IN THE HIGH COURT OF COLOMBO

Attorney General of Sri Lanka

(on behalf of the Criminal and Investigation

Division)

Prosecution

Vs

1. Mr Sunil Wickremasinghe

Factory owner of Beauty Garments Pvt Ltd,

No 23/5 , Sedawatta Road

Case no: HC (Crim)215/2019 Wellampitiya

2. Mr Jayasiri Manda

Accountant of Beauty Garments Pvt Ltd,

No 23/5, Sedawatta Road,

Wellampitiya
Accused

On this 20th day of October 2019

 WRITTEN SUBMISSIONS OF THE PROSECUTION

Nature of action

These written submissions are tendered on behalf of the Attorney General, hereinafter referred to as
the ‘Claimant'. The cause of action arose in the Respondent's garment factory in Wellampitiya and
thus the jurisdiction of the High Court of Colombo shall be invoked

Relevant Facts

The owner of a garment company, hereinafter referred to as ‘the first Respondent' had incorporated
a dummy company with the name of a sister company of a well-known insurer by shaping the mark
of the Chairman and the money controller of the said insurance company. The 1st Respondent along
with the accountant, hereinafter referred to as the ‘2nd Respondent' represented forged papers to a
German bank linked to the well-known insurer for purposes of transferring 700 million. On the
presentation of papers, the said bank deposited the money to the Respondent's local bank account.
The 1st Respondent sought the Exchange Controller's consent to withdraw the money by showing
proof of documents that he had paid. Before authorizing the release of funds, the Central Bank
officials had instructed the native bank to check the validity and/or authenticity of the papers
presented by the 1st Respondent for the withdrawal of funds to determine how the 1st Respondent
had been given funded such a considerable amount of money. Without looking at the documents
properly, the private bank released 400 million rupees to the 1st Respondent. The Central Bank
questioned the native bank about the release of funds. Thereafter, the native bank made inquiries
with the German Bank that sent the money and once the insurance company figured out their loss of
funds, they reported it to the CID.

Questions of Law

(a) Is the 1st Respondent and 2nd Respondent guilty of the offence of fraud (by forgery) and
offences under the Companies Act No.7 of 2007?
(b) Is the 1st Respondent guilty of money laundering?
(c) If the 1st Respondent and 2nd Respondent are guilty of fraud, is the corporate veil lifted to
make both the 1st Respondent and the 2nd Respondent liable?
Submissions

• Whether the 1st Respondent should be a party to the action?

1. The CID investigators had arrested the accountant, but the facts are silent as to whether the
1st Respondent has been arrested.
2. The 1st Respondent e had forged the signatures of Chairman and the Financial Controller of
a reputed insurance company and had assisted the accountant in forging the documents
that were presented to a to withdraw money.
3. It is further submitted that the factory owner that the accountant was an agent of the 1st
Respondent.
4. Under the principle of agency, an agent is a person who is authorized to do an act on behalf
of his principle. It is submitted that the 1st Respondent with the aid of the 2nd Respondent
had prepared a false set of documents. This clearly shows the fact that 2nd Respondent had
acted on behalf of the 1st Respondent. The 2nd Respondent had acted in the capacity of an
agent to the 1st Respondent.
5. It is therefore respectfully submitted that both 1st Respondent and the 2nd Respondent
should be made parties to the action. The actions of the 1st Respondent attract the offences
of fraud and money laundering.
6. It is respectfully submitted as offences under the money laundering Act are cognizable
offences and as such the 1st Respondent can be arrested by investigating officers but ought
to follow the procedure laid down in Section 36 of the Code of Criminal Procedure.

 Whether the action falls within the jurisdiction of the High Court?

7. Two specific offences have been committed by the 1st Respondent in cognizance with the
2nd Respondent. Namely, the offences of fraud and money laundering.
8. It is submitted under CCPA the offence of Fraud is under the Magistrate Court's jurisdiction
and the offence of money laundering is dealt with in the High Court.
9. Section 175 of the Criminal Procedure Code inter alia states that if the offences flow from
the same transaction both offences could be tried in the same court.
10. Therefore it is respectfully submitted that the dummy company with and the presentation
of false documents was to withdraw money from the private bank, the offences of money
 laundering and fraud flow from the same transaction fall within the jurisdiction of the High
Court.

 The constituent elements of a crime and the burden of proof

11. It is submitted that the offences of fraud and money laundering attract criminal liability, the
general elements of a crime namely the actus reus and the mens rea must be established.
The burden of proof on the said elements should be beyond a reasonable doubt.

