Interim injunction issued against MTD Walkers preventing transfer of shares

The Commercial High Court on February 20, 2020, issued an interim injunction against MTD Walkers PLC and its parent company MTD Capital Bhd of Malaysia, in an action preferred by People’s Bank in the background where a corporate disclosure had been made by MTD Walkers to the Colombo Stock Exchange (CSE) on September 9, 2019, that MTD Capital Bhd intended to transfer its majority shareholding in MTD Walkers to a third party.

People’s Bank preferred the application before court on the basis that MTD Walkers and its subsidiaries had obtained substantial facilities from it and that an approximate sum of Rs.7.3 billion remained due and owing to People’s Bank, which may not be recoverable if the majority shareholding in MTD Walkers was transferred to a third party. People’s Bank through its plaint also took up the position that there were already several pending cases instituted against MTD Walkers by several financial institutions, including People’s Bank, which had lent substantial sums of money to MTD Walkers and its subsidiaries and that enjoining orders had been obtained or were still in force in the said cases against MTD Walkers.

People’s Bank also maintained through the plaint that given that there had been no effort by MTD Walkers to settle the sums owed to People’s Bank that the transfer of the majority shareholding in MTD Walkers to a third party would inevitably cause immense loss and damage to People’s Bank.

People’s Bank in its plaint maintained this position specifically in the light of several corporate guarantees had been given to People’s Bank by MTD Walkers as part of security for the loans obtained by its subsidiaries.

People’s Bank also very clearly set out in the plaint that its intention was not to interfere with the operations of MTD Walkers and that it would consent to the transfer of the majority shareholding, if a reasonable means of repayment was proposed to the bank by MTD Walkers/its parent company. People’s Bank through its plaint also brought to the notice of court that a similar enjoining order had already been issued by the Commercial High Court on September 26, 2019, against MTD Walkers and MTD Capital Bhd, in a case instituted by Commercial Bank on the basis of the fact contained in the corporate disclosure of MTD Walkers dated September 9, 2019.

People’s Bank in its application also named the CSE as a defendant in the application merely for the purposes of notice. Thus, Judge M. Ahsan R. Marikar, in the first instance by order dated October 23, 2019, issued an enjoining order against MTD Walkers PLC and its parent company, preventing the transfer of the majority shareholding of MTD Walkers PLC and/or changing the ownership structure of MTD Walkers, until such time as People’s Bank was consulted and an accepted settlement plan was proposed to People’s Bank in respect of outstanding sums owed.

Pursuant to receiving the notice of the plaintiff’s application, the defendants (MTD Walkers and MTD Capital Bhd) filed their statement of objections to the plaintiff’s application to obtain interim relief. Pursuant thereto, parties filed their respective written submissions in respect of the interim injunction sought by People’s Bank in its plaint.

Accordingly, Judge M. Ahsan R. Marikar, by order dated February 20, 2020, on consideration of all material placed before him and the submissions of parties, granted an interim injunction until the hearing and final determination of the case against MTD Walkers PLC and its parent company preventing the transfer of the majority shareholding of MTD Walkers PLC and/or changing the ownership structure of MTD Walkers until such time as People’s Bank was consulted and an accepted settlement plan was proposed to People’s Bank in respect of the outstanding sums owed.

The case has been fixed to June 1, 2020, on which day the answer on behalf of MTD Walkers and its parent company MTD Capital Bhd of Malaysia is due to be filed in court. MTD Walkers, which is a company engaging in multi-disciplinary activities in Sri Lanka, has of late been in the centre of major controversy in the background, where the company and its subsidiaries had obtained significant borrowings from many financial institutions and are unable to repay the same. People’s Bank was represented by Dr. Harsha Cabral PC, along with Nishan Premathiratne, Nadun Wijayasriwardena, Attorneys-at-law, on the instructions of Julius and Creasy.

MTD Walkers and MTD Capital Bhd were represented by Suren De Silva, Attorney-at-law, on the instructions of DL and F De Saram.

The CSE was represented by FJ and G De Saram.