TROPICAL HERBS (PVT) LTD., AND TWO OTHERS
LINK NATURAL PRODUCTS (PVT) LTD(Case No. 02)
COURT OF APPEALUDALAGAMA. J.
C. COLOMBO 5859/SPLJUNE 25th, 2001
JULY 4th, 2001JULY 17™. 2001
Companies Act No. 17 oj 1982 – Board of Investment oj Sri Lanka LawNo. 4 oj 1978 – amended by No. 4 of 1992 S. 17(2). S. 27A – EnjoiningOrders Issued against Companies registered under Law No. 4 of 1978- Validity – Latent Jurisdiction – Rules of Natural Justice.
The Petitioner Company is a limited liability Company registered underthe Companies Act and is a Company registered in terms of the Board ofInvestment of Sri Lanka (BOI) Law. The Plaintiff Respondent obtained anenjoining order ex parte, as prayed for in the Petition.
On leave being sought, it was contended that, in view of S. 27A of the BOILaw as the Petitioner Company is a Company registered under the BOILaw, District Court was obliged to comply with the provisions of S. 27Aand give the Petitioner a hearing before making an enjoining order againstthe Petitioner.
The position of the Plaintiff Respondent was that, S. 27A only requires theissue of Notice on the party against whom an enjoining order is soughtand any violation, if any, affects only the latent jurisdiction of the Court.The latent lack of jurisdiction can be cured by the conduct, waiver, inactionor by the subsequent acquiescence of the parties.
(i) S. 27A clearly spells out this condition precedent which should havebeen complied with before an enjoining order is issued by Courtagainst a BOI registered Company, therefore before an enjoining orderis issued, the party against whom it is sought should be noticed andheard.
Per Nanayakkara, J.
"It is clear on a perusal of the relevant section that the incorporationof this statutory requirement by noticing and giving a hearing to acompany registered in terms of the BOI Law has been influenced byconsiderations of principles of natural justice, audi alteram partem.in the interest of Companies which have been established by making
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colossal investments, indisputably, it was to mitigate the risk ofinjustice and damage to a Company under BOI Law by the issuance ofenjoining orders, that special statutory provisions governing interimrelief by way of enjoining orders have been made.
APPLICATION by way of leave to appeal from the order of the District
Court of Colombo.
Cases referred to :
Tropical Herbs (pot) Ltd u. Link Natural Products (put) Ltd – 2001- 3 SALR 141 (Case No 01)
Perera u. Commissioner oj National Housing – 77 NLR 361
Fernando u. Roland – 75 NLR 23 1
Gamini Marapana, PC., with Navin Marapana for the Petitioners.
K. Kanag Iswaran, PC., with G. Alagaratnam. P. Jayawardena and
Buddhika Illangatilaka for the respondent.
Cur. ado. uult.
September 13, 2001.
The plaintiff – respondent (respondent) instituted actionagainst the defendants – petitioners seeking, inter alia, injunctiverelief and enjoining order as prayed for in the plaint. Of thedefendants – petitioners the lsl defendant – petitioner is a limitedliability Company incorporated under the Companies Act No.17 of 1982 and it is also a Company registered in terms of theBoard of Investment of Sri Lanka Law No. 4 of 1978.
After the institution of the action , the plaintiff -respondent,on an ex – parte application made to court, obtained an enjoiningorder against the defendants – petitioners as prayed for in theplaint.
Thereafter the defendants filed their statement of objections,by way of petition affidavit challenging the jurisdiction of theCourt to entertain, hear and determine the plaintiff -respondent's action and praying for the suspension of theenjoining order issued against them.
The learned District Judge who held an inquiry into theobjections taken by the defendants, delivered his order on30. 04. 2001 rejecting the objections of the defendants againstthe enjoining order.
Tropical Herbs (Put) Ltd., and two others v. Link NaturalProduct (Pvt) Ltd (Nanayakkara, J.)
Against that order the defendant sought relief in anotherapplicationby way of leave and this Court has alreadydetermined that matter in favour of the defendants – petitionersholding that the District Court has no jurisdiction, to entertain,hear and determining the action of the respondent.
After the learned District Judge rejected the objections inregard to the enjoining order. Counsel for the defendant onceagain on 08. 06. 2001 had made further oral submissions,basing his argument on the provisions of section 26A of theBoard of Investment of the Sri Lanka Law No. 4 of 1978 asamended by Act No. 49 of 1992.
The learned District Judge again on 15. 06. 2001 made anorder rejecting the submission and the application of thelearned Counsel for the defendants – petitioners for thesuspension of the enjoining order issued by him on 30.04. 2001.
It is against this order, that the Defendants – petitionershave now sought relief by way of leave to appeal in thisapplication.
Learned Counsel's main contention in this Court was thatin terms of the provisions of section 26A of the Board ofInvestment of Sri Lanka Law No. 4 of 1978 as amended by ActNo. 49 of 1992 an interim relief by way of an enjoining ordercould not have been validly issued on an ex-parte applicationof a party against a Company registered under the Board ofInvestment of Sri Lanka Law. Learned Counsel contended thatthe learned District Judge was obliged to comply with theprovisions of section 27A of the Board of Investment of Sri LankaLaw and issued notice on the petitioner and given him a hearingbefore making an enjoining order against the defendants -petitioners. Therefore the enjoining order issued against thedefendants – petitioners in disregard of the provisions of thissection has rendered it invalid, and it should have beensuspended when its invalidity was brought to the notice of Courtsubsequently.
