More time needing Touchwood objects but petitioner proceeds with winding up

The much awaited Touchwood winding-up case was called in the Commercial High Court yesterday before High Court Judge Amendra Senevirathna, on 19 March 2014 for the inquiry of the Winding-up where the appearances and the legal representations of the parties were as before.

Counsel for the petitioner Avindra Rodrigo, proceeded with the inquiry of the winding-up amidst many objections by the counsel for the company Harsha Amarasekera P.C.

The company had delayed the inquiry on various grounds, promising a settlement from the time the matter was first heard in Court and it was apparent that the company attempted to postpone the inquiry, when the matter was taken up in Court yesterday. Inquiry will resume on 24 March 2014 on which date the company will be given the opportunity to make their submissions.

The counsel for the company requested Court to grant two more days to settle the petitioner and the intervening creditors, to which counsel for the petitioner and other counsel representing the intervening creditors objected, stating that it was yet another delaying tactic. As no payments were made by the company since the institution of action the petitioner and intervening creditors seemed adamant to proceed with the inquiry for the winding-up.

The petitioner filed action in the Commercial High Court Colombo, to wind-up Touchwood Investments PLC on 26 July 2013 as the company had failed to pay monies due to him. The company objected to the Winding-up Petition filed in court and stated that the company will settle all the investors of the Agarwood plantation in Thailand in accordance with a proposed payment plan.

The company proposed a settlement scheme to settle the petitioner in full in two installments, 50% of the payment by 14th January 2014 and 2nd installment of the remaining 50% by 14th March 2014. The company also admitted debt of seven other intervening creditors, and proposed a settlement plan to pay them in three instalments of 25% by 14 January 2014, 25% by 14 March 2014 and the remainder by 14 June 2014. The company failed to adhere to the terms of settlement they proposed, and no payments were made by 14 January 2014. The creditors who were deceived by the previous management of the company had a glimpse a hope of recovering their dues in the light of the proposed settlement plan presented by the new management, but soon realised that even though the management had changed hands not much has change. They were yet again left with only disappointment and regret.

On 27 January 2014 when the case was called in the Commercial High Court, counsel representing the company Harsha Amarasekara PC stated that the CEO of the Company, L.W. Kiwlegedara will issue cheques to the petitioner and seven other intervening creditors in settlement of the 1st instalment that was due on 14 January 2014. The cheques dated 27 February 2014 were issued from the personal bank account of the CEO and were presented to the creditors in open Court.

Later when the case was called on 25 February 2014 the company requested the creditors to bank the cheques on 3 March 2014. The petitioner and the creditors accepted the said cheques even though they were post-dated cheques issued from the account of the CEO of the company and presented the cheques on 3 March 2014 as requested. The petitioner and the creditors have exhibited a great degree of tolerance towards the company by complying with numerous requests and by providing further time and opportunities for the company to settle their dues.

However, when the cheques presented in open Court were returned, the petitioner and the intervening creditors had no other recourse but to proceed with the winding-up. Numerous assurances given by the company in open Court were treated with no regard disrespecting the entire Court system and the legal proceedings of Court.

Avindra Rodrigo stated in his submissions that the petition for the winding-up had been made in compliance with the provisions of the Companies Act 7/2007 and the company had not at any instance disputed the monies owed to the petitioner. The company had given numerous assurances to the petitioner that his dues will be settled in a timely manner. Five cheques issued to the petitioner by the company before instituting legal action too had been returned as the said cheques were issued from a closed account. The Board of Directors of the company is said to have been changing frequently exhibiting the instability of the company. The counsel further stated that it is established beyond doubt that the company has no money to pay the investors as it had adopted a ‘Ponzi’ scheme where old investors are paid with the money invested by new investors, and the company is now faced with a liquidity crisis as there are no new investors.

Counsel further stated that directives issued by the SEC imposing a restriction on the management and alienation of the assets of the company will prevent the company from alienating its assets, however, as there is no official, such as a liquidator to take over or monitor the management of the company these directives may be of no effect in practice. It was further stated that a company which has failed to settle the petitioner and seven creditors as per the settlement plan is deemed unable to pay the admitted debts of 257 other creditors of the company and that alone reveals the insolvent state of the company. Counsel further submitted that the company has not only failed to pay its investors but also the salaries of its employees for the past few months and that the company now has no registered office.

Counsel further emphasised the urgency of concluding this matter as further delay would only increase the improbability of recovering the investors’ dues. Counsel further drew an analogy to other similar incidents of the recent past where public quoted companies collapsed leaving the investors with no hope of recovering their dues.

Several counsel appearing for the intervening creditors supported the submissions made on behalf of the petitioner and made submissions in support of the winding-up. They also drew Courts’ attention to the fact that investors of other companies using the brand name Touchwood such as Touchwood Ltd., in Thailand and Touchwood Forestry Company Ltd. in Hong Kong, may resort to other courses of action to recover their dues.

Several questions in relation to the accuracy and reliability of the information contained in the Annual Report of 2013 of the company were raised by a counsel for an intervening creditor.

Inquiry will be resumed on 24 March 2014 on which date the company will be given the opportunity to make their submissions.

Counsel Avindra Rodrigo instructed by Messrs. FJ&G De Saram appeared for the Petitioner while Harsha Amarasekara instructed by Messrs. Paul Rathnayake Associates appeared for Touchwood Investments PLC.
http://www.ft.lk/2014/03/20/more-time-needing-touchwood-objects-but-petitioner-proceeds-with-winding-up/