IN THE MATTER OF AN ARBITRATION BETWEEN

Lanka National Bank Ltd.

481, T. B. Jayah Maatha,
Colombo 10 and having a Branch Office
At No. 88, Main Street,
Colombo 10.

Claimant

Vs.

1. Mr. Linus Udurawana, and

2. Mrs. Preethi Viswakula.

Carrying on business in Partnership under the

name, style and firm of
M/s Gold Entertainments of
708/B,
Independence Avenue,
Colombo 07.

Respondents

To

1
2
3

On this 5th day of November 2007

The Statement of Defence and the Counter Claim of the 1st Respondent is as follows:

1. The 1st Respondent denies all and singular the several statements as are contained in the
statement of claim of the Claimant save and except those of which are expressly admitted
to hereinafter.

2. The 1st Respondent admits the entering into of the Lease Agreement No. 2609/007/119
and morefully referred to in the Statement of Claim and annexed marked ‘C1’ thereto.
The 1st Respondent does not admit any amendment to the said Agreement, and
specifically denies that the Agreement was ever amended .

3. The 1st Respondent pleads that though the aforesaid Lease Agreemetn was entered into
by the Partners of Gold Entertainments, the said Partnership was converted to sole
proprietorship on or about 19th August 1999 where the 1st Respondent was made a sole
proprietor. The 1st Respondent had made several payments out of his Personal Funds
bother before and after the establishment of the Proprietorship.
 4. The 1st Respondent pleads that the 1 st Respondent has made approximately 33 payments
in respect of the Lease rentals falling due under the Lease Agreement the subject matter
of this Arbitration.

5. The 1st Respondent admits the receipt on or about the 12 th June 2001, of the purported
letter of termination dated 2nd June 2001.

6. The 1st Respondent however specifically states that the purported termination a is
contained in the aforesaid letter a copy of which has been marked ‘C3’ with the
Statement of Claim is wrongful and / or is illegal. In particular, the 1 st Respondent states
that there was no default in payment of rentals to justify the purported termination, and
further pleads that the preconditions for the termination of the lease did not exist.

7. In any event and without prejudice thereto, the 1 st Respondent pleads that the Claimant
has not acted on the basis that the Lease has been determined and

(a) in particular pleads that the Claimant has continued to accept monies from the 1 st
Respondent notwithstanding the aforesaid purported termination.

(b) In any event, the subsequent conduct of the Claimant negates the positions now
taken up by the claimant that the aforesaid Lease Agreement was terminated.

8. In inter alia the aforesaid circumstances the 1 st Respondent pleads that the Claimant is
estopped from taking up the position that the Lease Agreement has been terminated.

9. In any event and without prejudice thereto, the 1 st Respondent pleads that there has been
no termination in law or in fact of the Lease Agreement.

10. The 1st Respondent pleads that the subject matter of the Lease was totally destroyed by
fire which occurred on or about the 5 th July 2001 at Peradeniya and the agreement
thereby;

(a) become frustrated and / or

(b) stood terminated

11. In the circumstances, the 1 st Respondent pleads that eh Claimant is not entitled to claim
and the 1st Respondent is not obliged to pay the Claimant the monies claimed in the
Statement of Claim.

12. Subject to the aforesaid the 1 st Respondent denies paragraphs 2 to 10 of the Statement of
Claim.

For the 1st Respondent’s Claim in Reconvention

13. The 1st Respondent reiterates paragraphs 1 to 10 above.

14. The 1st Respondent specifically pleads that the aforesaid Lease Agreement was in force as
at the 5th July 2001.

15. The 1st Respondent pleads that under and in terms of the aforesaid Lease Agreement, the
Claimant was obliged in law to insure the property leased as was contemplated by
Article 14 of the Lease Agreement.

16. The 1st Respondent pleads that the Claimant failed to insure the property leased.

17. The 1st Respondent pleads that the property leased was destroyed by fire which occurred
on or about the 5th July 1999 at Peradeniya.

18. The 1st Respondent pleads that in the circumstances the Agreement was frustrated in
consequence of the said fire and although he was relieved of all obligations that arose
from the Lease Agreement, he is entitled to claim from the Claimant damages for the
loss suffered by him due to the failure of the Claimant to take out an Insurance Policy to
cover the leased property.

19. In inter alia the aforesaid circumstances the 1 st Respondent has suffered loss and damage
in a sum of Rs. 3,199,972.10 being the value of the leased property which would have
accrued to the 1st Respondent had the Claimant insured the leased property and / or the
insurance claim been properly pursued.

20. The Claimant has refused and / or neglected to pay the said sum to the 1 st Respondent
though thereto demanded.

21. A dispute has therefore arisen in that the Claimant has refused to pay the 1 st Respondent
the said sum of Rs. 3,199,972.10.

22. In the circumstance, the 1st Respondent is entitled to an award from the Tribunal for the
recovery of the said sum of Rs. 3,199,972.10 from the Claimant.

WHEREFORE the 1st Respondent prays that the Tribunal be pleased to-

(a) dismiss the claim made by the Claimant;

(b) make an award directing the Claimant to pay the 1 st Respondent a sum of Rs.
3,199,972.10 together with legal interest thereon from date hereof till the date of the
Award and thereafter on the aggregate amount of the Award till payment in full;
(c) for costs; and
(d) for such other and further relief as to this Court shall seem meet.

Attorney-at-Law for
the 1st Respondent