Has the offence of fraud been committed?

12. A false representation of a matter of fact—whether by words or by conduct, by false or

misleading allegations, or by concealment of what should have been disclosed—that
deceives and is intended to deceive another so that the individual will act upon it to her or
his legal injury. Fraud is commonly understood as dishonesty calculated for advantage
13. The 1st Respondent had forged the signatures of the Chairman and the Financial Controller
of a reputed insurance company in Venezuela to falsely register themselves as the sister
company of the said insurance company. Upon registration, the 1st Respondent with the aid
of the accountant prepared false documents to induce a German Bank connected to the
insurance company to deposit money in the dummy company's private bank account.
14. It is respectfully submitted that the actions of 1st Respondent would a prima facie amount to
fraud as it was actions calculated for unjust enrichment. Fraud takes two forms. Namely the
offence of forgery under Section 452 of the Penal Code.

Fraud under the Penal Code- forgery

15. Section 23 of the Penal Code states that a person does something fraudulently if he has the
‘intent to defraud'. Thus Section 452 read with Section 23 of the Penal Code falls within the
parameters of fraud if the 1st Respondent makes a false document with the intent to
commit fraud.
16. It is submitted that reading Section 452, ‘to make a false document' and the ‘the intent to
commit fraud' has to be established. Making a false document is laid down in Section 453 as
‘a person who dishonestly signs or seals…'
17. It is further submitted in the case of Perera v Munaweera (1954) it was decided that the
accused can escape from criminal liability if he can prove that he had no guilty mind.
18. In Fernando 1945 30 C.L.W the accused was charged with attempting to obtain price-
controlled goods using forged documents. The price of Sanatogen was controlled under the
Ordinance which required that a dealer should sell a price-controlled article on tender of the
price. As Messers Cargills Ltd. Sold Sanatogen only on production of a doctor's prescription,
the accused attempted to obtain a bottle from them on production of a forged prescription.
The accused was guilty of a criminal attempt.
19. Further, in Ramachandran 1962 64 N.L.R at 512, the accused was charged with using as
genuine a forged Citizenship to obtain a passport.
20. It is submitted that the Respondent has forged the signature because the representative of
the Venezuelan insurance company reported it to the CID that the signature is forged.
Section 47 of the Evidence Ordinance reads that when the Court has to form an opinion as
to the persons by whom any document was signed, the opinion of any person acquainted
with the handwriting of the person by whom it is supposed to be signed that it was or was
not signed by that person is a relevant fact and would be admissible evidence.
21. It is submitted that there would not be any difficulty in establishing 47 of the Evidence
Ordinance as the representative is the Chief Executive Officer and therefore, he would have
close acquaintance with the Chairman and Financial Controller. It is therefore respectfully
submitted the signature in issue would be admissible evidence.
22. The investigating officers have produced the documents relating to the registration to the
EQD. The EQD report confirms the fact that the signature is forged, and this corroborates
the evidence of the above-mentioned representative.
23. It is further submitted that it would not be difficult to prove forgery as one forgery is to
corroborate the other. The 1st Respondent made forged the signatures for the registration
of a dummy company and based on the said registration of the dummy company he was
able to create further false documents to withdraw money in the said dummy company's
name.
24. It is further submitted that 1st Respondent has the intention to commit fraud as the purpose
of registering and /or impersonating a sister company of a reputed insurance company and
presenting false documents was to unjustly enrich himself with funds that belonged to the
insurance company.
25. It is further submitted that under Section 15 which states that in establishing the intention,
the fact that such act formed a series of similar occurrences is relevant. It is respectfully
 submitted that there were allegations that the factory owner had committed a similar fraud
previously. Thus, the intention of fraud is established.
26. Therefore, it is respectfully submitted the offence of fraud by forgery under Section 452 of
the Penal Code had been committed.
27. It is further submitted that as of 1st Respondent is liable for forgery under Section 452 of the
Penal Code. It is further submitted that action against both the 1st Respondent and 2nd
Respondent could be brought for conspiracy and the 2nd Respondent could also be liable for
forgery by having a common intention set out in Section 32 of the Penal Code.

Fraud under the Companies Act No.7 of 2007; falsification of documentation

28. Under Section 512 of the Companies Act, any person who falsifies documents with the intent
to defraud shall be guilty of the offence of falsification of records. This would not be difficult
to prove as there is clear evidence that the registration of the company was done with false
documents as set out in paragraphs 19 to 22 of these submissions) i.e forged signatures and
the 1st Respondent has falsely presented documents for the German Bank to deposit money
to the company's private account. To prove intent to defraud, paragraphs 23 to 24 of these
submissions shall be relevant.

