law.
Sri Lanka also provided safe harbour to the second Iranian warship, IRIS Bushehr, and evacuated its 219 crew members a day after the Dena was torpedoed. The vessel was taken to the port of Trincomalee after reporting engine problems.
Citing an internal cable, Reuters reported that Washington had urged Sri Lanka not to repatriate the Iranian sailors. However, the State Department spokesperson reiterated that the disposition of the crew and survivors was a matter for Sri Lanka to decide, adding that the United States respects Sri Lanka’s sovereignty in managing the situation.
Meanwhile, India allowed a third Iranian warship, IRIS Lavan, to dock in a port on humanitarian grounds after it reported operational difficulties.
The ship docked at the port of Kochi, where many of the crew, including young cadets, were disembarked and transferred to a nearby facility.
President Anura Kumara Dissanayake said Colombo would follow the provisions of the Hague Convention, which requires neutral states to detain combatants of warring parties until the end of hostilities.
A senior administration official said Sri Lanka was in discussions with the International Committee of the Red Cross regarding the treatment of survivors from the torpedoed vessel. International humanitarian law would apply to the wounded, who could be repatriated if they requested it, the official added.
Iranian diplomats in Colombo have requested the return of the remains of sailors killed in the attack to Iran.
Opposition and SJB leader Sajith Premadasa, emphasised the critical need for the Indian Ocean region to remain peaceful and not become part of any conflict, said a news report published by NDTV yesterday.
It said: As the Iran-Israel war enters its second week, the theatre of the war has expanded dramatically, reaching the waters of Sri Lanka. With the sinking of Iranian warship IRIS Dena in international waters off Lanka’s coast and the docking of a second Iranian vessel, IRIS Busheher, Colombo has become embroiled in a conflict where it seeks to remain only a neutral bystander.
Speaking with NDTV, Sajith Premadasa, Leader of the Opposition in Sri Lanka emphasised the critical need for the Indian Ocean region to remain peaceful and not become part of any conflict.
“The Indian Ocean has on successive occasions been declared a peaceful area and should remain so,” said Premadasa.
The Sri Lankan government has said that it will attend to all survivors of the ill-fated IRIS Dena and IRIS Busheher as per international protocols and norms. Sri Lankan President Anura Kumara Dissanayake said his country had a “humanitarian responsibility” to take in the crew of the vessel, which was allowed to dock at Trincomalee in Northern Sri Lanka.
Premadasa, who is the leader of the opposition party SJB, called on all parties to cease the ‘asymmetric warfare’. He cautioned that the widening conflict would have devastating consequences for smaller countries like Sri Lanka, which is still reeling from its worst economic crisis in 2022.
“The Middle East conflict is already spreading to other countries, and this is having an impact on Sri Lanka and Sri Lankan people,” Mr Premadasa told NDTV.
A third Iranian vessel that was in the Indian Ocean, IRIS Lavan, has docked at Kochi in India. India has said it was a “humanitarian call” after the vessel sent out a distress call.
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