COURT OF APPEAL.JAYASINGHE, J..JAYAWICKREMA, J.
D.C. COLOMBO NO. 4548/SPL.30™ NOVEMBER. 1999.
19™ JANUARY. 2000.
Declaration that Mortgage Bond is null and void – Interim Injunctionrestraining Bank from selling/alienating land in Mortgage Bond -Resolution passed by Bank – Null and void? – Peoples Bank Act, No. 29 of1961 amended by Act. No. 32 of1986 – S 29D – Can the borrower invalidatethe Resolution – Injunction – Prima facie case – Notaries Ordinance S.31 (18)
– S.33 – Wrong date of Execution – S.2 Prevention oj Frauds Ordinance.
The Plainti/T Respondent sought a declaration that the Mortgage Bond2885 is null and void and/or has been fraudulently executed by theDefendant Petitioner (Bank) and that the Resolution passed by the Bankto parate execute' the property is null and void.
The Plaintiff Respondent contended that he did not sign the MortgageBond, and it was never executed on 26. 01. 93.
The Defendant Petitioner’s contention is that the Respondent has soughtto take advantage of a mistake made by the Notary in settingout the dateon the original Mortgage Bond to be 26. 01. 1993. whereas the correctdate of execution which is set out in the duplicate is 26. 01. 1994. TheDistrict Court issued an interim injunction restraining the Bank fromselling/alienating the land in question.
In view of the admissions, the Plaintiff Respondent is estopped fromdenying the fact that the property described in Deed 10384 (TiLle Deed)was tendered as security. The Plain tiff Respondent has not come to courtwith clean hands.
The Defendant Petitioner has produced the Duplicate of the Bondfrom the Land Registry which gives the correct date of the execution as26. 01. 1994.
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The mere fact that the Notary has inserted a false/wrong date of itsexecution does not render a Deed void – Provided that the Deed has beenexecuted according to S.2 Prevention of Frauds Ordinance.
The provisions in S.29(D) are of similar import ns "shall not be calledin question in any Court". The Resolution passed by the Bank cannot beinvalidated or challenged in an action in the District Court. The sale ofthe mortgaged property by public auction upon the said Resolutioncannot be restrained by an interim injunction.
The Plaintiff Respondent has failed lo establish a'prima facie case."The Plaintiff Respondent has taken advantage of a mere mistake of thedate of the execution set out in Lhe original Bond to fabricate a case tothe extent of even challenging Lhe Mortgage Bond itself.
APPLICATION for Leave to Appeal from the Order of Lhe District Courtof Colombo.
Cases referred to :
Thiyagarasa us Arunodayam [ 19871 2 Sri.L.R. 184 at 188
C.A. LA 74197 with CA (Rev) 433/97 D.C. Colombo 4707 Spl.
Felix Dias Bandaranayake us State Film Corporation (19811 2 Sti.L. R.281 at 312
American Cynanamid Company us Ethicon Ltd., (1975) 1 SLL ER504 at 510 '
Ceylon Hotel Corporation vs Jayatunga 74 NLR 443
Amerasekara vs Mitsui Co. 11993] 1 Sri.L.R. 22
Rajan and 2 others vs Sellasamy [ 1994] 2 Sri.L.R. 377
Walkers Sons & Co. Ltd., vs Wijesena [ 1997] 1 Sri.L.R. 293
Hotel Galaxy vs Mercantile Hotel Ltd., [ 1987] 1 Sri.L.R. 6
P.A.D. Samaresekera P.C. for Defendant Petitioner.
Hemasiri Withanachchi with Vijith-Singh for Plaintiff Respondent.
Cur. adv. vult.
Februaiy 07, 2000JAYAWICKREMA, J.,
This is an application to revise Lhe order of the learnedDistrict Judge of Colombo dated 10. 01. 1997 (marked X-8)wherein she had issued an interim injunction restraining the
Peoples Bank v. Hewawasam (Jayawickrema, J.)
Defendant Bank from selling and/or alienating the landdescribed in the schedule to the plaint upon the purportedMortgage Bond No. 2885, except with a due order obtainedfrom the Court.
The Plaintiff-Respondent instituted action against theDefendant-Petitioner seeking inter alia, a declaration that theMortgage Bond No. 2885 is null and void and/or has beenfraudulently executed by the Defendant-Petitioner, for adeclaration that the resolution marked ‘E' of the Board ofDirectors of the Defendant-Petitioner is null and void in law,and for an enjoining order/interim injunction restraining theDefendant Bank from selling and/or alienating the landdescribed in the schedule to the plaint upon the purportedMortgage Bond No. 2885.
