Yashodha Holdings (Pvt) Ltd loses the legal battle against People’s Bank to prevent the bank from recovering overdue facilities by disposing the property mortgaged to the Bank

Colombo: Recently, Supreme Court allowed People’s Bank to proceed with disposing the mortgaged property belonging to a benefitted director of Yashodha Holdings (Pvt) Ltd., which was mortgaged to the Bank as security for a facility granted to Yashodha Holdings PVT Ltd.by the Bank.

The particular case had been filed by Yashodha Holdings (Pvt) Ltd challenging the acquisition of the mortgaged property in terms of People’s Bank Act 29 of 1961 as amended.

Having considered legal arguments from both the parties, Supreme Court decided to permit the bank to proceed with the disposal of the Mortgaged property. This judgement, by lifting the corporate veil, further confirmed that a director cannot hide under the disguise of the Company name and a property of a benefitted director of a company, which is mortgaged to a Bank is also subject to be Parate Execution.

While this judgment enables People’s Bank to recover a part of the debt which had been defaulted by Yashodha Holdings (Pvt) Ltd for over two decades, banking experts are of the view it is also a remarkable judgment for all commercial banks, for it will act as a deterrent against wilful defaulters who seek to hide from their debt liabilities towards banks.