Counsel says Directives ultra vires, tainted
Perpetual Treasuries case Actions of the Central Bank are ultra vires and unreasonable There were other bidders that bid over the advertised amount
Senior Counsel appearing for Perpetual Treasuries, adverting to the Directives issued by the Director of the Department of Supervision of Non-banking Financial Institutions of the Central Bank, argued that it was apparent that though the Directives did not refer to the Bond Issue, and were allegedly issued in view of other alleged violations, the Directives were obviously the CB’S attempted response to the Bond Issue.
President’s Counsel S.A. Parathalingam making his argument before the Court of Appeal last Friday (10) claimed that Perpetual Treasuries had been singled out and victimised as it had been the biggest bidder in the auction of Treasury Bonds.
It was submitted that there were other bidders that had also bidden over the advertised amount, but who have been conveniently forgotten about. It was submitted that bidders regularly bid over the advertised amount at different yield rates.
The Bench comprised Justices Vijith K. Malalgoda (President/ca) and S.thurairaja.
Counsel continuing his argument stated that the actions of the Central Bank are ultra vires (beyond its legal power or authority) and unreasonable in the issuance of the unlawful and unwarranted Directives dated 7th November 2016 under Regulation 11(2) of the Local Treasury Bills (Primary dealers (Regulations) and the Registered Stock and Securities (Primary Dealers) Regulation.
He stated that Perpetual Treasuries is non insolvent and it is a Registered Primary Dealer who is a specialized intermediary in the government security market and only Registered Primary Dealers were permitted to participate in Central Bank Bond auctions.
He submitted that up to date Perpetual Treasuries had not been faulted and a charge has not been made out against Perpetual. Notwithstanding that Perpetual had been slandered, convicted and victimised by certain quarters including the press.
President’s Counsel S.A. Parathalingam making his argument before the Court of Appeal last Friday (10) claimed that Perpetual Treasuries had been singled out and victimised as it had been the biggest bidder in the auction of Treasury Bonds. It was submitted that there were other bidders that had also bidden over the advertised amount, but who have been conveniently forgotten about. It was submitted that bidders regularly bid over the advertised amount at different yield rates.
The Bench comprised Justices Vijith K. Malalgoda (President/ca) and S.thurairaja.
Counsel continuing his argument stated that the actions of the Central Bank are ultra vires (beyond its legal power or authority) and unreasonable in the issuance of the unlawful and unwarranted Directives dated 7th November 2016 under Regulation 11(2) of the Local Treasury Bills (Primary dealers (Regulations) and the Registered Stock and Securities (Primary Dealers) Regulation.
He stated that Perpetual Treasuries is non insolvent and it is a Registered Primary Dealer who is a specialized intermediary in the government security market and only Registered Primary Dealers were permitted to participate in Central Bank Bond auctions.
He submitted that up to date Perpetual Treasuries had not been faulted and a charge has not been made out against Perpetual. Notwithstanding that Perpetual had been slandered, convicted and victimised by certain quarters including the press.
He cited a Fundamental Rights case instituted by three professionals against the Perpetual Treasuries alleging that government suffered a loss as a consequence of the auction on February 27, 2015.
However, the Supreme Court at the stage of supporting dismissed the case stating that there was no legal basis to issue notice, he pointed out.
Nevertheless, Counsel brought to the cognizance of the Court that an unfortunate event occurred on 1st April 2016, which led to the default of the Intra-day Liquidity Facility (ILF) which is a means of borrowing money and settling it before the closure of the same business day.
He said it occurred on 1st April 2016 which was a Friday and the Domestic Operation Department (DOD) of the Central Bank sent a letter dated 4th April 2016 stipulating the default and the respective charges for such failure for a period of three days inclusive of Saturday and Sunday.
The Counsel submitted that the fine had been settled by Perpetual as required on the very next business day.
He submitted that Perpetual Treasuries had already been penalised and fined for the said violations.
Notwithstanding that, the letter of the Director of the Department of Supervision of Non-bank Financial Institutions of the Central Bank dated 7th November 2016 alleged that in view of the said violation and certain other minor defaults, Perpetual Treasuries has failed to carry on business of a primary dealer in compliance with the provisions of the Regulations made under the Local Treasury Bills Ordinance and that it was carrying on business of a primary dealer in a manner detrimental to its customers and the national economy.
The Counsel contended the allegations are untruthful and the reasons cited to impose the purported Directives are baseless amounting to illegality and it was ultra vires to the regulatory authority the Central Bank sought to act under.
He highlighted that there is no direction in the letter dated 7th November 2016 by the Director of the Department of Supervision of Non-bank Financial Institutions of the Central Bank to the Perpetual Treasuries to comply with any provisions of the said Ordinance or to cease to carry on business in a specified manner .
Instead it was pointed out that the Central Bank, under the guise of protecting the customers of Perpetual Treasuries, had imposed disproportionate and unreasonable restrictions, tainted with malice and in terms of its own whims and fancies. He lamented it is unprecedented and they have acted outside of the scope of Regulations made under the Local Treasury Bills Ordinance. Petitioners Perpetual Treasuries (Pvt.) Ltd, Perpetual Asset Management (Pvt.) Ltd and Perpetual Capital Holdings (Pvt.) Ltd cited Central Bank, Monetary Board, CB Governor Dr Indrajit Coomaraswamy and 10 others including the Attorney General as Respondents.
Instructed by G.G. Arulpragasam, S.A. Parathalingam PC with Nishkan Parathalingam and Niranjan Arulpragasam appeared for Perpetual Treasuries (Pvt.) Ltd and Nihal Fernando PC with Romali Tudawe and Maduka Perera appeared for the other two Petitioner Companies. Faisz Musthapha PC with Faiza Markar instructed by Gowry Shangary Thavarasha appeared for the Central Bank. Deputy Solicitor General Milinda Gunatilake appeared for the Monetary Board and the Attorney General.