Daya Group of Companies is forfeited to People's Bank

The Court of Appeal, having heard a writ petition filed by Daya Group Limited and Daya Apparel Export (Pvt) Ltd challenging the decision by People's Bank to sell mortgaged properties by public auction under its Parate execution powers, has decided to dismiss it. The court also ruled that People's Bank has full entitlement to legally proceed with the process of recovering the outstanding loan.

This decision was announced by a bench of Court of Appeal judges comprising Mr. R. Gurusinghe and Dr. Sumudu Premachandra, and the petitioner companies were also ordered to pay one million rupees in court costs.

The petitioners had requested the court to issue writs of Certiorari, Prohibition, and Mandamus, seeking to nullify a resolution passed by the Board of Directors of People's Bank to sell the mortgaged properties by public auction to recover outstanding loan amounts exceeding USD 1.42 million.

Representing the petitioner companies, it was stated that they faced severe financial difficulties due to an unprecedented economic downturn, including the 2019 Easter Sunday attacks, the COVID-19 pandemic, fuel shortages in the country, and political instability, which adversely affected their ability to repay bank loans.

The petitioners accused People's Bank of illegally exercising its Parate execution powers under the People's Bank Act and also stated that the bank had unfairly inflated the loan amount by applying excessive foreign exchange rates. Furthermore, the companies argued that the auction process was procedurally flawed because they had not been duly served with the statutory mandatory notices.

However, the Court of Appeal rejected all these arguments and affirmed the bank's right to legally proceed with the recovery process. People's Bank had strongly opposed the petition, stating that despite being given several opportunities for loan restructuring and steps taken to postpone the auction, the petitioners had continuously defaulted on loan payments. Furthermore, the bank pointed out to the court that the petition was legally unsustainable under Section 29D of the People's Bank Act, which prohibits debtors from challenging resolutions related to the exercise of Parate execution powers.

Here, announcing the verdict, Justice Premachandra observed that although the challenged auction resolution was passed in March 2021, the petitioners filed this writ application with a delay of more than one year and eight months, specifically in November 2022. The bench concluded that the petitioners failed to provide satisfactory reasons for this prolonged delay and that they had delayed in asserting their rights in a timely manner. Therefore, the court emphasized that People's Bank has the full right to continue the process of auctioning the mortgaged properties to recover outstanding loans, in accordance with the official resolution passed by the bank on March 26, 2021.