Banks breathe sigh of relief with landmark judgement by High Court

A recent landmark judgement of the Civil Appellate High Court by Justice Dr. D.F.H. Gunawardhana, with Justice Dr. Namal Balalle agreeing, has finally clarified a point of law in the area of winding-up of companies in Sri Lanka.

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The issue argued before the High Court was whether a bank is liable to reimburse a company in liquidation, where a bank has allowed outward remittances from a bank account of a company being wound-up during the pendency of winding-up proceedings.

In a major victory for State Bank of India, the bank successfully defended itself against a claim for $ 260,000, made by the Liquidator of TCI Hotels, the entity being wound-up.

The Liquidator claimed that the bank had allowed an outward remittance to a third-party beneficiary in Dubai, after a petition for the winding up of TCI Hotels had been instituted in the District Court of Colombo.

The District Court held against the bank, requiring the bank to reimburse the amount to the company being wound-up.