Dockyardgate COVER-UP demands lessons to be learnt

by Vishvamitra

(September 06, Colombo, Sri Lanka Guardian) We believe in the role of the media as the ‘watchdog’ of the nation and are committed to expose any wrongdoing with trustworthy information to the public at all times on issues where we observe the public interest is undermined. Our Investigative journalism keeps an ‘eagle’s eye’ on the members of the legislature, the executive which includes all officials holding public office and the members of the judiciary for the purpose of making them accountable for any abuse of office. These officials simply exercise the inalienable sovereign power of the people as the members of the executive, legislature and judiciary and hence are under duty to discharge their respective roles with total integrity whilst committed to uphold the rule of law and to protect the public interests. The very same public, whose sovereignty they exercise on trust, expect the media to play its ‘watchdog’ role vigorously and effectively to ensure that the peoples’ sovereignty is not undermined. The scandalous affairs like the ‘Dockyardgate’ are brought under the scrutiny of public eye as a direct result of our obligation being the ‘fourth state’ to the Nation.

Colombo Dockyard fraud in a nutshell

The Colombo Dockyard Ltd [CDL], a BOI registered enterprise, sold 21 marine crafts manufactured locally with BOI privileges, which is prohibited under the law. The law requires that if the CDL intends to sell any finished products manufactured with raw material imported on duty free basis for export bound production, it should first apply for permission from BOI followed by Customs authorization and then pay all fiscal levies [Customs duties and other taxes] on the value of the goods as determined by the Customs.

On an information provided by a private informant, the Customs launched an investigation [Case No: P/Misc/93/2000] as far back as in October 2000 into this unlawful transaction. The investigators founds that the CDL had defrauded the total duty component amounting to a sum of Rs 619,483,827.00 on the 21 marine crafts sold unlawfully and managed to discover three key important elements concerning this colossal revenue fraud.
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Peoples’ sovereignty auctioned in Public

619 m rupees of public funds allowed to be robbed

Supreme Court undermines the public interests allowing AG withdrawing court action

Vasu’s intervention to protect public interest refused

Plot involving the AG, ST and ex Customs boss succeeds

Executive is on the side of the criminals

Customs morale undermined

Wake-up call for the politicians: Stop admin-legal-business mafia

Media as the watchdog of the Nation
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Firstly the CDL did not apply for Customs permission for the sale of 21 marine crafts. Secondly the CDL included the duty component in the sale price marine crafts and recovered the total amount of fiscal levies amounting to Rs 619,483,827.00 from the buyers. Thirdly, the CDL misappropriated the total amount of the fiscal levies so recovered, without paying a single cent to the Customs.

Media campaign to

Media launched a grueling campaign to bring this day light robbery of misappropriation of public funds to the lime-light. All the relevant hard evidence were brought under the public scrutiny exposing the plot engineered by the former Director General of Customs [DGC] Sarath Jayathilake and two of his deputies [ZAM Jazeel and Tilak Perera], present Attorney General [AG] Mohan Peiris and Dr PB Jayasundara, the Secretary to the Treasury.

Unsung heroes battle to the last

The evidence unearthed by a team of investigators headed by TR Ratnasiri, Assistant Superintendant of Customs clearly proved the attempts made by those high ranking individuals to shut the case from the very inception of the detection. Truly these Customs men deserve the tribute of the nation for their untiring efforts in taking the fight to the very end amidst strongest possible opposition posed by their own head of the department, the DGC, Sarath Jayathilake and the other powerful heads of the Department mentioned above. The uphill task sustained over a period of decade against heavy odds to protect the public interests, is truly remarkable.

