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Law / Politics /Opinion


SC Grants interim relief to Major General

The Supreme Court last week restrained the Army Commander and several other military officers from giving effect to a new rule formulated by the army; from promoting any junior officer above the rank of Major General Nimal Ainsley Jayasuriya, the Area Commander of the Weli-Oya operational area and from withdrawing his security and other entitlements until the determination of a fundamental rights application made by Major General Nimal Jayasuriya.
The Petitioner holds the substantive/confirmed rank of Brigadier in the Sri Lanka Army and also holds the rank of Major General (unconfirmed). Previously, he served as the Commander of the 53rd Division of the army, which is known as the elite ‘Reserve Strike Force’ for the entire army, comprising of the Air Mobile Brigade, Special Forces Brigade and Commando Brigade.
The Military Secretary, Major General Y.S.A. De Silva, the Army Commander, Lieutenant General Sarath Fonseka, the Defence Ministry Secretary and the Director Army Medical Services were made respondents.
The Bench comprised Chief Justice Sarath N. Silva, P.C, Justice Rajah Fernando and Justice Gamini Amaratunga
The Petitioner stated that in February 1999, he was promoted to the rank of Brigadier (temporary) and thereafter, duly conformed in the said rank of Brigadier in January 2003.
Prior to that, at the time he completed his training in the army and was commissioned in 1977, the Petitioner was the youngest officer in the army. He was also the youngest officer at the stage of each of his promotions, which was the case even up to the stage of his last promotion to the rank of Major General.
The Petitioner has been awarded, inter alia, the prestigious ‘Rana Weera Padakkama’ twice and the ‘Rana Sura Padakkama’ thrice, in recognition of his gallantry and has also been awarded the following ‘Military Operations Medals’: The North and East Operations Medal, The ‘Purna Bhumi’ Padakkama, the Vadamarachchi Operational Medal and The ‘Riviresa’ Campaign Medal.
The Petitioner stated that all his promotions up to the rank of Major General (temporary) have been effected on time.
In April 2005, the Petitioner was promoted to the rank of Major General (temporary) of the Sri Lanka Army.
The Petitioner stated that he is due to be confirmed in the said rank of Major General prior to June 2007.
The Petitioner, an outstanding sportsman, represented Sri Lanka at basketball and played rugby for the Army Sports Club until 1980, when he sustained a severe spinal injury whilst playing Rugby for the army and thereafter continued to suffer from a severe backache.
Thereafter, the Petitioner stated that on medical advice he went to the UK for treatment at his own expense, and leave for 84 days for this purpose was approved by the Army Commander and the Defence Ministry Secretary.
After arriving in London, the Petitioner was compelled to re-schedule the prior appointments he had made from Sri Lanka, due to his delayed arrival. He duly applied for an extension of leave on the October 25, 1985 for an additional 10 weeks, in order to complete his medical treatment in the UK. This was duly approved by his commanding officer.
Much to his surprise, despite the aforesaid explanations submitted, a formal Charge was thereafter framed against him for the alleged offence of being Absent Without Leave for a period of 76 days from 04/11/1985 up to 20/01/1986.
He was found guilty and convicted of the said offence on 31/03/1986 and was imposed with a punishment of a ‘severe reprimand’ as well as a loss of pay for 77 days.
The imposition of a severe reprimand and deduction in pay are punishments which are provided for by section 133 of the Army Act and are recognised therein as the two least severe punishments that can be inflicted on officers convicted of offences.
The Petitioner also states that the said Charge Sheet referred to above, contains remarks made by the then Commander of the Support Forces, wherein he acknowledges the fact that he had produced documentary evidence of medical treatment but purports to state that he should have obtained prior approval. The Petitioner was thereafter convicted for being absent without leave for 76 days.
He stated that had medical certificates from Dr. J. Gould of St. Mary’s Hospital London, together with the important covering letter containing the endorsements made thereon by the Commanding Officer of the Army Hospital as well as by the Director – Army Medical Services, been furnished at the inquiry into the charge framed against him and prior to his wrongful and unlawful conviction for allegedly being absent without leave for 76 days, he would not have been found guilty of the said offence. He is unaware as to how or why the said covering letter of 27/03/1986 and the said medical certificate, containing the said endorsements had not been forwarded to the inquiring officer prior to imposing the punishment on the Petitioner. He verily believes that the said documents were unfairly withheld.
His request for extended leave had not been forwarded to the Secretary to the Defence Ministry for his approval, although the Defence Ministry Secretary is the proper authority according to law, who is also empowered to approve or refuse such applications for leave.
He states that the Director, Army Medical Services (DAMS) has made an endorsement on 29/03/1986 (two days prior to the Petitioner being convicted of the aforesaid offence) on the Medical Certificate submitted by the Petitioner, to the effect that same “may be approved”.
The Commanding Officer of the Army Hospital had made a minute dated 31/03/1986 that the Petitioner was referred to the UK for treatment in consultation with him and that the documentary evidence (medical certificate) submitted by the Petitioner was ‘authentic’ and had forwarded it to the Director – Army Medical Services, for necessary action.
Thereafter, the Director – Army Medical Services endorsed this minute to the effect that the said medical certificate covering the period up to 15/01/1986, could be approved.
The Petitioner was thereafter been granted four consecutive promotions and confirmations without any delays or complications whatsoever.
In October 2005, He formally appealed to the then Commander of the Army, Lieutenant General Shantha Kottegoda, in order to obtain redress in respect of the issue of being absent without leave in 1985, due to a crucial covering letter and a medical certificate (which were duly endorsed by the Commanding Officer of the Army Hospital and by the Director – Army Medical Services), having being unfairly withheld prior to convicting the Petitioner of the said offence of being absent without leave for 76 days.
The then Army Commander recommended to the then Defence Ministry Secretary that the Petitioner be granted covering approval for the period of his said absence.
The then Defence Ministry Secretary has stated that an injustice had been caused to the Petitioner by penalising him without considering all the facts. He also expressed concern as to why the said reports had not been seen at the inquiry and also with regard to the lack of reasons why the Petitioner’s application for an extension of leave had not been submitted to him for approval.
He stated that even after covering approval had been granted he was continuously victimised.
The Petitioner states that the ‘National Defence Course’ (NDC) is considered a very significant/important course in the Sri Lanka Army and the same is offered to army personnel based on their seniority. He stated that he was unfairly deprived of participation in the NDC ‘s in 2004, 2005 and 2006.
He also stated that junior officers had been promoted above him contrary to the practice in the army and that when Major General N. Mallawarachchi went on retirement, the Petitioner was the senior most officer next in line to be appointed Colonel Commandant of the Regiment. However, Brigadier Daya Ratnayake, an officer who is one whole rank and four years junior to the Petitioner was appointed to this rank.
The Petitioner stated that much to his utter shock and surprise, he received a letter on the January 18, 2007 (which is dated 12/01/2007), signed by the first Respondent and captioned “Reaching Maximum Service in the Substantive Rank”, whereby the first Respondent informed him that as he had gone leave for 77 days he cannot be confirmed in the rank of Major General.

