046-SLLR-SLLR-1999-V-1-HEMASIRI-FERNANDO-v.-HON.-MANGALA-SAMARAWEERA-MINISTER-OF-POSTS-TELECOMM.pdf
SC Hemasiri Fernando v. Hon. Mangala Samaraweera, Minister of Posts,
Telecommunications and Media and Others415
HEMASIRI FERNANDO
v.
HON. MANGALA SAMARAWEERA,MINISTER OF POSTS, TELECOMMUNICATIONSAND MEDIA AND OTHERS
SUPREME COURTDHEERARATNE, J..
WIJETUNGA, J. ANDBANDARANAYAKE. J.
S.C. (FR) APPLICATION NO. 14/99APRIL 29, 1999
Fundamental Rights – State controlled commercial company – Removal of aGovernment Director without adducing any reason – Aribitrary and capricious action- Article 12 (1) of the Constitution.
The 3rd respondent (Secretary to the Treasury) purporting to act on behalf ofthe Government of Sri Lanka (GOSL) in the exercise of his power under Article19.2 of the Articles of Association of the 4th respondent, Sri Lanka Telecom Ltd.,(SLT) removed the petitioner from the post of Director/Chairman of the company.No reasons were given to the petitioner as to why he was removed.
After the incorporation of Sri Lanka Telecom Corporation as a public companyin terms of the conversion of public corporations or Government Owned BusinessUndertakings Act, No. 25 of 1987, Nippon Telegraph and Telephone Corporation(NTTC) of Japan purchased 35% of the shares of SLT and approximately 3.5%Shares were given over to employees. Thus, the Government retained approxi-mately 61.5% shares. In terms of the share purchase agreement between theGOSL and NTTC, 6 Directors including the Chairman were the nominees of GOSLwhile 4 Directors were to be nominees of NTTC. This arrangement is also reflectedin the Articles of Association.
416
Sri Lanka Law Reports
(1999] 1 Sri LR.
Held:
Behind the veneer of the commercial company is the State. The power ofthe State is conferred on the 3rd respondent to be held for the benefit ofthe public.
Per Dheeraratne, J.
“As observed by Wade and Forsyth (7th edition) at 391. . .“ the truthis that in a system based on the rule of law", 'unfettered Government discretionis a contradiction in terms'.'
The action of the 3rd respondent was arbitrary and capricious and thepetitioner's fundamental right for equal protection of the law has been violated.
APPLICATION for relief for infringement of fundamental rights.
Faisz Musthhapha, PC with Sanjeewa Jayawardena, Ananda Kasturiarachchi andMs. Chandrika Silva for the petitioner.
K.C. Kamalasabayson, PC SG with Uditha Egalahewa, SC and Mohan Gopallawa,SC for 1st and 3rd respondents.
Shibly Aziz, PC with Kalyani Jayawardene and Ms. Thaheeda Barrie for the 4threspondent.
Romesh de Silva, PC with Hiran de Alwis for the 5th respondent.
P. A. D. Samarasekera, PC with Harsha Amarasekera and Ms. Kumudini Wijetungafor the 6th respondent.
Aritha Wickramanayake with Aruna Samarajeewa for the 8th respondent.
Gomin Dayasiri with Arawinda R. I. Atharupana and Ms. Niranjalee Wijesinghefor the 9th respondent.
Cur. adv. vult.
SC Hemasiri Fernando v. Hon. Mangala Samaraweera, Minister of Posts,
Telecommunications and Media and Others (Dheeraratne, J.)417
July 29, 1999.
DHEERARATNE, J.
In 1990 a corporation known as the Sri Lanka Telecom was estab-lished in terms of the State Industrial Corporations Act, No. 49 1957.The corporation took over the functions, inter alia pertaining to tel-ecommunications which were discharged by the Department of Tel-ecommunications. By letter dated 15. 9. 94 the 1st respondent Minister,acting under sections 12 and 13 of the State Industrial CorporationsAct, appointed the petitioner as a Director and Chairman of the SriLanka Telecom for a period of 3 years. On 14. 11. 94 the petitionerwas appointed Secretary to Hon. Prime Minister.
In September, 1996, Sri Lanka Telecom was incorporated as apublic company Ltd. (4th respondent) in pursuance of an order publishedin the government Gazette made in terms of the Conversion of PublicCorporations or Government Owned Business Undertakings Act,No. 25 of 1987 and the shares of the company vested with theSecretary to the Treasury for and on behalf of the Government ofSri Lanka. The Articles of Association of the new company empoweredthe Government of Sri Lanka to dispose of shares in the companyprovided that the Government retained not less than 51% of the totalnumber of shares. Nippon Telegraph and Telephone Corporation(NTTC) of Japan purchased approximately 35% of the shares of SriLanka Telecom Ltd. and approximately 3.5% shares were given overto employees thus the Government retaining approximately 61.5%shares. In terms of the share purchase agreement signed betweenthe Government of Sri Lanka and NTTC, the Government of Sri Lankaremains the sole beneficial owner of the shares purchased byNTTC. By the shareholders agreement entered between the Govern-ment of Sri Lanka and NTTC out of the Board of Directors of SriLanka Telecom Ltd. 6 Directors including the Chairman were to benominees of the Government Of Sri Lanka while 4 Directors were tobe nominees of NTTC; this arrangement is also reflected in the Articlesof Association.
