By Ranga Sirilal
COLOMBO (Reuters) - Former Sri Lankan army chief Sarath Fonseka appeared before a military court on Tuesday on charges of engaging in politics while in uniform, officials said, as hundreds of his supporters protested near the capital.
The court martial held at the navy headquarters in Colombo was adjourned until next month after lawyers for the army commander challenged the legitimacy of the court and opposed the choice of the members of the military tribunal.
Fonseka, who lost a presidential election to incumbent Mahinda Rajapaksa earlier this year, was arrested last month following allegations that he was plotting a coup against the government.
The former army commander has denied the allegations and said these were political motivated and aimed at denying him the chance to run in parliamentary elections next month.
"The general said that he is neither pleading guilty or not guilty because the court has no power to hear and try these charges," Nalin Ladduwahetti, one of eight lawyers appearing on his behalf, said.
Hundreds of Fonseka supporters protested against what they said was his "illegal" arrest and court martial, blocking traffic on a street in Panadura, a town 27 km (17 mile) south of Colombo.
Police used tear gas to disperse the crowd and arrested 10 people, a spokesman said. The protest took place despite the Marxist Janatha Vimukthi Peremuna (JVP), an ally of the army general, calling off a planned protest. It gave no reason.
Prolonged street protests, strikes and labor unrest could have a ripple impact on Sri Lanka's $40 billion economy, which is forecast to grow more than 6 percent this year following the end of the 25-year war against Tamil Tiger separatists last year.
Protests after the arrest of Fonseka in February dragged down the island nation's share market but stocks have since recovered, even though foreign investors have been net sellers.
On Tuesday the share index fell 1.6 percent to hit a near two-week low due to profit taking after it hit a fresh record high on Monday.
Foreigners have sold a net of 7.1 billion rupees ($62.5 million) worth of shares up to Monday in 2010 and over 42 percent of the total net outflow in the bourse was recorded after the arrest of Fonseka, stock exchange data showed.
A decision by the International Monetary Fund to delay further disbursement of a $2.6 billion loan after Sri Lanka missed its 2009 budget deficit target has added to investors' concerns. The government is planning to seek a waiver from the IMF, the central bank said on Monday.
Fonseka's trial was adjourned until April 6 but he is due to appear again on Wednesday before another court martial investigating malpractices in military procurement.
The army commander and Rajapaksa worked together to end the war against the Tamil Tiger separatists last year but soon fell out.
Fonseka lost by an 18 percentage point margin to Rajapaksa in the January poll, after which he accused the president of rigging the vote.
(Editing by Sihar Aneez and Sanjeev Miglani)