Learned Counsel for the plaintiff – respondent respondingto the submission of Counsel for the defendants – petitioners
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argued that section 27A of the Act No. 47 of 1992 only requiresthe issue of notice on the party against whom an enjoining orderis sought and violation of the provision of the section, if at all.affects only the latent jurisdiction of the Court. The latent lackof jurisdiction can be cured by the conduct of the parties andthe petitioners are now estopped form agitating the questionof lack of jurisdiction by their subsequent acquiescence, waiverand inaction. Counsel also referred this court to the followingauthorities in support of this argument:
Perera v. Commissioner oj National Housing121 LilyFernando v. Roland131.
Therefore Counsel submitted that the learned DistrictJudge's order was not made per incuriam and the question ofapplicability of section 27A of the Board of Investment ofSri Lanka Law Act, does not arise in this matter.
At this stage it has become necessary to examine thequestion of validity and correctness of the impugned order madeby the learned District Judge. In this case, what is at issue isthe validity of the procedure adopted in issuing the enjoiningorder. To determine the question of validity of the order and thecorrectness of the procedure adopted, a careful examination ofsection 27A of the Board of Investment Law will be necessary.
The relevant section 27A of the Board of Investment LawNo. 4 of 1978 as amended by section 8 of the Act No. 49 of1992 reads thus: "No enjoining order may be issued undersection 664 of the Civil Procedure Code against a Board ofInvestment registered Company, except after notice to andhearing the Board of Investment Company. When this particularsection is carefully analyzed it becomes evident that thelegislature has clearly imposed a restraint on the court to issuean enjoining order against a company registered under theBoard of Investment Act unless certain procedural requirementsare met. This section clearly spells out the condition precedentwhich Should have been complied with before an enjoining orderis issued by court against a Board of Investment registeredCompany. The section clearly states that before an enjoining
Tropical Herbs (Pvt) Ltd., and two others v. Link NaturalProduct (Pvt) Ltd (Nanayakkara, J.)
order is issued, the party against whom it is sought should benoticed and heard.
Therefore it is incumbent and obligatory on the Court toissue notice to the registered Company against whom anenjoining order is sought and give it a fair hearing before anyorder by way of an interim relief is issued against it. When astatutory provision has imposed an obligation on the court toissue notice and vie a hearing to a Company registered in termsof section 17(2) of the Board of Investment Law it will requirethe court to follow the procedure prescribed by statute for thepurpose. If it has failed to act in compliance with the proceduralrequirements, it may inevitably render any order made incontravention of the procedure laid down by statute, void andliable to suspension and recession.
In this case, it is an admitted fact that an enjoining orderwas issued against the defendants – petitioners, on an ex – parteapplication made by the respondent. It is also an admitted factthat no notice and hearing was given to the defendants -petitioners. Therefore it is obvious that the Court has acted incontravention of the procedure laid down by the statutoryprovisions in issuing the enjoining order against which thedefendants – petitioners have now sought relief by this application.
Even if it is admitted that this is a matter which affects onlythe latent jurisdiction of the Court, and the defendant -petitioners have not taken any objection at the earliest possibleopportunity, as argued by Counsel for the respondent, it cannotbe said that the respondent was unaware of the fact that the 1stdefendant – petitioner Company is registered under the Boardof Investment Law, as some of the documents marked by therespondent himself clearly establish this fact. It was the duty ofthe respondent to produce all the relevant and material evidencewhich would have had a bearing on the decision of the learnedDistrict Judge whether to issue an enjoining order or not. Byhis failure to do so, the respondent can also be guilty of wilfulsuppression of material facts to court. In this case, thedefendants – petitioners had been denied the opportunity ofbeing heard before the enjoining order was issued. Perhaps,had the Court known that the petitioner was a Company
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registered in terms of the Board of Investment Law, it wouldhave influenced the judicial mind and the learned District Judgewould have come to a different conclusion. It is clear on a perusedof the relevant section, that the incorporation of this statutoryrequirement of noticing and giving a hearing to a Companyregistered in term&of the Board of Investment Law, has beeninfluenced by considerations of principles of natural justice, AudiAlteram Partem, in the interests of Companies which have beenestablished by making colossal investments.
Indisputably, it was to mitigate the risk of injustice anddamage to a Company registered under the Board of InvestmentLaw by the issuance of enjoining orders, that Special StatutoryProvisions governing interim reliefs by way of enjoining ordershave been made.
Therefore, I find myself unable to agree with the argumentadvanced by Counsel for the respondent and that in view of theabove mentioned reasons, I am of the opinion that the impugnedenjoining order had been issued in contravention of theprocedural requirements of the Law and it should not have beenissued without notice and hearing the defendant – petitioner.
As indicated earlier, this court has already made adetermination in regard to an earlier order (Supra) made bythe learned District Judge in this very case, holding that theDistrict Court lacks jurisdiction to entertain, hear and determinethe case. Therefore this Court now determines that the DistrictCourt not only lacks jurisdiction to entertain, hear anddetermine this case, the particular enjoining order against whichrelief has been sought, had been made in contravention of theprocedural requirements of the Board of Investment Law.Therefore the impugned order made on 15. 06. 2001 is herebyset aside.
The petitioner is entitled to taxed costs.
UDALAGAMA, J. – I agree.
TROPICAL HERBS (PVT) LTD., AND TWO OTHERS v. LINK NATURAL PRODUCTS (PVT) L