Sri Lanka Insurance Corp sale reversed by court- Update

June 4, 2009 (LBO) – Sri Lanka’s Supreme Court said a 2003 privatization of Sri Lanka Insurance Corporation (SLIC) to listed Distilleries group was illegal and ordered the firm to be returned to the government and the purchase price refunded. Court ordered the government to repay more than six billion rupees originally paid by the private firm to gain control of SLIC.

Court said Milford Holdings, a special purpose company incorporated by the Distilleries group to purchase SLIC, could keep the profits earned during the time they ran the insurer.

Distilleries Company of Sri Lanka is part of the empire of businessman Harry Jayewardene. SLIC life and general insurance funds control large stakes in several listed companies including John Keells Holdings and Commercial Bank.

Court said senior government officials had acted without proper authority from the island’s cabinet of ministers and the sale was ‘null and void’ from the beginning.

Though the cabinet had to ‘appoint’ a tender board, a permanent tender board had been ‘assigned’ to give covering approval for the actions of an ad hoc steering committee, Court said.

But Supreme court Justice Amaratunga, delivering the order said in the interest of equity a ‘quasi