Sunday, October 13, 2013

Battle for control : Serene Pavilions

The entire saga of the board room battle of the Rs. 200 million Serene Pavilions Resort, a high end sea side boutique hotel at Wadduwa boiled over when Mr. Clive Leach arrived in Sri Lanka in August this year.

About the same time, Mr. Lokuhetty is reported to have held a board meeting with his wife who is also a director, at their Rajagiriya residence, and as the quorum for a board meeting is 3 persons, appointed their son as a director along with two others. They removed the Company Secretaries Chart Business Systems (Pvt.) Ltd., and appointed R & J Corporate Secretaries (Pvt.) Ltd., The resolution to remove the Company Secretaries was voted only by the Lokuhetty family.

Mr. Lokuhetty claims that people dressed in Army uniform were present outside his residence when he was holding his meeting.

The Company Secretaries thereafter lodged a complaint at the Welikada police station of the purported board meeting that had been held at the Lokuhetty residence and also reported the matter to the Registrar of Companies saying that the appointment of new Directors was illegal.

However, Mr. Lokuhetty submitted papers to the Registrar of Companies with the new list of directors, and the Registrar accepted these names. Mr. Lokuhetty also complained to the Slave Island police station of an ‘illegal board meeting’ that is being held by the other directors.

Mr. Leach and the other directors decided to sack Mr. Lokuhetty as the CEO of Serene Pavilions. Mr. Dilith Jayaweera, a hotelier of recent origin was among those who visited the Serene Pavilions last week (September 11) with a group of some fifty persons. He accompanied two directors of the hotel who voted to oust Mr. Lokuhetty. Mr. Jayaweera says that he has no interest in the matter other than “it was my duty to clear the ill feeling that this British national had developed towards our motherland and its truly honest people”.

Mr. Jayaweera says that he met Mr. and Mrs. Leach late on the night of 31st August and that he was introduced to them by a senior official of the Capital Maharajah Group. Mr. Leach who was once Chairman of Yorkshire TV in the UK was also a director of Capital Maharajah Group.

He says that Mr. Leach had asked him to be the Alternate Director to him “if that was the only way I could fight for his rights and restore his faith in the goodness of our country.” Previously, he says, he was asked to consider managing the hotel and that he was in consultation with the management of Citrus Leisure PLC, a company that owns hotels in Sri Lanka, and that the company had “agreed to consider providing temporary management services to Serene Pavilions.”

Mr. Lokuhetty had then arrived at the hotel when Mr. Jayaweera and the directors were addressing the staff of the hotel accompanied by his lawyers and two police officers including a Senior Superintendent and said that he remained CEO of the hotel. The police then recorded statements from both parties. The matter is now before courts.

Meanwhile, Mr. and Mrs. Leach received a telephone call from the Department of Immigration asking them to call over immediately. When they went to the Department they were told that they were in receipt of a complaint from Mr. Lokuhetty that they were engaged in business having come on a tourist visa. Mr. and Mr. Leach left for the UK thereafter.

Quarrel with Leach was over exclusive right to one pavilion

Anura Lokuhetty, the CEO and director of Serene Pavilions had this to say about the saga:

“The reason for the falling out (with Mr. Clive Leach) is a very simple issue. We knew each other since 1991 when I was the General Manager at Riverina hotel. Our families were close to each other. Even in May when he came to Sri Lanka we met and went for dinner. The issue came up when we built this (hotel). We brought the land through South West Holdings. 

We were involved in other businesses. We sold all these businesses and invested the money in South West Holdings. We bought the land (to build the hotel) soon after the tsunami. We took a bank loan of USD 1.9 million from the Bank of Ceylon. It was the worst time in Sri Lanka. But the BOC considering my involvement in the hotel industry and my dealings provided the facility. We hired a foreign architect. While the buildings were going on we wanted extra money.

This was in 2008. I invited one of my schoolmates Sumith Guruge and Chris Warnakulasuriya and another Indian known as Gautam Radia came in. We sold about 32 per cent and both of us had the controlling shares. (68 per cent). When we were about to open the hotel Clive Leach wanted to block one pavilion for him exclusively. That means we can’t sell it when he is not here. I said I have not given that facility to other shareholders. We have only 12 pavilions. 

If you block one pavilion the business will get affected by 8.5 per cent. I said it cannot be done, but at the initial stage I gave it. Later, the other two directors came to know about it and made a fuss, Clive expected (me) to support him. I could not do that. He did not accept the offer to occupy it when he is not in the country. We sell a pavilion for US dollars 600 per night. Then he said children below 15 cannot be entertained. I said that was not possible. So it was on this issue that we fell out.

Mr. Lokuhetty denied there were questions about the hotel’s accounts. “Everything is audited. Even last month’s accounts were done. Everything is 100 per cent transparent”, he says.

