IN THE SUPREME COURT OF THE DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA In the matter of an appeal against the judgment of the High Court Judge dated 19.12.2003 under and in terms of Section 5 of the High Courts of the Provinces (Special Provisions) Act No. 10 of 1996 read together with Section 755 of the Civil Procedure Code.

Ceylon Comany Group (Pvt) Ltd., Level 4, Millenium House, Nawam Mawatha, Colombo 02.

Plain S.C. (C.H.C.) Appeal 11/2004 Case No. H.C. (Civil) 127/2000 (1) Vs.

Southern Group Team Holdings (Pvt)

Ltd., No. 155/5, Castle Street, Colombo 08.

Defendant AND NOW BETWEEN Southern Group Team Holdings (Pvt)

Ltd., No. 155/5, Castle Street, Colombo 08.

Defendant-Appellant Vs.

Ceylon Comany Group (Pvt) Ltd., Level 4, Millenium House, Nawam Mawatha, Colombo 02.

Plaintiff-Respondent Before: Hon. S. Thurairaja, P.C., J.

Hon. Janak De Silva, J.

Hon. Mahinda Samayawardhena, J.

Counsel:

Harsha Amarasekera, P.C. for the Defendant-Appellant Aruna de Silva for the Plaintiff-Respondent Written Submissions:

16.03.2018 and 28.06.2022 by the Defendant-Appellant

07.03.2018 by the Plaintiff-Respondent Argued on: 20.05.2022 Decided on: 24.07.2024 Janak De Silva, J.

The Plaintiff-Respondent (Respondent) instituted this action on 10.09.2000 against the Defendant-Appellant (Appellant) in the High Court (Civil) of the Western Province (Holden in Colombo) (“Commercial High Court”). The action was based on two causes of action.

Firstly, the Respondent seeks to recover a sum of Rs. 130 million in total with interest at 16% per annum from 16.09.1997 up to the date of the decree and thereafter with legal interest on the aggregate sum until payment in full.

Secondly, the Respondent seeks to recover a sum of Deutsche Mark (“DEM”) 23,298/- or its value in Sri Lankan Rupees together with legal interest thereon from the date of the decree until payment in full.

The first cause of action is based on a Memorandum of Understanding (“MOU”) (P1) the Respondent had entered into on 15.08.1997 with Messrs. Chandrasiri Tilak Maliduwapathirana, Kithsiri Saman Maliduwapathirana, Priyantha Maliduwapathirana and Ajantha Maliduwapathirana (collectively referred to as “TPG”).

TPG held 95% of the issued share capital of the Subsidiaries referred to in the MOU which were Southern Group Tea Industries (Private) Limited, Southern Group Mulatiyana Teas (Private) Limited, Southern Group CTC Teas (Private) Limited and Southern Group Goluwawatta Tea (Private) Limited. In terms of the MOU, parties agreed to incorporate a Holding Company to function as the Holding Company of the Subsidiaries for the purposes set out in the MOU. The Holding Company of the Subsidiaries was Southern Group Tea Holdings Limited, the Appellant.

According to the MOU, the Respondent was obliged to invest a sum of Rs. 115 million in the Appellant and for the Appellant to issue 11,500,000 debentures. The Respondent had the option of converting the debentures and interest into shares of the Appellant on or before 30.11.1997.

In terms of Clauses 5.3 and 5.4 of the MOU, the Respondent was authorised to conduct a due diligence inquiry within 3 months from the signing of the MOU to ascertain the viability of the project. It was agreed between the parties that, in the event the debentures were not converted into shares on or before 30.11.1997 by the Respondent, the Appellant shall redeem 50% of the par value of debentures at the end of the period of 18 months from the date of issue and the balance within 36 months from the date of issue.

The Appellant, by letter dated 01.12.1997, requested a further sum of Rs. 15 million from the Respondent to be advanced in favour of the Appellant (P3). The Appellant issued receipts with respect to both payments (P2 and P4).

According to the Respondent, the Appellant failed to convert the said debentures into shares, which led to the accrual of the first cause of action.

The second cause of action is for a sum of DEM 23,298/-. The Appellant, by way of a letter dated 04.11.1997, addressed to