The stock market regulator has already been informed of the government's intention to revoke Friday's sale to an unidentified foreign buyer, which some believe could be a front for a local business.
"The Prime Minister acted at lightning speed no sooner he was informed of this illegal sale," Finance Minister Ravi Karunanayake told reporters on the side-lines of a dinner hosted by Foreign Minister Mangala Samaraweera at his official residence in Colombo.
"We can and we are going to reverse the transaction because it is illegal," the minister said.
"The Bank of Ceylon managers did not have authority to sell this stake. The (BOC) board had discussed, but not decided to sell this stake. Heads will roll."
Senior administration officials say two additional general managers of Bank of Ceylon had allegedly authorised the sale without the approval of the board of directors of the bank. The transaction was carried out while BOC's chairman was out of the country.
It is not clear what the threshold of transactions the management or investment committee is allowed to conduct without getting approval from the board. The bank is also known to have liquidated other investments in recent days.
However, the administration feels that any sale of a "strategic stake" requires specific permission.
In terms of the size, a 1.3 billion rupee sale is just 0.08 percent of the 1,678 billion rupee balance sheet of the Bank of Ceylon as of September 2016.
In the annual report, the 1.3 million block of Seylan voting shares is listed in the 'available for sale' portfolio.
"Four months ago, the government had an offer of 140 rupees for a share of Seylan, but it was turned down," another top ministerial source said on Sunday.
Friday's sale of 13 million shares of Seylan was done at 100 rupees, above the market rate of 85 rupees.
However authorities believe the value of the 7.5 percent block could be considerably higher for a strategic investor.
Asked if the decision to reverse the share transaction would have a negative impact on the already lacklustre stock exchange, the minister said it should not discourage genuine investors.
"In fact, our decision should boost the market because it shows we won't allow any hanky-panky."
However, if the buyer was a genuine foreign investor, the effects are less clear, market analysts say.