Collective action against both the 1st Respondent and 2nd Respondent

29. Section 113A of the Penal Code deals with an offence of conspiracy. It is respectfully
submitted that the above-mentioned provision requires an agreement to commit an offence.
30. It is respectfully submitted that in Cooray 1950 51 N.L.R at page 433 the Court of Criminal
Appeal held that for the offence of conspiracy an agreement is essential.
31. Further in Podisingho 1951 53 NLR at page 49 the Court of Criminal Appeal held that in
handling conspiracy cases the trial judge must draw the attention of the jury to the
importance of the element of the agreement.
32. It is thus submitted that the provision requires two or more persons to agree to the
commission of an offence. The mere fact that the accused had facilitated the offence is not
enough for the offence of conspiracy. There must be a concursus animorum i.e agreement
by both the accused and the person committing the crime that the crime should be
committed. There is no express agreement between the 1st and 2nd Respondent to commit
 fraud. However, there is an agreement by implication. Both the 1st and 2nd Respondent
collectively agreed to perpetuate the fraud as both worked together to commit the offence
as the facts state that 1st Respondent with the help of the 2nd Respondent had falsely
created documents that were presented to the German Bank. Therefore the 2nd
Respondent has not merely facilitated the fraud but has agreed to perpetuate the fraud with
the 1st Respondent. Its therefore respectfully submitted that although there is no express
agreement between the 1st and 2nd Respondent, an agreement can be implied by the
conduct of the 1st and 2nd Respondent. Therefore, it is respectfully submitted that will both
the 1st and 2nd Respondent are liable under Section 113A of the Penal Code.

Actions against the 2nd Respondent

(a) Abetment
33. As the 2nd Respondent is guilty of conspiracy, he would be liable for abetting the offence of
forgery under Section 100 of the Penal code which states that a person abets an offence if
he engages in any conspiracy. Thus the 2nd Respondent shall be guilty of the offence of
forgery under Section 452 of the Penal Code.

(b) Common intention

34. It is further submitted to your Honors Court that the 2nd Respondent too would be liable by
way of Section 32 of the Penal Code. Section 32 of the Penal Code is produced verbatim.
35. It is submitted that interpreting the said section two requirements need to be established.
Namely (a) the contribution of each person in furtherance of the offence and (b) sharing the
same intention to commit the offence whereby a series of intentions should be combined in
a shared intention common to all. Although the intention is common, each person should
have guilty knowledge must be established against each person; Somapala (1956) 57 N.L. R
on page 350.
36. It is submitted that both the owner and assistance of the accountant had effectively worked
together to present false documents and induce the German Bank to deposit the money.
The actions of the 1st Respondent of faking the signatures of the Chairman and the Financial
Controller and the presentation of false documents with the aid of accountant had
contributed to the common purpose, which was to fraudulently withdraw funds from the
 Private Bank. Thus, both the 1st Respondent and the 2nd Respondent had a common
intention under Section 32 of the Penal Code to commit the offence of forgery.
37. Is the company liable for the actions of the 1st and 2nd Respondent or has the corporate veil
being lifted to make both the 1st and 2nd Respondent personally liable?
38. It is submitted that the 1st and 2nd Respondent are personally liable for their actions on the
following grounds:
(a) The 1st Respondent has acted contrary to the provisions of Section 5 of the Companies
Act No.7 of 2007 and thus it is submitted that the company has not been duly registered
(b) The 1st and 2nd Respondent has acted fraudulently and thus the veil of incorporation
has been lifted.

The company has not been duly registered

39. It is submitted that Section 5 of the Companies Act No. 7 of 2007 states that a company is
not incorporated if its incorporation is done by unethical and/or fraudulent means. As the
1st Respondent had incorporated a dummy company by forging the signatures of the
Chairman and Financial Controller, the incorporation was fraudulent and therefore the
company has not been duly incorporated. As there is no company to sue, the 1st and 2nd
Respondent would be personally liable.

Has the veil of incorporation has been lifted?