Ugly face of the Customs junta

The former DGC Sarath Jayathilake, Tilak Perera [Director of Customs, appointed to hold the inquiry] and ZAM Jazeel [Customs Legal Advisor with no legal qualification], dodged the Customs inquiry commenced after the completion of the investigation into the fraud, for a well over 10-year period. This strange and unacceptable conduct clearly undermined the morale of their own Customs investigators as the long, deliberate delay in finalizing the inquiry facilitated the fraudsters at CDL to find an escape routes. After purposely marking time for four years the DGC Sarath Jayathilake unlawfully terminated the Customs inquiry on 05th March 2004 granting an amnesty to the CDL. [Image of the notification of termination reproduced]. Yet, the investigators refused to give in and challenged their own boss with a court action filed before the Court of Appeal [Case No: CA/1397/2004] on 25th of June 2004. This decisive and brave action effectively forced the DGC Jayathilake to withdraw the amnesty granted to the CDL, and also to give an undertaking to the Court, to resume and complete the Customs inquiry ‘as expeditiously as possible’. Accordingly, the court action was withdrawn by the Customs investigators on 09th February 2005. However, the immunity enjoyed by the DGC Jayathilake was such that he openly violated his own undertaking to the Court and continued to undermine the Customs inquiry allowing the CDL to find a way out.

On 27th June 2005, the Inquiry Officer Thilak Perera, who was apparently a party to the fraud, allowed unfounded objections with regard to the legality of the Court ruling and the continuation of the Customs inquiry by the accused company CDL. This was a minutely calculated ploy by the Inquiry Officer in connivance with the CDL, to suppress the inquiry proceedings. And again on 25th July 2005, Thilak Perera allowed another application made by the CDL to suspend the Customs inquiry for 6 weeks allowing them to file counter action before the Court of Appeal against the holding of the Customs inquiry. Accordingly the inquiry was postponed until 06th Sep 2005 and never saw the light thereafter. Then with the tacit approval of the Customs junta, the CDL initiated its own Court action before the Court of Appeal [CA/1413/2005] demanding a writ of prohibition from the continuation of the Customs inquiry.

The dubious Court action accommodates CDL

The DGC used this Court action by the CDL to justify his suspension of the Customs inquiry and also as an excuse for not carrying out his undertaking given to the Court of Appeal to resume the inquiry. However there was no interim order made against Customs by the Court of Appeal to suspend the Customs inquiry proceedings. Thus the Customs junta comprising of Sarath-Jazeel and Tilak Perera will never find an answer for ignoring the completion of the Customs inquiry since the year 2000.

Since the Dockyard Court of Appeal Case [CA/1413/2005] filed in 2005 the Customs inquiry had been putting under the carpet by the Customs junta citing the Court case as an excuse. However as referred to above there was no legal impediment whatsoever against holding of the Customs inquiry.

This was the moment the legal fraternity joined the relay and began defending the revenue fraudster. However there was no judicial precedence available for the Court of Appeal to accommodate the CDL’s request for writ of prohibition from the continuation of the Customs inquiry. In the circumstance the matter was deliberately dragged on for further period of 4 years, vividly demonstrating the link between the Customs junta, the AG, the lawyers appearing for the CDL and the members concerned in the Judiciary. Accordingly the deliberate silence on the part of the executive [DGC and AG] and the failure on the part of the Judges concerned in the case for 4 years, paved the way for the CDL to prolong the tax evasion and to use the public funds for unjust enrichment. This inordinate delay appeared as if all the conspirators had been waiting for a favourable ruling on which they could rely upon from a higher Court.

Dockyard ruling demands scrutiny of judiciary

On 20th March 2009, the conspirators were provided with the opportunity they had been waiting for by the Supreme Court in its controversial ruling given in the Toyota Lanka case [SC Appeal No: 49/2008]. In this case it was held that where the Customs duty is defrauded the same can be recovered under Section 18A of the Customs Ordinance without imposing any penalty. After finding the much awaited exit route for the CDL in the Supreme Court decision, the Court of Appeal swiftly within a month from the Supreme Court decision. The Court held on 27th April 2009 that the Customs duty and other levies defrauded by the Colombo Dockyard Ltd could be “recovered” under section 18A. Accordingly a writ of prohibition was issued against the Customs from continuing the revenue fraud inquiry against the CDL.