The Plaintiff-Respondent is the owner of the land andpremises described in the schedule to the plaint in terms of thedeed No. 10385 (marked A). He had discussions with theDefendant Bank as a Director of Juelstox International (Pvt.)Company Limited and the Defendant Bank agreed to grant acredit facility of Rs. 13,000,000/=. In order for the saidCompany to obtain the said credit facility the Plaintiff-Respondent provided information and also gave a copy of thesaid Deed No. 10384 as security to the Defendant Bank.
The Plaintiff-Respondent alleged that the Defendant-Petitioner obtained his signature on several documents toprocess the overdraft facility and thereafter, the Defendant-Petitioner granted to the Plaintiff-Respondent an overdraftfacility of Rs. 1,000,000/=.
The Defendant-Petitioner by letter dated 07. 1 1. 1995(marked – D) informed the Plaintiff-Respondent that theDefendant has resolved to sell by public auction the landdescribed in the schedule to the plaint upon a purportedMortgage Bond No. 2885 dated 20. 01. 1993 attested byJayanthi Medawatte, N.P.
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The Plaintiff-Respondent averred in his plaint that thesaid Bond No. 2885 has been fraudulently executed by theDefendant-Petitioner and that the Plaintiff-Respondent didnot sign the said Mortgage Bond in the presence of the saidNotary Public.
The basis for the above averment is that the year ofattestation in the deed appears as 1993 where as it shouldhave been 1994.
The learned Counsel for the Plaintiff-Respondent arguedthat the Mortgage Bond No. 2885 was never executed on26. 01. 1993 and therefore is a fraudulent deed.
Counsel for the Defendant-Petitioner submitted thatthe Plaintiff-Respondent has sought to take advantage of amistake made by the Notary in setting out the date in theOriginal Mortgage Bond (marked D-7) to be 26. 01. 1993where as the correct date of execution of the Bond, which is setout in the duplicate (marked D-8) is 26. 01. 1994. Hecontended that the only typographical mistake in the OriginalBond (D-7) is that the year of execution, 1994 has been typedas 1993. He further submitted that it so happened that in themonth of January, by mistake one continues to insert the oldyear instead of the newyear and that the Plaintiff-Respondentwho executed the Mortgage Bond No. 2885, latching on to thesaid mistake, has dishonestly made use of the said mistake tofabricate the case against the Defendant-Petitioner to theextent that he never executed the said Mortgage Bond. Thelearned Counsel for the Defendant-Petitioner submitted thateven if the Plaintiff-Respondent’s case is taken at its highest itdoes not reveal a primafacie case and the present action hasbeen instituted with the sole object of delaying the recoveryof the monies lawfully due and owing to the Defendant-Petitioner.
The Plaintiff-Respondent states in his plaint that he neveroffered the land described in the Mortgage Bond as security.
Peoples Bank u. Hewawasam (Jayawickrema, J.)
But, it is to be noted that in his ‘Customers Application ForCredit Facilities’ dated 08. 10. 1993 which is marked as D-5in para 14, he has offered as security 17.7 perches land withupstair house at No. 1 A/1111, New Parliament Road, SriJ ayawardanapura.
Further the document (marked C) dated 04. 10.1993 sentby the Defendant-Petitioner to the District Manager of thesame Bank with a copy to the Plaintiff-Respondent clearlystates that deed No. 10384 and plan No. 5531 has been offeredas security and therefore to inquire into the matter and report.Further the plaintiff-Respondent in para 7 of his plaint admitsthat on this application a sum of Rs. 13,000,000/= wasgranted as a loan by the Defendant-Petitioner and in para 8 headmits that he tendered the deed No. 10384 as security. Therelevant admissions of the Plaintiff-Respondent in his plaintdated 22. 02. 1996 (XI) are as follows:
Para 7 :
Para 8 :
When one considers the above admissions by the Plaintiff-Respondent in his plaint, it appears that if there was any
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fraudulent act it was on his part by denying that lie obtainedthe loan on tendering Deed No. 10384 as security. The landand premises described in deed No. 10384 is the same as in theMortgage Bond No. 2885. In view of the above admissions, thePlaintiff-Respondent is estopped from denying the fact thatthe property described in deed No. 10384 was tendered assecurity, which is the same as the property described in theMortgage Bond No. 2885. It is a basic principle of equity thata person who comes before Court should come withclean hands. In the instant case the Plaintiff-Respondenthimself after tendering the property in Deed No. 10384 assecurity, now challenges that the Defendant-Petitioner hasfraudulently obtained his signature to certain documents.The learned Counsel for the Plaintiff-Respondent, in para 3.2of his written submissions accepted the position that thesubject matter of this case is the property described inMortgage Bond No. 2885. He submitted that the Plaintiff-Respondent did not execute that Mortgage Bond. Thisargument is untenable, in view of the admissions made by thePlaintiff-Respondent himself in his plaint.