40. In the event, if your Honour is satisfied that the dummy company has been properly
constituted and/or incorporated in law, it would be a bar for the company to deviate from
liability as the company is a separate legal entity from its members.
41. According to Section 2(1) of the Sri Lankan Companies Act No 7 of 2007 ‘a company is a body
corporate' and a juristic person (Wijayawardana, 2014). It has its rights and privileges as it is
a distinct legal personality separate from its shareholder. Thus, it can sue or be sued by its
corporate name. The said contention is supported by several authoritative English cases.
42. In Salomon v Salomon a merchant named Salomon had incorporated his leather boot and
shoe repair business and transferred most of the shares of the company to himself and six
shares to his wife and his children as statutorily required. Mr Salomon lent the corporation
money and in return, the company issued debentures to Salomon. As Salomon had trading
difficulties, he transferred his debenture to a third party in exchange for a loan. Salomon
defaulted on the loan and the TP sought to enforce the debenture. The TP sought to sue
Salomon and as he was unable to enforce the debenture as the company had gone into
insolvency. The House of Lords held that the company was properly incorporated. The fact
 that the shareholders of the company was himself and his family members has no merit.
Lord Mc Naughton held that a company in law is distinct from its members even if the
business is carried out in the same way. The company is not an agent or a trustee of its
members.
43. It is submitted in Gramophone and Typewriter Ltd v Stanley it was held that the business of
the company was not the business of its members.
44. The principle of corporate personality is further applied in the case of Lee v Lee's Air Farming
Ltd in this case Mrs Lee claimed for social welfare compensation from the State for her
husband's death. Mr Lee had incorporated his crop spraying business and he acted in the
capacity of a director, shareholder and employee. It was held that Mr Lee and the company
had formed separate entities, and it was possible for Mr Lee to be employed by Lee's Air
Farming. The said contention was further affirmed in Macura v Northern Insurance
Company Ltd (1925).
45. It is submitted that the that although the business of the company is primarily conducted by
the 1st Respondent, the company is a separate legal from its owner. The 2nd Respondent
actions is an employee of the company and thus the company would be liable for his actions.
Thus based on both Salomon v Salomon and Lee v Lee's Air Farming the company could only
be made liable for the acts of the 1st and 2nd Respondent.
46. It is however submitted that there are several instances where the court has pierced the veil
of incorporation to make members of the company disguised by the veil to be personally
liable. As per the words of Staughton in Atlas Maritime Co SA v Avalon Maritime Ltd (N01)
[1991], 4 All ER769 lifting the veil of incorporation denotes the principle of equating the
rights and liabilities of the company to the rights or liabilities or activities of its shareholders.
47. It is further submitted that one such exception to a company being a separate legal entity is
the fraud exception.
48. In Jones v Lipman (1962) a vendor Mr Lipman agreed to sell his land to Mr Jones and
thereafter he changed his mind. To evade the obligation to sell Mr Lipman incorporated a
company and transferred the land to the said company. Court held that the company was a
fraud and the court granted an order of specific performance in favour of Jones.
49. The case of Gilford Motor Company LTD v Horne (1933) was a classic case where the
company's separate legal personality was exploited to perpetrate fraud. Here the Defendant
was bound to do a specific action but attempted to evade the said obligation. The court
lifted the corporate to hold the relevant persons liable.
 50. The law of Sri Lanka has taken a similar approach as seen in the case of In Hatton National
Bank Limited v Samathapala Jayawardena and two others S.C (CHC) Appeal 6/06 S.C where
C.N.Jayasinghe J held, with Shiranee Tilakawardana J and Saleem Marsoof J held that ;

‘since the principle of Salomon v Salomon and Co Ltd the courts have been careful in not using
the veil of incorporation to disguise some unlawful activity or improper use or as a tool to default
creditors as set out in cases of Merchandise Transport Ltd v British Transport Commission[1962]
2 QB 173 and Jones v Lipman [1962]1 WLR 832'.

51. The 1st Respondent and 2nd Respondent had perpetrated a fraud. The 1st Respondent had
created a ghost company to impersonate a sister company of a reputed insurance firm so
that it could unjustly enrich himself as set out in paragraphs 15 to 26 of these written
submissions.

Has the offence of Money Laundering been committed?

