"All agreements with Avant Garde are to be cancelled. The Navy will takeover the operations," Cabinet spokesman and Minister Rajitha Senaratne said.
The President took the decision at a special meeting today, he added.
Sirisena's decision came after this week's resignation of Law and Order and Prisons Reform Minister Tilak Marapana Marapana who was under pressure to resign over the controversy involving him.
Avant Garde was allowed to run the floating armory under the previous regime of Mahinda Rajapaksa.
The company was accused of running an illegal arms operation.
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