K. Priyantha Fernando, J.(CA)

The Petitioners filed this action on 25th June 2025 challenging the conduct of the Coconut Development Authority-CDA (1st Respondent) and the Board of Investment-BOI (2nd Respondent) in granting approvals to the 4th Respondent- Shengda Industrial Company (Pvt.) Ltd. to establish a coconut water processing project in Nattandiya, within Sri Lanka’s “Coconut Triangle.”

FACTUAL MATRIX:

The 1st Petitioner, a company incorporated to manufacture frozen concentrated coconut water, had obtained prior approvals from the relevant authorities and entered into an agreement under Section 17 of the Board of Investment Law No 4 of 1978. The project, which required 150,000 litres of coconut water daily (approximately 45 million litres annually), was to be the first of its kind in the country. Substantial investment, including USD 2 million of the projected USD 4.6 million, has already been brought into Sri Lanka.

THE PETITIONERS’ POSITION:

The Petitioners argued that they had a legitimate expectation that, having granted its no-objection, the 1st Respondent would not allow new entrants into the market until the 1st Petitioner’s raw material requirements were established. However, despite earlier revocations of approval for Nattandiya on grounds of resource scarcity and risks to sustainability, the 1st Respondent subsequently reinstated approval for the 4th Respondent at the same location. This occurred against the backdrop of a severe national coconut shortage, during which the Government had permitted limited imports of coconut products but not coconut water, the essential raw material for the Petitioners’ operations. The Petitioners contended that the approval of the 4th Respondent exacerbated the scarcity, undermined their project’s viability, and threatened the broader coconut industry in the region.

They alleged that the Respondents’ actions are unlawful, arbitrary, discriminatory, and in breach of natural justice, procurement norms, and the principles of fairness and rationality.

THE POSITION OF THE 4^th RESPONDENT

The 4^th Respondent by way of its Limited Statement of Objections dated 9^th July 2025, raised several preliminary objections. It was contended that the affidavit filed by the Petitioners was invalid, as it had been affirmed by an individual without authority to represent the Petitioner companies, rendering the application to be dismissed in limine. The 4^th Respondent further alleged that the Petitioners had suppressed material facts, acted with mala fides, and failed to establish a prima facie case. It was submitted that their project involved a foreign investment of USD 1 million, much of which had already been committed towards the construction of factory premises and the importation of machinery. The 4th Respondent further maintained that coconut water was merely a by- product of copra production and would not be affected by an alleged shortage of coconuts. As per the 4^th Respondent, it was an attempt by the Petitioners to obstruct legitimate competition and secure a monopoly, and was therefore mala fide and vexatious.

COUNTER OBJECTIONS OF THE PETITIONER:

The Petitioners denied the positions advanced by the Respondents and described them as frivolous, technical, and irrelevant. They argued that the real issue laid in the arbitrary and unreasonable decision of the 1^st Respondent to revoke approval previously granted for Hambantota and to permit operations in Nattandiya during a period of coconut scarcity The Petitioners emphasised that the 1^st Respondent had not filed objections thereby leaving the positions set out in the Petition uncontested. They contended that the Respondents had failed to show any genuine progress in relation to the Hambantota project, and had misrepresented their operations in Nattandiya. The Petitioners contended the approval granted to the Respondents was unlawful, irrational, and contrary to principles of fairness, natural justice, and rational decision-making, especially given th