Court of Appeal flouts the law

The Court of Appeal failed to take any notice of the disparity of the facts between the Toyota Lanka case and the facts in the Colombo Dockyard case where the crux of the issue was about the evasion of payment of duties.

The case against Dockyard was about the willful evasion of Customs duties by the company whereas in the Toyota Lanka case it was about under payment of duties or misdescription of the goods. The Toyota Lanka ruling itself clearly distinguishes the difference between the evasion of duties with that of duties under-paid or unpaid on goods misdescribed and this simple and clear fact was totally ignored by the Court of Appeal.

Thus the Dockyardgate drama becomes a classic case that depicts the power and influence wielded by the admin-legal-business mafia that has the capability of maneuvering the whole ‘system’ to their advantage. Any prudent person who reads between the lines would sense a clear linkage in the time factor involved. It was as if the Court of Appeal had been waiting for over a period of 4 years for an impending, favourable judgment that could be manipulated for the advantage of the CDL from a higher Court to rely upon. The prompt application of the Toyota Lanka ruling within a month, to bring an end to a more than a decade old Dockyard case seals the conspiracy theory which had been in the air all along.

Clearly, the Court of Appeal ruling was liable to be challenged before the Supreme Court. Yet the DGC Sarath Jayathilake refused to do so and simply continued to ignore the gravity of the damage caused by the said ruling. He was least bothered about the encouragement given to the fraudster elements [including the CDL] by this ruling to defraud the government revenue with total impunity.

DGC deliberately fails but the investigators press-on

The Customs investigators refused to accept DGC’s dubious stand and were determined to challenge the Court of Appeal ruling. They warned the DGC of another Court action against his unbecoming conduct and abuse of office compelling him to originate a letter directing the AG to initiate action to challenge the Court of Appeal ruling.

Improper conduct of Mohan Peiris AG

The AG in a strange turn of event refused to challenge the Court of appeal ruling that favoured the CDL. Yet, the investigators pushed on further and were able to convince the Solicitor General Priyasad Dep to appeal against the Dockyard ruling. Accordingly, the Supreme Court [SC/SLA Application 100/2009] action was filed on 05th June 2009 challenging the Court of Appeal ruling.

The AG had point blankly refused to proceed with the Supreme Court action which had been initiated by the Solicitor General without his consent. He warned that the application for special leave would be withdrawn on the first day itself when it was first taken up before the Supreme Court. However, Mohan Peiris was prevented from doing so with progress of the aggressive media campaign against his alleged abuse of office.

The AG kept on postponing the matter under the pretext that he needed more time to reconsider whether to proceed with the application or to withdraw the same. Finally after a period of one year he informed the DGC, Sarath Jayathilake on 10th May 2010 that he would withdraw the case on the next date that fell on 30th August 2010 and directed the DGC to recover the duties from the CDL under Section 18A of the Customs Ordinance.

This action by the AG could be regarded as final act to terminate the Customs Inquiry and set free the accused CDL without any penal sanctions. DGC Sarath Jayathilake would have loved to comply with the AG’s advice and to finalize the case once and for all. However he was prevented from doing so as the Customs inquiry file had gone missing. Then he was removed from the office of the DGC and replaced by Mrs Sudharma Karunarathna from the Treasury.

Customs Junta misleads the New DGC

Continued actions by the remaining members of the Customs junta [Jazeel and Thilak] to close the case by complying with the AG’s directive were derailed for some unknown reasons. They acted surreptitiously without the knowledge of the new DGC and on 31st May 2010 directed the officers concerned to take action as per the AG’s advice. The Customs insiders believe that they had acted on the advice of the former DGC Jajathilake who had begun controlling his junta from outside as he had missed the opportunity to close the case before his sudden removal.

