INDIAN OVERSEAS BANKv.
RAMADAS & OTHERS
COURT OF APPEALEDUSSURIYA. J.
DC COLOMBO 1794/MJANUARY 25th, 1999
Prescription Ordinance – Overdrafts – Does Prescription begin to run fromdate on which each sum is withdrawn or only after a demand forrepayment?
No agreement has been placed in evidence and there is no evidenceto the effect that the sums overdrawn became payable only on demand.
Claim in respect of the overdraft is time barred in as much as a periodof over 3 years had lapsed by the date of institution of action since lastpayment by the Defendant Respondent.
APPEAL from the Judgment of the District Court of Colombo.
Cases referred to :
Parrs Banking Company Ltd., v. Yates (1998) 2 QB 460
Wright v. New Zealand Farmers Co-operative Association ofCanterbury Ltd.. (1939) 2 All ER 701
Joachimson v. Swiss Bank Corporation (1921) All ER 921Prasanna Jayawardena for Plaintiff-Appellant.
Lalanath de Silva for Defendant Respondent.
Cur. adv. vult.
February 26, 1999.
EDUSSURIYA, J.The Plaintiff-Appellant instituted action to recover twosums of money aggregating to Rs. 591,789/24 with interest at23% per annum from 1st May 1986. The first of the said twosums being a loan of Rs. 100,000/- together with interest
Indian Overseas Bank u. Ramadas & Others (Edusswiya. J.)323
amounting to Rs. 155,279/44 cts. and the second beinga sumof Rs. 436,509/80 cts.
The learned Additional District Judge dismissed thePlaintiff-Appeliant’s action after trial and consequently thisappeal has been filed.
Counsel for the Defendant'Respondent conceded at thehearing of this appehl that the Plaintiff-Appellant is entitled toJudgment in the said sum of Rs. 155,274/44 cts. with interestas prayed for in the plaint. However it was the contention ofcounsel for the Defendant-Respondent that the Plaintiffcannot succeed in appeal in respect of the claim forRs. 436,509/80 cts. due on the overdraft facility as it isprescribed in as much as the last payment made by theDefendant-Respondent was in December 1983, over threeyears prior to the date of institution of action, and that theaccount has remained dormant since then.
Counsel for the Plaintiff-Appellant contended that thecause of action arose only on demand and that this actionhad been instituted within three years of the demand forre-payment of the sum due on the overdraft facility.
The Plaintiff-Appellant has not produced any documententered into between the Bank and the Defendant-Respondent at the time of the granting of the overdraft facility,which sets out that re-payment wall become due on demand.In fact the overdraft facility appears to have been madeavailable to the Defendant-Respondent on an oral agreement.
Counsel for the Defendant-Respondent relied on thestatement in the Judgment in Parrs Banking CompanyLimited u. Yates111 to the effect that prescription begins to runas against each sum overdrawn from the moment it isoverdrawn.
In that case the Bank sued a party who guaranteedre-payment of sums of money which were overdrawn by the
Sri Lanka Law Reports
12000) 3 Sri LR.
customer of the Bank, from time to time. By the date ofinstitution of the action no sum of money had been overdrawnfor over a period of six years and the Court treated the Statuteof Limitations as beginning to run in respect of each sumoverdrawn from the date it came into the account, althoughthe guarantee was a continuing one. Counsel for the Appellantreferred to Paget’s Law of Banking and submitted that thequestion had been asked therein whether Parrs BankingCompany Limitted v. Yates(Supra) was any longer good law.
Paget’s Law of Banking 9th Edition refers at page 521 to thedecision of the Privy Council in Wright u. New Zealand Farmers'Co-operative Association of Canterbury Linuted12' wherein itwas held that so long as there is a continuing guarantee, thenumber of years which have expired since any individual debtwas incurred is immaterial. Be that as it may, the questionbefore us presently is whether prescription begins to runfrom the date on which each sum is overdrawn or whetherprescription begins to run only after a demand for re-paymentis made by the Bank.
Our attention has been drawn to the decision in Joachimsonv. Swiss Bank Corporation131 which was a case where acustomer of a Bank sued the Bank for the recovery of moneystanding to the credit of the customer in a current account,and it was held that in the absence of a special agreement ademand by the customer is a necessary ingredient in the causeof action against the bank for money lent.
The decision in that case stressed that the relationshipbetween a banker and a customer is that of debtor and creditorand that the moment money was deposited in the Bank itbecame a debt due to the customer and that the questionwhether a demand by the customer is necessary before actionis instituted arises only in the unlikely case of a bankerpleading the Statute of Limitations or as in that case where thefacts were special. That decision held that a demand wasnecessary in the absence of a special agreement for a cause of
Indian Overseas Bank v. Ramadas & Others (Edussuriya, J.)
action to arise for the reason that although themoment moneyis deposited it becomes a debt due to the customer, if the Bankwere to seek the customer and repay the debt the bank wouldnot be in a position to honour the other implied obligationsthat arise such as meeting cheques drawn by the customer etc.
However the same cannot be extended to cover the case ofa customer who has overdrawn his account since there is noimplied obligation that a customer’s overdrawn cheques bemet by the banker in the absence of a special agreement. Ashereinbefore mentioned no such agreement has been placed inevidence and therefore there is no evidence to the effect thatthe sums overdrawn become payable only on demand.
Therefore I am of the view that the claim in respect of theoverdraft account is time barred in as much as a period of overthree (3) years had lapsed by the date of institution of actionsince the last payment by the Defendant-Respondent. TheJudgment of the learned District Judge is thus set asidepenalty and Judgment entered for the Plaintiff in a sum ofRs. 155,279/44 cts. with interest at 23% per annum from lslMay 1986 till payment in full. The Appeal is therefore partlyallowed with costs fixed at Rs. 5250/-.
JAYASINGHE, J. – I agree.
Appeal Partly Allowed.
INDIAN OVERSEAS BANK v. RAMADAS & OTHERS