No Deal

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 shares to be returned to the government and the purchase price refunded.

Court also said Ernst & Young, the auditors of the firm should be removed. Court ordered the government to repay 6.0
billion rupees originally paid by the private firm to gain control of SLIC.

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

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

Justice Amaratunga, delivering the order said in the interest of equity a ‘quasi-contract’ was deemed to exist during the period Distilleries ran the insurer and the firm would be allowed to take out profits earned up to June 2009.

Court dissolved the board and asked the Treasury to appoint a new board.