It is evident from the minute made on the AG’s letter by the OIC Legal affairs, addressed to the Deputy DGC ZAM Jazeel that the AG, at the meeting held at the AG’s office on 04-11-2009, had advised the Customs to proceed with the Customs inquiry since the Court of Appeal ruling favoring the Colombo Dockyard Ltd does not preclude the holding of the Customs inquiry. Connivance of the Junta member Jazeel in the Dockyard scandal is clearly evident to any watchful eye, from his own admission by his minute on the AG’s letter. He simply concedes that he had failed to take any action to resume the Customs inquiry for a 6-month period since AG’s advice given on 04-11-2009 and hence orders all officials down the line to close the case as per the AG’s irrational advice given to DGC on 10-05-2010.

The new DGC Sudharma Kaarunarathna took a firm stand on this issue and nullified the attempts of the Junta members to ahead with the AG’s advice. Her decision also cancelled the improper action taken by the junta men, whose conduct confirms their apparent collusion in the Dockyardgate. The new DGC’s letter sent to AG on 03- 08-2010 [see the image of the letter shown separately] demonstrates her stand that clearly goes against AG’s advice. Her stand is based on the consideration of the colossal revenue loss incurred by the government and also based on the sudden deviation of the AG’s own stand since his original opinion dated 04-11-2009. The new DGC clearly informed the AG that the withdrawal of the Supreme Court action at this stage is inappropriate.

ST [Dr PB Jayasundara] to the rescue of AG and the CDL

At a meeting held at the General Treasury on 16th Aug 2010 the ST directed the DGC Mrs Karunarathna to abide by the AG’s advice and to drop the Supreme Court action that was due on 30th Aug 2010. He simply directed the DGC to initiate action in terms of Sec. 18A of the Customs law to recover the duties defrauded by the CDL. The ST knew that his decision was just an eye wash as the said provision of law [Sec. 18A] allows the CDL to pay the colossal sum of money misappropriated in installment basis [Sec 18A (4) as they pleased. Even that will be only after a time consuming prosecution of CDL before the Magistrate’s Court. The questionable directive by the ST in this case was purely to protect the interests of the revenue fraudster and obviously against the public interests. Thus his conduct in this case warrants him to be subjected to judicial scrutiny once again. He had been a person who was guilty for abuse of office and removed from the pubic service with a heavy penalty of Rs 500,000.00. Probably, having fully considered the seriousness of his action the ST took necessary precautions, not to put his pen on paper.

In this backdrop the Customs Officers Trade Union on 23rd Aug 2010 urged the new DGC Mrs Karunarathna to turn down the ST’s directive, which was not in the best interest of the government. Further the Trade Union demanded that the ST’s irrational directive be in writing before any action is taken on the directive.

Vasudeva Nanayakkara, MP intervenes to protect the public interest

As the total weight of the admin-legal-business mafia headed by the AG, ST and the Customs junta was behind the CDL, the public interest was clearly under threat and the fate of the Supreme Court action was hanging in the balance. In the circumstances the only option available was to seek permission from the Court to intervene to protect the public interest. Hence the public interest litigation activist Vasudeva Nanayakkara, MP and Presidential Advisor, intervened and sought permission from the Supreme Court on 23rd Aug 2010 for the intervention, in the event the AG withdrew the SC action as already threatened by him.

The Apex Court Drama and AG’s double standard

What unfolded before the Supreme Court on 30-08-2010 marked one of the saddest days of this country, where peoples’ sovereignty was auctioned to a government revenue fraudster, the Colombo Dockyard Ltd [CDL], by the Judges of the Supreme Court who are under duty to ensure that the public interest is protected at any cost. The AG informed the Court that he was withdrawing the Court action, completely disregarding the directions by the new DGC Sudharma Karunarathna, his client. In a case of this magnitude public duty of the AG should have been to accommodate the reasonable request by the client [DGC] and to direct the CID to initiate a proper investigation to bring all culprits involved to book.

Under these circumstances it was worth scrutinizing the integrity of Mohan Peiris who had been a member of the private bar appeared against Customs to protect the interests of the government revenue fraudsters. Our undercover investigators have managed to discover an authentic affidavit that caries a prophetic testimonial by a highly respected senior administrator [WDL Perera, the DGC from 1999 to 2001]. In an affidavit by him as far back as February 2001 he had reported Mohan Peiris to the then CJ which carried the following remarks about Mohan Peries’s integrity.

