Court dismisses Daya Group petition against People’s Bank auction

The Court of Appeal has dismissed a writ petition filed by Daya Group Limited and Daya Apparel Export, challenging the decision of People’s Bank to sell properties mortgaged to the bank through a public auction under the Parate Law.

The court ruled that People’s Bank has the legal right to proceed with the recovery of the outstanding loan.

The judgment was delivered by a bench comprising Court of Appeal Judges R. Gurusinghe and Dr. Sumudu Premachandra. The court also ordered the petitioner companies to pay legal costs amounting to Rs. 1 million.

The companies had sought a writ order to quash the decision of the People’s Bank Board of Directors to auction the mortgaged properties in order to recover an unpaid debt exceeding US$1.42 million.

Before the court, the petitioner companies argued that they had suffered severe financial setbacks due to the 2019 Easter Sunday attacks, the COVID-19 pandemic, fuel shortages, and political instability, which had affected their ability to repay the loan.

The companies also alleged that the bank had unlawfully exercised its Parate powers and had inflated the outstanding debt by applying excessive exchange rates.

However, rejecting these arguments, the Court of Appeal noted that the bank had officially issued a Parate notice on March 26, 2021, and that the petitioners had nevertheless failed to settle the debt.

Accordingly, the judges held that People’s Bank had the full legal right to auction the properties in question to recover the outstanding loan.

People’s Bank told the court that it had provided several opportunities to restructure the loan and postpone the auction, but the petitioners had continued to default on repayments.

The bank further argued that, under Section 29D of the People’s Bank Act, borrowers are not entitled to challenge the bank’s Parate decisions in this manner.

Delivering the judgment, Judge Premachandra observed that although the bank had made its decision in March 2021, the petitioners had filed their writ application only in November 2022, after a delay of one year and eight months.

The court emphasized that the petitioners had failed to provide a reasonable explanation for the delay.