When one considers the above facts it is clear that thePlaintiff-Respondent is attempting to take advantage of thetypographical error in the year of execution. It is to be notedthat even the Plaintiff-Respondent himself had made such anerror in para 13 of his plaint, when he states that the date inMortgage Bond No. 2885 as 20. 01. 1993. In actual fact,according to the Plaintiff-Respondent's position it should be26. 01. 1993. Thus the Plaintiff-Respondent himself has madea typographical error in giving the date of the deed. In any casethe title extract marked as D-6 issued by the Registrar of Landsclearly states that the nu mber and the date of the Deed as 2885dated 26. 01. 1994 and not as 1993.
Although the Original Bond marked D-3 bears the date26. 01. 1993, the duplicate of the said bond marked D-8 bearsthe correct date i.e. 26. 01. 1994. Further in a letter sent bythe Plaintiff-Respondent to the Defendanl-Petitioner Bank
Peoples Bank u. Hewawasam (Jayawickrema, J.)
marked D- 14(a), the Plaintiff-Petitioner agreed to pay the loanofRs. 1,000,000/= in instalments. That letter also refers to theresolution marked E which sets out that the Defendant-Petitioner Bank would sell by public auction the propertyMortgaged by Bond No. 2885 to recover the monies due to theBank. The Defendant-Petitioner has produced the duplicateof the said Bond No. 2885 from the Land Registry whichgives the correct date of the execution as 26. 01. 1994. Theletter marked G which has been produced by the Plaintiff-Respondent has been issued by the Land Registiy, on anapplication made by the Plaintiff-Respondent to obtain a copyof a deed No. 2885 executed on 26. 01.1993 and not of a deedexecuted on 26. 01.1994. On that application, the Registrarhas informed the Plaintiff-Respondent that a deed No. 2885executed on 26. 01.1993 has not been received at the Registiy.If the Plaintiff-Respondent applied for a copy of a deedexecuted on 26. 01. 1994, most probably, the Land Registiywould have sent a copy of deed No. 2885 to the Plaintiff-Respondent as according to D-6, the certified extracts of thefolio, this bond has been executed on 26. 01. 1994. Furtherin the original bond the embossed Company seal of JuelstoxInternational (Pvt.) Limited which is in the possession of thePlaintiff-Respondent has been placed at the place where thePlain tiff-Respondent has signed the bond.
According to the provisions of the Notaries Ordinance aninstrument will not be invalidated due to an error in the dateof attestation. Section 31(18) of the Notaries Ordinance isas follows:
"He (Notary) shall correctly insert in letters in eveiy deedor instrument executed before him the day, month, and yearon which and the place where the same is executed and shallsign the same."
The above provision is subject to Section 33 of the saidOrdinance which is as follows:
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“No instrument shall be deemed to be invalid by reasononly of the failure of any notary to observe any provisionof any rule set out in section 31 in respect of any matterof form:. .
It was held in Thiyagarasa. Vs. Arunodayamm at 188that:
“the mere fact that the notary has inserted a fa lse or wrongdate of its execution does not render the deed void.", providedthat the deed has been executed according to Section 2 of thePrevention of Frauds Ordinance.
Further it is to be noted that provision in Section 31 (20) (b)of the Notaries Ordinance with regal'd to the notaries duty tostate whether she knows the Plaintiff-Respondent or theattesting witnesses, does not affect the validity of the Bond, inview of the provisions contained in Section 32 of the saidOrdinance.
Further according to the provisions contained in Section29 D of the People's Bank Act No. 29 of 1961 as amendedby Act No. 32 of 1986, a borrower is not competent tomake an application to Court to move to invalidate aresolution to sell by public auction any immovableproperty mortgaged to the Bank.