“… The respect and regard usually received by an Attorney-at Law at an administrative inquiry is based on the professionalism attributed to Attorney-at-Law by the administrative tribunals. In my view the conduct of the said Attorney-at-Law [Mohan Peiris] amounts to professional dishonestly and professional misconduct. This would undoubtedly have a negative impact in recognizing legal representations at Customs inquiries…”

Apex Court fails

When the AG sought permission to withdraw the action, the judges of the Apex court, opted for the safer option. First they rejected the objections raised on behalf of Vasudeva Nanayakkara, MP, who sought intervention to protect the public interest. The case history was brought before the Court by the counsel for Vasudeva and it was submitted that the AG should have set the criminal law in motion against CDL for misappropriation of pubic funds instead of letting it goes free by withdrawing the court action. Yet, the Judges in the Supreme Court simply dismissed Vasudeva’s application, on the basis that the MP was not a party to the case and the AG’s application for the withdrawal of the Court action was allowed with no questions asked as to why the AG filed the action in the first place and reason for the change of the AG’s stand after one year. It is strange that in the official case record there is nothing mentioned either on the grounds placed before the court for the intervention or reasons for the refusal of application seeking intervention by Vasudewa Nanayakkara, MP. Ultimately the ruling by the bench that included the CJ narrowed down to four-word ruling ‘Decided, application is dismissed’.
The Dockyardgate was one of the most fitting cases where the Supreme Court itself should have intervened to protect the public interest, when the AG backed-down for the reasons best known to him. In this case, the abuses of office by three important heads of government departments [ST, AG and DGC] were widely exposed with hard evidence. The evidence unearthed, clearly pointed to the fact that they were committed to shut the case, where public funds of over 619 million had been misappropriated. And their unbecoming conduct had been with a scant respect to their duty to protect and defend the public interests. Thus the CDL case, in effect gave a golden opportunity to the judges to recognise its own right or the right of any individual to initiate action in the pubic interest. In this case the individual who exercised the right was not an average citizen but an MP representing the people, who sought intervention to protect the public interests which was obviously under threat.

It was sad that the judges failed in their duty to protect the public interest despite a determined media campaign in progress, demanding action to bring those responsible for misappropriating a colossal sum of public funds to book. No doubt that the judges were quite acquainted with their jurisprudence; that the pubic interest litigation [PIL] was nothing new but had been devised by the activism by judiciary itself to deal with this type of situations where there in no other remedy is available. It is not necessary that the person who is the victim of the violation of his or her right should personally approach the Court but the Court itself can initiate action or a case can be initiated by a petition of any public-spirited individual to the court. In India where this novel mechanism was originally devised the judges are truly committed to uphold the rule of law and to protect the public interests and ready to reach out to the people through this mechanism. However, in Sri Lanka, it look like that some members in the judiciary are utterly ignorant of their bounden public duty and thereby they have miserably failed as the highest the watchdog of the rule of law.

System lacks checks and balances

What we witness in the ‘Dockyardgate’ is truly inconceivable. The executive that is corrupt to the core had belittled the peoples’ supreme authority over it, whilst the judiciary on the other hand auctioned off the sovereignty of the people rights to the highest bidder, in this case to the CDL. In this backdrop the inaction of the opposition and the right thinking MPs in the government is shocking and disgusted. Herein the role played by Vasudeva Nanayakkara, the government MP is commendable and sets a shining example that should awake the other MPs to the ground realities in governance.

The whole purpose of the media hype generated so far was to build a strong public opinion and to alert the opposition and also the right thinking MPs in the government, who have a public duty to oversee all organs of the government upholds the rule of law. However, we have to be honest and admit that the media has its own limitations. And it is very sad that in the presence of utterly impotent and incompetent men elected to the legislature our genuine attempts to protect the pubic interest fall on deaf ears.

