IN THE COURT OF APPEAL OF THE DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA In the matter of an Application for mandates in the nature of Writs of Certiorari and Prohibition under and in terms of Article 140 of the Constitution.

1. Capital Trust Holdings Limited CA/WRIT/465/2022 No.42, Sir Mohammed Macan Marker Mawatha, Colombo 03.

2. Tushan Harsha Mendis Wickramasinghe Chairman and Executive Officer of Capital Trust Holdings Limited, No.42, Sir Mohammed Macan Marker Mawatha, Colombo 03.

PETITIONERS Vs.

1. Securities and Exchange Commission of Sri Lanka (SEC)

Level 28 & 29, East Tower, World Trade Center, Colombo 01.

2. Hon. Attorney General Attorney General’s Department No.159, Hulftdorp, Colombo 12.

RESPONDENTS Before: Sobhitha Rajakaruna J.

Dhammika Ganepola J.

Counsel: Sanjeewa Jayawardana P.C. with Suren Gnanaraj and Rukshan Senadeera for the Petitioners Vikum de Abrew P.C. with Manohara Jayasinghe D.S.G. for the Respondents Argued on: 23.03.2023, 02.05.2023, 16.05.2023, 28.06.2023, 08.09.2023, 04.10.2023 Written submissions: Petitioners - 15.11.2023

4th Respondents - 03.11.2023 Decided on: 12.12.2023 Sobhitha Rajakaruna J.

The Director (Legal and Enforcement) of the Securities and Exchange Commission of Sri Lanka (‘SEC’), by way of a Notice of Action dated 05.09.2022 (‘P10’) informed the 2^nd Petitioner that the members of the SEC had made a direction to take steps to initiate legal proceedings against the 2^nd Petitioner for alleged market manipulation. The ‘P10’ further elaborates that Rule 12 of the SEC Rules forbids such market manipulation and the decision to institute legal proceedings was taken after due consideration of how the 2^nd Petitioner traded on behalf of the 1^st Petitioner, concerning the shares of Browns Investments PLC (‘BIL’) between the period of 08.12.2020 to 04.01.2021. The 1^st Petitioner is the holding company of several subsidiaries including the Capital Trust Securities Pvt. Limited which is a stock brokerage firm. The said ‘P10’ discloses that the SEC has requested the Attorney General to initiate legal proceedings against the 2^nd Petitioner. The SEC by a letter dated 26.10.2022 marked ‘P17’ has reiterated its decision to institute criminal proceedings against the 2^nd Petitioner. The Petitioner primarily challenges the decisions reflected in both the above ‘P10’ and ‘P17’.

The SEC Rules which have been published in Gazette Extraordinary No. 1215/2 on 18.12.2001 are marked as ‘P4’. Both parties unmistakably rely on the said ‘P4’. The Rule 12 of the SEC Rules reads:

“No person shall create, cause to be created or do anything that is calculated to create a false or misleading appearance or impression of active trading, or a false or misleading appearance or impression with respect to the market for or the price of any securities listed in a licensed stock exchange.”

Surveillance was done by the Colombo Stock Exchange(‘CSE’) and the SEC into the trading activity of shares of BIL during the period 01.12.2020 to 12.01.2021. As a consequence of the said examination, it was revealed that, during the said period, the trading pattern engaged by the 2^nd Petitioner and connected parties of BIL created a false sense of activity around the said stock and influenced its price. The SEC has demanded the 2^nd Petitioner to show cause by a letter marked ‘P3’. It is stated that the 2^nd Petitioner’s conduct spelled out in ‘P3’, allegedly created a false market for the respective security in contravention of Rules Nos. 12 and/or 13 of the said SEC Rules. The SEC, again by way of a letter marked ‘P8’ has requested the 2^nd Petitioner to show cause in respect of several accounts related to the Capital Trust Group (‘CTG’) which supposedly have traded significantly in the shares of BIL wherein certain abnormalities had been detected on trading in some identified Accounts. The 2^nd Petitioner has responded to the both above show cause letters by ‘P7’ (dated 27.01. 2021) and ‘P9’ (dated

05.10.2021).

In terms of section 147 of the Securities and