Lankem Tea & Rubber Plantations (Pvt) Ltd. v.
Central Bank of Sri Lanka and others (Sripavan. J.)
LANKEM TEA & RUBBER PLANTATIONS (PVT) LTD.,v
CENTRAL BANK OF SRI LANKA AND OTHERSCOURT OF APPEALSRIPAVAN, J.,
C.A. NO. 1112/2000FEBRUARY 9,
MARCH 26 ANDMAY 21,2004
Exchange Control Act, sections 7, 10(1), 11(1), 51 and 52 — Procedural fair-ness — Natural justice — Reasons not given — Denial of justice — Error oflaw — No opportunity given to show cause.
The 3rd defendant, the Controller of Exchange, directed the petitioner compa-ny to furnish an explanation for violating section 10(1). The explanation givenwas not accepted and the petitioner was imposed a penalty. On appeal to theMinister the penalty was reduced.
It was contended that the two decisions are ultra vires and null and void, asthe decisions are contrary to law, no reasons have been given, and that thepetitioner had acted in contravention of section 10(1).
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The schedule of the penalties does not indicate any violation by the peti-tioner company.
It appears that the penalties imposed were based on violations of section7 and sectionl 1; whether the petitioner or its Directors violated section 7and section 11(1), were not charges on which the explanation wassought.
The petitioner was not given an opportunity to show cause relating to vio-lations of section 7 and section 11(1).
One does not know how the Minister’s decision was arrived at. In theabsence of reasons, it is impossible to determine whether or not therehas been an error of law.
Failure to give reasons amounts to a denial of justice and is itself an errorof law.
APPLICATION for writ of certiorari
Case referred to:
Maradana Mosque v Badi-Ud-Din Mohamed – 1967 1 AC 13 – CA311/00-CAM 31.3.2003
R v Mental Health Review Tribunal – exparte Clatworthy (1985) 3 AllER 699
H.L.de Silva PC with Nigel Hatch, V.K. Choksy and K. Wijetunge for petitioner
Y.J. N. Wijeyathilaka Deputy Solicitor-General for respondents.
August 27, 2004
SRIPAVAN, J.The petitioner is a limited liability company incorporated underthe laws of Sri Lanka. By letter dated 30th June 1997 marked P1the third respondent alleged that investigations conducted by theExchange Control Department pertaining to the transfer / issue /sale / purchase of shares of George Steuarts ManagementServices (Pvt) Ltd (hereinafter referred to as GSMS) and KotagalaPlantations Limited revealed that the petitioner company had vio-lated sec. 10(1) of the Exchange Control Act and thereby commit-
Lankem Tea & Rubber Plantations (Pvt) Ltd. v.
Central Bank of Sri Lanka and others tSripavan. J.)
ted an offence in terms of sec. 51 thereof. The petitioner was alsodirected to furnish an explanation as to why a penalty should not beimposed in terms of sec. 52 of the said Act in respect of the saidalleged offence.
The petitioner, however denied liability by letter dated 28th July1997 marked P3 and in paragraph 7 of the affidavit of its ManagingDirector dated 5th October 2000 stated, inter alia, that none of theshareholders or directors of the petitioner company owned and / orcontrolled and / or managed GSMS at the time the transfer ofshares took place. It is observed that the third respondent withoutspecifically denying the aforesaid averment in paragraph 28 of hisaffidavit dated 27th March 2001 stated that having purchasedGSMS, Lankem changed its name to Lankem Tea and RubberPlantations (Pvt) Limited. Nevertheless, the third respondent by let-ter dated 20th March 1997 marked P10 informed that the petition-er’s explanation as contained in P3 could not be accepted andimposed a penalty in a sum of Rupees Eleven Million Six Hundredand Sixty Seven Thousand (Rs. 11,667,000). Being dissatisfiedwith the aforesaid decision of the third respondent, the petitioner byletter dated 10th December 1997 marked P12 preferred an appealto the Minister of Finance in terms of sec. 52(7) of the said Act. TheMinister having examined the said appeal reduced the penaltyimposed on the petitioner to Rs. 3,899,000 which was communi-cated by letter dated 7th August 2000 marked P14.
Learned President's Counsel for the petitioner contended thatthe decision of the third respondent dated 20th November 1997marked P10 and the decision on appeal by the Minister containedin P14 are ultra vires , illegal, null and void and are liable to bequashed by certiorari on the following grounds:-
That the said decisions are contrary to law as there areno evidence to support the said decisions;
That neither the third respondent nor the Minister ofFinance has given any reasons for their respective deci-sions;
That in any event, the petitioner has not acted in con-travention of sec. 10(1) of the Exchange Control Act.
It would appear from the share certificate marked 3R26(a) that
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GSMS on 11th January 1996 transferred 3340 shares to RovencoCompany Ltd. It was not in dispute that none of the shareholdersand / or directors of the petitioner company owned and / or con-trolled and / or managed GSMS at the relevant time when theshare allotment was made. In the circumstances, I do not see any solegal basis on which the petitioner company could be made liablefor violation of section 10(1) of the Exchange Control Act. Theschedule of the penalties annexed to the affidavit of the thirdrespondent marked 3R28 did not indicate any violation by thepetitioner company. Assuming that Lanken Ceylon Limitedchanged its name to Lankem Tea and Rubber Plantations (Pvt)
Ltd and that the petitioner company would become liable for anyviolation of the Exchange Control Act, it would then appear thatthe penalties imposed were based on violations of section 7 and11(1) of the Exchange Control Act, as evidenced by 3R28. 60Whether the petitioner or its directors violated section 7 and 11(1)of the said Act were not the charges on which the explanation ofthe petitioner company was sought. Accordingly, I hold that thepetitioner company was not given an opportunity to show causerelating to violations of section 7 and 11(1) of the said Act. Thedecision reached by the third respondent without giving an oppor-tunity to the petitioner company to answer the charges against itis wholly outside the jurisdiction of the third respondent. The con-cept of procedural fairness or natural justice requires that no per-son shall be punished for an offence without giving an opportuni- 70ty to answer the charges against him (Vide Maradana Mosque vBadi-Ud-Din Mohamedp).
The Secretary to the Treasury in his undated affidavit filed inMarch 2001 merely states that the Minister of Finance reducedthe penalties imposed upon the petitioner after due examinationof the appeal. One does not know how the Minister’s decisioncontained in the document marked P14 was arrived at. In theabsence of reasons, it is impossible to determine whether or notthere has been an error of law. Failure to give reasons thereforeamounts to a denial of justice and is itself an error of law. In Rv soMental Health Review Tribunal, ex. Parte Clatworthy(2 it washeld that reasons should be sufficiently detailed as to make quiteclear to the parties and specially the losing party as to why the tri-
Serendib Coconut Products Ltd. (In Voluntary Liquidation)
CA and others v. Commissioner-General of Labour and others (Sripavan, J) 137
bunal decided as it did and to avoid the impression that the deci-sion was based upon extraneous consideration rather than thematter raised at the hearing.
For the reasons stated, the decisions contained in the docu-ments marked P10 and P14 cannot be allowed to stand.Accordingly, a writ of certiorari is issued quashing the penaltyimposed on the petitioner by the third respondent in terms of the 90letter dated 20th November 1997 marked P10 and the decision ofthe Minister contained in the letter dated 7th August 2000 markedP14.
LANKEM TEA & RUBBER PLANTATIONS (PVT) LTD v. CENTRAL BANK OF SRI LANKA AN