52. It is respectfully submitted that money laundering is how money derived from illegal sources
is portrayed to have been acquired through a legitimate source.
53. It is submitted that the process of money laundering is conventionally considered to occur in
three stages.Namely placement, layering and integration. Firstly, the illegal funds are
introduced into the legal system and secondly the illegal funds are disguised and thirdly the
funds are once again reintroduced into the system. However, these three staged definitions
are too simplistic and the first and second stage generally overlap in financial crimes and it is
not a requirement to prove that the illegal funds were introduced into the financial system.
It is sufficient to prove that illegal funds were disguised and introduced into a legitimate
institution.
54. It is respectfully submitted that the law of Sri Lanka has combated money laundering by
three enactments. Namely, the Prevention of Money Laundering Act No.5 of 2006, the
Financial Transaction Reporting Act No.6 of 2006 and the Convention on the Suppression of
Terrorist Financing Act No. 25 of 2005.
55. It is submitted that the most relevant statue for the actions of the 1st Respondent is the
Prevention of Money Laundering Act No.5 of 2006. The pre-requisites of the said act are (a)
the person who has allegedly committed the offence, (b) the institution used for the
commission of the offence and (c) the act which constitutes the offence must be in Sri Lanka.
56. The 1st Respondent owned a factory in Wellampitiya. Thus, he would be considered as being
a resident of Sri Lanka. The funds received fraudulently was deposited in a private bank in Sri
Lanka and the offence of forgery and false presentation of documents was done in Sri Lanka.
 It is therefore respectfully submitted that the 1st Respondent falls within the scope and/or
ambit of the Prevention of Money Laundering Act No.5 of 2006.
57. In interpreting the said act, the 1st Respondent would be guilty of money laundering if he
has committed an unlawful activity or used the proceeds of any unlawful activity to perform
any of the following acts:
(a) has engaged directly or indirectly in any transaction relating to the property
(b) receives, conceals, disposes of any property
(c) brings in or transfers property out of Sri Lanka
(d) invests in Sri Lanka
58. Its however submitted that to prove money laundering it must be further proved that
person knew or had reason to believe that such property was derived or realized, directly or
indirectly from any unlawful activity or from the proceeds of any unlawful activity.
59. It is thus submitted that the offence relates to ‘property' ‘Property' has been interpreted in
the Act has currency or asset of any kind whether movable, immovable, tangible or
intangible, whether situated in Sri Lanka or elsewhere. The definition covers a wide ambit
which includes legal, electric or digital documents. It is submitted that ‘the money'
deposited in the private bank would amount to tangible currency.
60. The most significant part of the offence is that proceeds must be derived or realized from
any ‘ unlawful activity', has been defined under Section 35 of the Money Laundering Act
which includes offences, acts or regulations under the Poisons, Opium and Dangerous Drugs
Ordinance, the Bribery Act or any other written law for the time being punishable by death
or with imprisonable for a term of 5 years or more, notwithstanding 386,388,399, 401 of the
Penal Code.
61. It is submitted that the 1st Respondent has committed an ‘unlawful activity' by committing
the offence of forgery which is an offence punishable for a term of five years. It is further
submitted that the 1st Respondent as he has committed an ‘unlawful activity' by committing
the offence of cheating by impersonation. The 1st Respondent had impersonated a sister
company of a reputed insurance company by forging the signatures of the said reputed
insurance company.
62. It is further submitted that 1st Respondent has brought in funds into Sri Lanka by making
false documents which induced a German Bank connected to an insurance company ( the
company of which the signatures of the Chairman and Financial Controller were forged) to
deposit money to 1st Respondent's bank which was in Sri Lanka. Thus, the elements laid
down in paragraph 31 of these submissions has been satisfied.
 63. It must be further established that the 1st Respondent knew or had reason to believe that
such property is derived from unlawful activity or proceeds from any unlawful activity. This
would not be difficult to prove as all the actions of the 1st Respondent from registering the
company to the presentation of false documents to the German Bank was to unjustly enrich
himself with proceeds that belonged to a reputed Insurance Company.
64. It is further submitted in a Russian case criminal washed $89.1 bn from the Shell Banks. They
were able to launder the money as the island of Naru did not have strong policies on money
laundering and allowed its banks to function without validating the identities of its clients or
questioning how the money which was deposited came from.
65. It is submitted that although there are strong legal mechanisms to combat fraud such as the
Financial Transaction Reporting Act No.6. 2006 which requires the duty to act with due
diligence, the private bank verified the documents without proper inspection (even though
the central bank had reported its suspicions on the documents). This further enabled the 1st
Respondent to commit the offence of money laundering.
66. It is therefore respectfully that the 1st Respondent has committed the offence of money
laundering under the Prevention of Money Laundering Act No.5 of 2006.

Conclusion

67. In light of the aforesaid, it is respectfully submitted that;

(a) The 1st Respondent is guilty of money laundering under the Prevention of Money Laundering
Act No. 5 of 2006

(b) The 1st and 2nd Respondent are guilty of fraud by forgery under Section 452 of the Penal Code

(c)If so, the veil of incorporation shall be lifted and the 1st and 2nd Respondent shall be personally
liable for the offence of fraud by forgery