He claims that the board meeting he held with only his wife was not a separate meeting. “That was a proper board meeting. We called all the directors .we informed them. They came for the meeting with 10 other people and an Army vehicle with a person in an Army like uniform who was armed. My home is the registered office. I told them to come in. Only the directors can come in”.

“They lodged a complaint at the Welikada police saying I did not allow them to come in. It is they who had an illegal meeting. We lodged a complaint at the Slave Island police about that.” 

Asked about the appointment of his son as a director, Mr. Lokuhetty said “I am entitled to appoint my son as a director. I have more than 30 per cent of the shares therefore for every 10 per cent a director can be appointed”. He denies having employed local thugs and security personnel to block other directors from the hotel entering the hotel premises. He says it were others opposed to him who brought about 50 persons and intimidated him at the hotel site.

“They even came in an Army vehicle. One person was armed. Two directors were there,” he says.

The Commercial High Court of Colombo restrained Don Gamini Chandrathilake Netthicumara, Wasantha Kumara Galagoda and Nipuna Devindra Samarawickrama from acting as directors of Serene Pavilions (Private) Limited with immediate effect, in a case filed by one of the directors Sumith Guruge against the illegal manner in which the management of the company was being conducted.

The court order follows a boardroom battle between a British media moghul and investor and the Chairman of the multi-million rupee boutique hotel at Wadduwa, Clive W. Leach and some directors and Deputy Chairman and CEO, Anura Lokuhetty.

Mr. Guruge claims that the respondents had arbitrarily conducted a meeting not in keeping with the rules of the company and that thuggery was used to prevent him from conducting a meeting of the directors.

The Commercial High of Colombo Justice M.C.B.S Morais after listening to the submission by Counsel for Mr. Guruge granted interim relief restraining Messrs. Netticumara, Galagoda and Samarawickrama from functioning as directors with immediate effect.

There are 13 respondents in the case including Serene Pavilions (Private ) Limited, Anura Lokuhetty, Jit Warnakulasuriya, Dilani Lokuhetty, Clive William Leach, Stephanie Leach, Business Management House (private) Limited, Don Gamini Chandratillake Netthicumara, Wasantha Kumara Galagoda, Nipuna Devindra Samarawickrama, Chart Business System (Private ) Limited, Dilith Jayaweera and Gazali Hussain.

The petitioner states that the issued share capital of Serene Pavilions (Private) Limited company’s shares have been allocated in the following manner;
Clive William Leach (37.78 per cent)
Anura Lokuhetty (30.12 per cent)
Sumith Guruge (15 per cent)
Dishan Jitendakumar Warnakulasuriya (12.1 per cent)
Gautama Radia (5 per cent).

The petitioners states that acting in terms of the provisions of the articles of association of the 1st respondent the existing Directors namely Clive William Leach and Stephanie Leach respectively appointed Dilith Jayaweera and Gazali Hussain to be their alternative directors.

In or around January 11, 2013 all board members other than Anura Lokuhetty, agreed to proceed with a decision to sell Serene Pavilions (Private) Limited. The decision to sell the Company was positively responded to by Mr.Iqbal Daredia, an investor with an expression of interest to purchase 100 per cent of the equity at a substantial indicative price of US $ 4.5 million.

The petitioner states that the Secretaries of Serene Pavilions (Private) Limited had received a Board resolution instructing the same by South West Holdings (Pvt) Limited which was controlled by the 2nd respondent Lokuhetty seeking to re-issue share certificates to South West holdings (Pvt) Limited comprising 308,550 shares of Serene Pavilions (Private) Limited on the basis that the same was transferred by Clive William Leach with no consideration whatsoever.

The petitioner states that in line with this, Mr. Lokuhetty sought to coerce and exert pressure on the Company Secretaries of Serene Pavilions (Private) Limited viz., Chart Business System (Private) Limited seeking to effect an alteration of the share register.

The petitioner also states that, to the best of the petitioner’s knowledge, owing to the pressure inverted by Mr. Lokuhetty and /or any one and/or more of them, an alteration had been affected in the original register which was subsequently reversed upon seeking a legal opinion thus preserving the original share composition.


 In a strange twist to the controversy surrounding the Serene Pavilions hotel in Wadduwa, the property’s CEO Anura Lokuhetti was abducted and later dumped near a road in Bandaragama at dawn yesterday.

Police said Lokuhetti had been admitted to hospital for treatment after allegedly being assaulted by his abductors.

Wadduwa Police are reportedly questioning people in the area in connection with Lokuhetti’s abduction. The van used in the abduction is reportedly in Police custody.

The Serene Pavilions CEO is embroiled in a dispute over shareholding of the company involving businessmen Jit Warnakulasuriya and Sumith Guruge and a foreign investor whose interests are now being represented by businessman Dilith Jayaweera.
The abduction had taken place around 5:30 a.m. yesterday from the hotel in Wadduwa.

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