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Company’s Act becomes law

By Gihan Indraguptha
The private sector of the country has been hailed as the engine of economic growth, opening up many opportunities for progress. Yet the main law governing the private sector, namely the Company’s Act was seen as an impediment rather than a catalyst for growth in this important segment of the economy. Due to various shortcomings and loopholes in the prevailing law, many scandals have erupted with some such as the Hilton deal, Insurance Corporation privatisation deal making headlines in the recent past. After being on the drawing boards for well over 12 years, The Company’s Act No 7 of 2007 finally became law this week with the signature of the Speaker being placed on the document. The relevant bill was passed in Parliament through a rare bipartisan consensus with all parties unanimously endorsing the new law. The Nation spoke to one of the key architects of the Act, eminent chartered accountant Nihal Sri Amarasekera to get a better perspective of this all important Act.
Q: What was the need to draft a new Act rather than amend the old one?
A: The need for this new Company’s Act has been felt for a very long time. The current Act was passed in 1982 and it was mainly modelled on the British law of 1948. So in other words even in this era when the private sector of this country is considered the engine of growth and while the world has advanced in leaps and bounds, the country’s laws regarding this were more or less established in 1948. So rather than amending the prevailing law it was decided to enact a new law keeping with contemporary developments internationally. This process has been going on for several years. In fact the chairman of the commission looking in to this, Kanag Isvaran PC, has been working on this Act since 1995.
Q: Have you taken any precedence from other countries when drafting the law?
A: This act has primarily taken the Canadian model in to account. I think this is one of the most advanced company laws of this nature. In addition the Australian, Hong Kong and Japanese laws have also been taken in to consideration. However, I must add that we have addressed certain local interest too when drafting this Act in particular with labour and so on.
Q: What are the outstanding differences of the new law compared with the previous one?
A: In this new act we have diverted from the regime called share capital to Stated Capital. This Stated Capital is defined as the amount received by the company or the dues of the company in respect of the shares issued. So when you read this Act it is clear that we have moved away from a concept of a par value for a share. Shares are sold at a particular price at the inception of a company, with the growth of the establishment the board of directors can determine the vale of the share depending on the added value. This of course will be done with certain checks and balances. So what has been done is to abolish the share premium account. What traditionally was the share capital account and the share premium account has now been taken together as the status capital. So there’s no share premium. Even today when you are taking a valuation one considers either the earnings per share or the net assets per share that is considered. So this par value actually is something nobody is bothered about.
Q: There is a now confusion about the issuing of bonus shares in this Act. Can you clarify this matter?
A: A bonus share is a capitalisation of a reserve. In other words adding on to the share capital or giving money to the share holder. In this case when there is a surplus of assets then that money can be given to the share holders directly through what is called a distribution. Such an action can be taken with the approval of the board. This distribution should not be confused with the declaration of dividends. It is declared from the profits of the company while a distribution is done taking the reserves in to consideration.
Q: Now that this Act has become law, how soon do you think it could be implemented?
A: We are hoping to get all the mechanisms in place by the 31st of March. Most of the financial institutions end their year on the 31st of this month. If this Act can be implemented by then most of these businesses will be able to handle their accounts in accordance with the new standards. So for the smooth operation of the Act it is important that all he mechanisms are in place by the 31st.
Q: What are the checks and balances that you foresee in this act which can prevent the occurrence of scandals like the ones we saw recently regarding private companies?
A: We have introduced a mechanism called the solvency test which must be undertaken by the board of directors. In this it is important that the latest accounts be considered. This concept brought in to the Act will depend on two cardinal issues. First whether the company is able to pay its debt as it becomes due in the normal course of business and secondly whether the value of the company’s assets are greater than its liabilities and stated capital. Not only do the directors have to certify that there is solvency of the company but the auditors have to also certify the same. So there is always a check and balance to make sure that the company’s solvency is maintained.
