Aggrieved depositors cry foul over CB liquidation move

Dep o s i t o r s o f failed finance companies are weeping in despair, accusing the ‘ hear tless brute’ – the Central Bank ( CB) - in deciding to liquidate some of these failed finance companies, despite the repeated promises and assurances of even President Maithripala Sirisena and some Ministers.

The report “3 ailing finance companies to be liquidated” in last Sunday’s issue of the Business Times sent shock waves through these disgruntled depositors. Many were panic stricken and some of them called at the Business Times office to give “their side of the story”.

The three companies proposed to be liquidated are Central Finance and Invest Ltd ( CIFL), The Standard Credit Finance Ltd (SCFL) and City Finance Corporation Ltd (CFCL).

These helpless depositors indicate that already a considerable number of depositors have died either due to heart break or unable to meet their medical expenditure while there have also been some suicides due to heavy financial difficulties and they have been suffering for some as much as 10 years and, all based on false promises by the government and the Central Bank.

In these earmarked finance companies alone there are around 10,000 depositors and according to W. Gunawardene, President, CIFL Depositors Association ( CIFLDA) the depositors, shareholders and savings account holders would be a massive 25,000 and the cancellation of the business licence would affect all of them.

Depositors of CFCL indicate that they were manipulated and defrauded by Deepthi Perera alias Chulaka Gunawardena, Chairman, Aspic Group and after nine years many of their members are dead or lying in bed without money for medical expenditure, their children’s education is lost. Some who cannot meet their daily expenses have become paupers. Now the Central Bank has ignored the multi- pronged sufferings of these depositors and try to cover- up by liquidating these companies, they allege.

They accuse Aspic- owned CIFL of running a complex financial scam and the ploy adopted by having an unregistered CIFL and registered CIFL with different colour logos. Deposits have been collected for the unregistered company on the pretext of obtaining deposits for the registered one which is 40 years old. The unregistered firm ran into difficulty in 2008 due to gross mismanagement and no funds.

According to the CIFLDA the licence of registered CIFL was cancelled last week. In 2008 CIFL Asset Management ( unregistered) deposits were used to buy a licensed finance company called Industrial Finance Ltd ( IFL) and the liabilities of the collapsing CIFL was transferred to IFL. In 2011 IFL and CIFL Assets Management were renamed as City Finance Ltd and given Rs. 100 million to another alleged scammer to be invested in CFCL. Some directors of IFL were alleged to be punished by foreign courts for fraud.

Ms. Sonali Dunuwila, Secretary, City Finance Depositors Society quoting media reports in 2011 indicated that the Colombo Commercial High Court noted that the intention of the directors of the company was to defraud the creditors and deprive the availability of sufficient assets to meet the debts to be settled in the course of the impending winding up application in accordance with the provisions of the Companies Act .

Adducing many details to support their statement, she indicated, “How did the CB allow such people to be responsible for a licensed finance company? This is the same thing they are trying to do to CFCL, they have changed the name, written off the assets and now CB is trying to liquidate the company. CB seems to be part of the whole crisis."

Meanwhile, furious over the CB issuing notice to cancel the business finance licence of the CIFL, a delegation of the CIFLDA met J. T. R. Karunarat e, CB Assistant Gover nor November 22 and has registered their vehement protest against the cancellation of the licence.

Mr. Gunawardene told the Business Times that they have pointed out to the CB that the CB has blatantly violated the fundamental rights of the depositors, violated the law and acted against provisions of the Finance Act. He said that they have indicated to CB that it has violated the provisions of the Finance Act from Section 25 to 37 and preferred to act on Section 37 (1) of the said Act.

They are now preparing to complain to the Human Rights Commission against this injustice and would also be taking legal action where possible against the rights violation of their members.

He said that the Swiss investor, Chancental Works GmbH had promised to bring the money to the local Security Investment Account (SIA), in the first instance US$ 10 million and the balance $ 15 million equity capital to be transferred to the SIA totalling $25 million. He said that Mr. Karunaratne has indicated to them to ask the investor to bring the money first and then they would consider withdrawing the licence cancellation notice.

He said that the depositors have invested in CIFL purely based on the licence issued to the company by the CB. There is no finality of the investor proposals and accused the CB of not considering all these facts, and instead allegedly violated their rights.