Touchwood winding-up ensues heated exchanges; written submissions fixed for 3 April

The inquiry of the Touchwood winding-up case was resumed in the Commercial High Court before Amendra Senevirathna H.C.J, on 24 March, where the appearances and the legal representations of the parties were as before.

Counsel for the Petitioner Avindra Rodrigo and Counsel for the intervening creditors made their submissions in favour of the Winding-up Petition on the last date of the Inquiry (19 March 2014).

Counsel for the Company, Harsha Amarasekera P.C. made his submissions, opposing the Winding-up Petition when the case was taken up last Monday.

The company admitted the monies owed and payable to the Petitioner and other intervening creditors who have invested in the Agarwood plantation in Thailand amount to a total of Rs. 73 million.

The company admitted that they presented several schemes of settlement in Court and out of Court at various instances and the company even admitted that they issued cheques to its creditors which were eventually unrealised. They further admitted that the cheques issued from the personal account of the CEO of the company in open Court too had not realised for insufficiency of funds in the account.

Counsel for the company went on to say that the company has complied with all the Directives issued by the SEC imposing certain restrictions on the management of the assets of the company. The Counsel further assured that the company has not in any way attempted to siphon out funds or alienate its assets after winding-up proceedings were instituted.

Counsel further stated that the company owns not only the land used for the Sandalwood plantations in Sri Lanka but also the Land of Agarwood plantations in Thailand. However, the valuation report filed by the company discloses only land of local sandalwood plantations worth Rs. 335 million (including the value of the trees) and the company strongly believes that the debts can easily be settled by utilising the assets of the company.

The company stated in its submissions that it is not unusual for a company to undergo a liquidity crisis as in the present case. Counsel further explained by drawing an analogy with a bank where all of its depositors would want to draw their money out of the bank at the same time and stated that in such a scenario the bank will not be in a position to meet the demand of all of its depositors but would not be considered insolvent.

The company displayed a tendency to delay Court proceedings from the time of instituting legal action. Overcoming such delaying tactics the Counsel for the Petitioner and other intervening creditors insisted on proceeding with the inquiry for the Winding-up amidst objections from the company on the last occasion.

Amidst such objections from the company and certain objections from the SEC the Petitioner commenced the inquiry on 19 March 2014. Even though the inquiry for the winding-up is underway, the company still seems to believe that they are not insolvent and that they have sufficient assets to settle the creditors. The company strives continuously to convince Court that a solvent company such as Touchwood Investments PLC should not be wound-up.

Several questions were raised by the Honourable Judge during the submissions of the Counsel for the company. Among other queries it was questioned as to why cheques were issued from the personal account of the CEO if the company claims to be solvent.

Counsel for the Petitioner Avindra Rodrigo made further submissions at the conclusion of the company’s submissions. He emphasised that the company has no liquid cash at present to pay its creditors and for that simple reason the company is deemed insolvent. The fact that the company may have valuable assets should not be considered in deciding the insolvency of the company at present and Counsel further stated that the Court is not in a position to speculate the status of the company taking into account the assets of the company if it is obvious that the company has no cash. Whether the company could raise funds in the future to pay its debts is irrelevant to decide the status of the company at present.

The Counsel for the Petitioner further stated that the amounts due to the creditors by the company was never an unforeseen debt or liability as the company was aware of the period of maturity of the plantations. The time duration was stated in the contracts entered into and therefore the company should have made provision for the amounts payable to its investors. Counsel went on to state the fact that the company is faced with a cash flow crisis cannot be adopted by the company as a defence to the winding-up as the company had ample time to overcome such a liquidity crisis and prove its solvency.

Counsel for the Petitioner further stated even though the company claims to own land in Sri Lanka and Thailand and has filed a valuation report of its assets, not a single Title Deed verifying their ownership over such assets has been filed or produced in Court.

Counsel for the SEC Dr. Harsha Cabraal stated that an investigation carried out by the SEC has been concluded and that the report of the investigation will be filed in Court. From the submissions made by the Counsel for the SEC one could infer that SEC was not favouring the winding-up of the company even though they have not clearly disclosed if they were in support of or against the winding-up of Touchwood. Counsel for the Petitioner objected to the submissions of the SEC stating that they are neither a creditor nor a contributory of the company and therefore, has no authority to oppose the winding-up of the company.

Oral submissions by the parties were concluded and the case will be called for the filing of written submissions on 3 April 2014.

Counsel Avindra Rodrigo instructed by FJ&G De Saram appeared for the Petitioner while Harsha Amarasekara P.C. instructed by Messrs. Paul Rathnayake Associates appeared for Touchwood Investments PLC.
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http://www.cse.lk/cmt/upload_cse_announcements/7171395804426_.pdf