418
Sri Lanka Law Reports
[1999] 1 Sri LR.
The shareholders agreement also provided that the Governmentof Sri Lanka and the investor (NTTC) "shall procure the appointmentor continuation of "the petitioner and 5 others as nominee directorsof the Government of Sri Lanka and the petitioner in addition as non-executive chairman of Sri Lanka Telecom Ltd. By letter dated 27. 09.1996, the then Secretary to the Treasury nominated the petitioner asa director of Sri Lanka Telecom Ltd. and the letter further stated thatthe nomination had been made "in terms of Articles of Associationafter consultation with Hon. Minister of Finance and Planning and Hon.Minister of Posts and Telecommunications". The Secretary to theTreasury wrote letter dated 6th August, 1997, addressed to the Sec-retary of Board of Sri Lanka Telecom Ltd. stating that in terms ofsection 19.2 of the Articles of Association the petitioner and 3 otherswere appointed to the Board of Directors of Sri Lanka Telecom Ltd.with immediate effect. The letter further stated: "I confirm that theseappointments are made in consultation with Hon. Minister of Financeand Planning and the Hon. Minister of Posts and Telecommunicationsand Media".
Petitioner alleges that as Chairman of Sri Lanka Telecom Ltd., hehad several disagreements with the 1st respondent Minister overcertain highly contentious issues especially with the introduction of 2private operators Suntel (Pvt.) Ltd. the 8th respondent and Lanka Bell(Pvt.) Ltd. the 9th respondent who were licensed to operate fixed radiotelephone systems in Sri Lanka about 1995. In the 1st part of 1996both the 8th and 9th respondents commenced their commercialoperations as Wireless Local Loop Telephone Operators (WLL) andthe petitioner alleges that they received favoured treatment from the1st respondent.
The petitioner states that his relationship with the 1st respondentsuffered a total breakdown as a result of the media publicity givento an incident relating to the 1st respondent's obtaining a credit cardfrom the 4th respondent and using the same during his visits overseas.The petitioner states that the 1st respondent suspected him of havingsupplied the information. The petitioner. further states that the 6th
SC Hemasiri Fernando v. Hon. Mangala Samaraweera, Minister of Posts,
Telecommunications and Media and Others (Dheeraratne, J.)419
respondent had issued a persona/ cheque in order to settle the 1strespondent's credit card bills and the 1st respondent suspected thatit was done on his advice. The contention of the petitioner was thatbecause of these incidents the 1st respondent got the petitionerremoved from the post of Director/ Chairman of the Sri Lanka TelecomLtd. This is denied by both the 1st and 3rd respondents.
On 28th December, 1998, the petitioner received a copy of a letterdated 24. 12. 1998 addressed to the 4th respondent. That reads:
"HIGHLY CONFIDENTIAL.
24th December, 1998
Sri Lanka Telecom Ltd.,
Telecommunications Headquarters,
Lotus Road,
Colombo 1.
I, Dixon Nilaweera, Secretary to the Treasury, acting on behalf of theGovernment of Sri Lanka, in view the powers vested with me interms of Articles (s/c) 19.2 of the Articles of Association of Sri LankaTelecom Ltd., hereby remove Mr. Hemasiri Fernando from thepost of Director / Chairman of Sri Lanka Telecom Ltd., with immediateeffect.
Dixon Nilaweera,
Secretary to the Treasury for and on behalf of the Government ofSri Lanka."
The petitioners position is that his removal is grossly arbitrary,capricious, and unreasonable and has been influenced by collateralconsiderations and made for accusations which do not bear any formof objective scrutiny. It was contended on behalf of the 5th respondent,that the petitioner's removal was a matter purely falling within theCompany Law and therefore within the purview of Private Law asopposed to Public Law, the former of which does not attract the
420
Sri Lanka Law Reports
[1999] 1 Sri L.R.
fundamental rights jurisdiction of this Court. The position of the 1stand 3rd respondents was that in terms of Article 19.2 of Articles ofAssociation, the Government of Sri Lanka has a right to remove thepetitioner from the office of a director representing the Governmentand there is no requirement either to give the petitioner notice orreasons for his removal; the petitioner could be removed without anyreason being given.
As observed earlier the Government of Sri Lanka owns 61.5% ofthe shares of the company and it is the beneficial owner of 35% ofthe shares held by the NTTC. Behind the veneer of the commercialcompany is the State. The power of the State is conferred on the3rd respondent to be held for the benefit of the public. As observedby Wade and Forsyth (7th edition) at 391 ". . . the truth is that, ina system based on the rule of law, unfettered Government discretionis a contradiction in terms".
No reasons have been given to the petitioner as to why he wasremoved. We hold that the action of the 3rd respondent is arbitraryand capricious and the petitioner's fundamental right for equal pro-tection of the law has been violated. As regards the relief to begranted, when this matter was being argued, we indicated to counsel,that in the event of the petitioner succeeding in his application, wewill not order reinstatement, as the petitioner would then find himselfin the position of a square peg in a round hole. We order the Stateto pay a sum of Rs.1,00,000 as compensation and Rs. 25,000 ascosts.
WIJETUNGA, J. – I agree.BANDARANAYAKE, J. – I agree.
Relief granted.