Section 29 D is follows:
‘The Board may by a resolution . . . authorise any personto sell by public auction any immovable property mortgaged tothe Bank as security for any loan in respect of which defaulthas been made in order to recover the whole of the unpaidportion of such loan, and the interest due thereon i . . andthereafter it shall not be competent for the borrower in anyCourt to move to invalidate the said resolution for anycause whatsoever and no Court shall entertain any suchapplication.”
Peoples Bank v. Hewawasam (Jayawickrema, J.j
It was held by Ekiussuriya, J. in C.A. L.A. No. 74/97withC.A. Application (Rev.) No. 433/97 – D.C. Colombo CaseNo. 4707/Splm. that:
“Section 29(D) sets out that it shall not be competent forthe borrower to move any Court to invalidate such a resolutionfor any cause whatsoever, and no Court shall entertain suchan application …
If this Court were to fall into the error of drawing adistinction between the words invalidate and null and void inthe construction of Section 29(D), this Court would be, in myview seeking to act in contravention of the intention of thelegislature and bring to naught the intention of the legislaturein granting parate execution rights to the Bank …"
The above expression in Section 29(D) is of similar importas “shall not be called in question in any Court”, containedin Section 22 of the Interpretation Ordinance. Hence, we agreewith the submissions made by the learned President's Counselon behalf of the Defendant-Petitioner that the said resolution(marked E) passed by the Board of Directors of the People’sBank, cannot be invalidated or challenged in an action in theDistrict Court. Therefore, in these circumstances, the sale ofthe mortgaged property by public auction upon the saidresolution marked E cannot be restrained by an interiminjunction. The Plaintiff-Respondent has failed to establisha prima facie case. The Plaintiff-Respondent has takenadvantage of a mere mistake of the date of the execution set outin the Original Bond to fabricate a case to the extent of evenchallenging the mortgage bond itself. It was held in Felix DiasBandaranayake Vs. The State Film Corporation131 at 302that:
"In Sri Lanka we start off with a prima-Jacie case. That is,the applicant for an interim injunction must show that thereis a serious matter in relation to his legal rights, to be tried atthe hearing and that he has a good chance of winning. It is notnecessary that the Plaintiff should be certain to win. It is
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sufficient if the probabilities are he will win. Where howeverthe Plaintiff has established a strong prima facie case that hehas title the legal right claimed by him but only an arguablecase that the Defendant has infringed it or is about to infringeit, the injunction should not be granted."
Unless the material available to the Court at the hearingof the application for an interlocutory injunction fails todisclose that the Plaintiff has any real prospect of succeedingin his action, the Court should not go on to considerthe balance of convenience of the parties. (Vide AmericanCyanamid Company Vs. Elhicon Ltd.141 at 510). The question tobe decided in an interlocutory injunction is, will the harm theDefendant-Petitioner will suffer, if the injunction is granted begreater than the harm which the Plaintiff will suffer if it isrefused? In deciding the equities the conduct and dealings ofparties before the application is taken into account. Thequestion of waiver and acquiecence by the Plaintiff of theDefendant’s conduct and unexplainable delay on the part ofthe Plaintiff in making the application are considered (VideCeylon Hotels Corporation Vs. JayatungeIC’1).
In order to entitle the Plaintiff to an interlocutoryinjunction, though the Court is not called upon to decidefinally on the right of parties, it is necessary that the Courtshould be satisfied that there is a serious question to be triedat the hearing and that on the facts before it, there is aprobability that the Plaintiffs are entitled to relief.
The parties seeking an enjoining order or interiminjunction should have a good chance of winning the case orthere must be a primafacie case tosucceed (V ide AmarasekeraVs. Mitsui Company Limitedl6)). If the prima facie case hasbeen made the Court must consider where the balance ofconvenience lies. (Vide Rcyan and 2 others Vs. SellasaJny,7,).
A party applying for an enjoining order or interiminjunction enters into an contract with the Court that he will
Peoples Bank v. Hewawasam (Jayawickrema. J.)
speak the truth. The party must act with Uberrima Fide (VideWalkers Sons & Company Limited Vs. Wijesena!S!).
It is settled law that if a party has breached the principleof Uberrima Fide and obtained an enjoining order, the saidenjoining order will be dissolved without the Court looking intothe merits of the case. (Vide Hotel Galaxy Vs. Mercantile HotelLimited191). Hence in view of the above reasons, we set aside theorder of the learned District Judge dated 10.01. 1997(markedX-8). The application for revision is allowed with costs fixed atRs. 10,000/= payable by the Plaintiff-Respondent to theDefendant-Petitioner.
JAYASEVGHE, J. I agree.