According to this Act a major transaction, which is defined can only take place after obtaining the approval of the shareholders through a special resolution. In cases like the Insurance Corporation privatisation issue where the company which got the nod from the Government buy the entity transferred its rights to an unknown overseas company. Here the shareholders rights were definitely not considered. The new Act envisions to rectify such matters.
Another check that is put in place is to ensure that the board of directors be held responsible if there is an erosion of the capital of the company. In such a case within 20 days of discovering that over 50 percent of the initial capital has been lost, the directors should address the shareholders and inform them of the reasons for this and come up with a detailed report to rectify the matter.
Q: One of the key complaints made against the private sector is their regard for labour. Does the new Act have provisions to enhance the protection of the workers?
A: If the company has defaulted payments to its employees then that payment gets priority over mortgages and other liabilities. Even when it comes to a liquidation the payments due to an employee will get priority over liabilities to banks and even the taxes due to the Government. So Employees Provident Funds and Gratuity Funds will be paid before any other issue is taken up. This is a major feature where the rights of the labour has been strengthened.
Q: Does this law apply to small businesses to or is it mainly focusing on big companies?
A: We have introduced the single shareholder concept which is commonly seen in other countries. This is targeting the small businessmen who are running their own enterprises. These informal businesses can be made in to limited liability companies which will have limits on their risks. So in case of failure this individual will not run the risk of losing his personal wealth like his house and property. What happens now is that small scale entrepreneurs who start businesses with loans from banks some times end up losing everything they have.
There is an important feature in this Act which protects the government. The Secretary of the Treasury can be a sole shareholder of a company. In the cases of converted companies there are seven odd officials who hold shares and it is difficult to implement any change. So in such cases the Secretary to the Treasury can be the sole representative of the Government. This reduces the inefficiencies when taking decisions.

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US Court refuses to dismiss Class Action against Tata

(Business Wire) SAN FRANCISCO – US District Court Judge Vaughn Walker denied the motion of Tata America International Corporation and its parent corporations Tata Consultancy Services, Ltd., and Tata Sons, Ltd. (collectively referred to as ‘Tata’) to compel arbitration in India and dismiss the nationwide class action lawsuit in the United States Court.
The complaint, brought in Federal Court in San Francisco by Gopi Vedachalam, an employee of Tata America International Corporation, alleges Tata unjustly enriched itself by requiring all of its non-U.S.-citizen employees to endorse and sign over their federal and state tax refund checks to Tata.
“Judge Walker upheld the principle that before a company can force an employee working in the United States to give up the right to have his or her claims heard in a United States court, it must show that both the company and the employee clearly and mutually agreed that these claims would be heard elsewhere,” stated co-class counsel for plaintiffs.
The Court found that the documents purportedly requiring arbitration in India applied one set of rules to Vedachalam and another set to Tata, negating any mutual agreement to arbitrate legal disputes.
“The Court’s order ensures that Vedachalam will have his day in Court in the United States before a neutral judge, not in India in front of a private arbitrator of Tata’s choosing,” explained co-class counsel for plaintiffs.
The complaint alleges further that, at least until July 2005, Tata required its non-U.S.-citizen employees to sign power of attorney agreements delegating an outside agency to calculate and submit each employee’s tax return to state and federal authorities. Tata then required its non-U.S.-citizen employees who received tax refunds from state and federal tax authorities to endorse the tax refund checks and send them back to Tata.
One of India’s largest business conglomerates, Tata’s revenues in the last fiscal year totaled nearly $22 billion. The proposed class consists of thousands of current non-U.S. citizen employees of Tata working in the United States, plus former Tata employees dating back to 2000.