The ultimate victims of the floodgate of corruption of the scale of Dockyardgate scandal are not the high ranking public officials or the judges who enjoy comfy life, but the poor people of this country, as the public funds that are meant for public good are allowed to be robbed in broad day-light. What is witnessed in this case proves that in Sri Lanka the peoples’ supreme authority over all organs of the government [executive, legislature and judiciary] is openly undermined by the executive and the judiciary. It is sad that the Judiciary in Sri Lanka remains a silent spectator while the common man’s screams for justice fall on deaf ears.

In this backdrop, there is an overwhelming duty vested in the parties in the opposition and all the right thinking elected members in the ruling party to ensure transparency in dealings of all institutions; to make sure that no common man suffers by abuses of power. Where these fundamentals are lacking the role of the media would be handicapped and it would not be able to function effectively as the fourth pillar of the nation.

Lessons to be learnt by Apex Court

The mishandling of the ‘Dockyardgate’ case should surely open the eyes of the all concerned in the judiciary and the head of the state. The head of the state should realize that ultimately entire blame would come on him. The people of this country learned a costly lesson because of the passive approach applied by the judges in the Apex Court. In any ideal democracy the judiciary is expected to promote transparency, accountability and integrity in government, politics and the rule of law. People expect the judiciary to advocate high standards of ethics and morality in our nation's public life. At a time peoples’ sovereignty is threatened and ridiculed in public, the whole nation expect the judiciary to use it authority and to play an active role to ensure that nobody in the executive, legislature or judiciary abuse the power entrusted to them by the people, because ‘no one is above the law’.

The judges of Apex court enjoy a high a degree of freedom under the Constitution. They are immune from expulsion, except by order by the President that should be supported by majority of total number of members in the Parliament for their removal [Sec 107]. Therefore, like the great Indian Supreme Court Judge Baghawathi, who introduced the judicial activism more than two decades ago, the people of this country expect the Judges of the Supreme too, to use its authority and perform an active role protecting the public interest whenever undermined. The Court itself should take cognisance of matters which deserve investigation and inquiry or promote litigation by any public-spirited individual.

The Constitution of Sri Lanka provides that the government should eliminate economic and social privilege and disparity, and exploitation of man to man or by the government [sec 27 (7)]. If the judges in the apex court condone this sort of national crimes, who else would encourage, investigate and uncover the misconduct by government officials. It is the cardinal duty of the judiciary to make everybody aware that judiciary would not tolerate any abuses by adopting the judicial activism in all deserving cases to restore law and order ‘no one above the law’. Therefore to give effect to the ‘directive principles of state policy’ as provided by the Constitution, whenever the Court senses that the public interest is undermined, the Court should by its own motion initiate litigation or encourage litigation by a private citizen, as in the Dockyardgate the MP Vasudeva did, to hold to account those abuse any office because ‘no one is above the law’.

People of this country demands the judiciary to demand its authority to ensure high ethical standards are observed in all institutions which include the judiciary itself, through monitoring their activities and the use of the judicial mechanism to hold everybody to account because ‘no one is above the law’. Judges of the apex court should beware that they are under duty to educate the public with its own activism to check the abuses and misconduct of members in the legal profession, particularly at a time ethical, law abiding and moral civic culture is at its lowest level in the profession ‘because no one is above the law’.

The judiciary cannot alienate from its obligation to the nation that all organs of the government respect the sovereignty in people and respect the rule of law and protect the public interests at all times. In the case of CDL, the Supreme Court should have employed the judicial activism, empowering itself to deal with the corrupt government officials like DGC Sarath Jayathilake, AG Mohan Peiris and the ST Dr PB Jayasundara, setting up a deterrent against future would be offenders. The citizens expect the judiciary to play a positive role and not just a passive role like the one it performed in the Dockyard case where the public interest was undermined. Thus, people put the members of the judiciary in this country on notice with a firm demand for value for their money spent on the maintenance of the judiciary at an enormous cost to the tax payer.