Amerasekera v. Amarasinghe
COURT OF APPEALWIGNESWARAN, J„WEERASURIYA, J.
A. NO. 593/96
C. COLOMBO NO. 35246/NSNOVEMBER 4TH, 1997DECEMBER 01 ST, 1997
Civil Procedure Code – Cap Llll – S. 704(1)(2) – Unconditional leave to appealand Defend – Promissory Note – Was it duly Stamped – Stamp Duty Act No.43 of 1982 – S. 7, S. 7 (2), S. 7 (3) – Bills of Exchange Ordinance – S. 30(l)-genuiness of the defence.
The plaintiff-petitioner instituted action under Caption Llll of the Civil ProcedureCode to recover a sum of Rs. 3 million on a promissory note.
The defendant-respondent was granted unconditional leave to appear anddefend. In the revision application it was contended that court failed to –
Consider whether the defence is prima facie sustainable.
Consider whether the defence was bona fide.
It was manifest on an examination of S. 704 (2) that it requires the courtto consider the petition and- affidavit together with any document annexedand decide whether the defendant has disclosed a prima facie sustainabledefence. It further requires the court to consider that even if the defendantdisclosed a prima facie sustainable defence whether such defence isbonafide.
The averment in the affidavit of the defendant-respondent that thepromissory note in question was a false and fraudulent document doesnot only by itself furnish any material in the absence of other circumstancesto buttress that allegation.
The defendant – respondent had averred that no consideration passed,having regard to the absence oil a specific averment denying the signatureon the promissory note this denial of consideration has no meaningful effect.
Sri Lanka Law Reports
 3 Sri L ft.
Per Weerasuriya, J.
‘By making a general statement of fraud without specifying particulars or groundsof such fraud one cannot discharge the burden of satisfying court of a prima faciesustainable defence and presence of good faith*.
The promissory note should be stamped with stamps to the value ofRs. 1,500. However, any instrument bearing an adhesivee stamp whichhas not been cancelled in the manner set out in S. 7 (1) (2) is deemedto be unstamped to the extent of the value of that stamp.
APPLICATION in Revision from the order of the District Court of Colombo.
Cases referred to:
C. W. Mackie and Co., Ltd. v. Trans Lanka Investment Ltd. 1995 -2 SLR 6.
Anamalay v. Allien – 2 NLR 25.
Ramasamy Chetty v. Uduma Lebbe Marikar 5 NLR 310.
Rengaswamy v. Pakeer – 14 NLR 190.
Supramanian Chetty v. Krishnasamy Chetty 10 NLR 327.
De Silva v. De Silva 49 NLR 219 at 223.
Wallingford v. The Directors of the Mutual Society (1880) 5 AC 685.Romesh de Silva PC with Palitha Kumarasinghe for plaintiff-petitioner.
N. S. A. Goonatilleke PC with M. B. Peramuna for defendant-respondent.
Cur. adv. vult.
March 19, 1998.
The plaintiff-petitioner by plaint and supported by an affidavit dated
instituted action against the defendant-respondent in termsof chapter Llll of the Civil Procedure Code to recover a sum ofRs. 3 million on a promissory note marked 'X' together with interestthereon. The defendant-respondent by petition and affidavit dated
sought leave to appear and defend the action uncondi-tionally. The Additional District Judge by his order dated 21.08.1996granted defendant-respondent unconditional leave to appear and defend.It is from the aforesaid order that the present application for revisionhas been filed.
Amerasekera v. Amarasinghe (Weerasuriya, J.)
The case of the plaintiff-petitioner in this revision application hasbeen presented on the following grounds namely :
that the learned District Judge had failed to consider whetherthe defence is prima facie sustainable;
that the learned District Judge had failed to consider whetherthe defence is bona fide; and
that the learned District Judge had failed to adduce reasonsfor his order.
The defendant-respondent had sought unconditional leave to appearand defend the action basically on the ground that she had deniedthe execution of the said promissory note. However, learned counselfor defendant-respondent submitted that subsequent to the filing ofpetition and affidavit, he sought to challenge the promissory note onthe basis that it was not duly stamped in terms of the provisions ofStamp Duty Act, No. 43 of 1982 and that court is precluded fromaccepting such document. It must be observed that a copy of thepromissory note and the letter of demand had not been served onthe defendant-respondent along with the summons and on beingrequested by her, the plaintiff-petitioner had forwarded copies of suchdocuments as evidenced by letter dated 17.05.1996 (P5b). It transpiredthat the defendant-respondent had sought to tender written submis-sions on the question of proper stamping of the promissory note whichhowever was refused by the District Judge on being objected to bythe plaintiff-petitioner.
Section 7 of the Stamp Duty Act requires that the person executingan instrument which is chargeable with stamp duty shall cancel thestamps by writing his name across it. Section 7 (2) lays down thatwhere an instrument bears an adhesive stamp of the value ofRs. 50 or more such stamp should also be cancelled by cutting itwith a prick, punch, cutter or nipper. In terms of item No. 19 of theregulations published in the Gazette Extraordinary No. 224/3 of20.12.1982 made by the Hon. Minister of Finance and Planning byvirtue of powers vested in him by section 1 of the Stamp Duty Act,
Sri Lanka Law Reports
 3 Sri L R
the promissory note filed in this action should be stamped with stampsto the value of Rs. 1,500. Section 7 (3) of the Stamp Duty Act stipulatesthat where any instrument bearing an adhesive stamp which has notbeen cancelled in the manner set out in subsections (1) and (2) shallbe deemed to unstamped to the extent of the value of that stamp.
Learned counsel for the defendant-respondent contended that thepromissory note marked 'X', bears only one stamp to the value ofRs. 10 which had been cancelled. However, it would appear thatthe defendant-respondent had not disputed the fact that the promissorynote had been stamped with stamps to the value of Rs. 1,500. Thus,it is to be noted that what is in issue is not sufficiency of the valueof stamps affixed to the promissory note, but the question of non-cancellation of some stamps. It is to be observed that section 33 (1)of the Stamp Duty Act prohibits any instrument chargeable with stampduty not duly stamped from being received or admitted in evidence.However, it is significant to note that what section 7 (3) stipulatesis that any instrument bearing a stamp which has not been cancelledin the manner set out in subsections (1) and (2), shall be deemedto be unstamped only to the extent of the value of that stamp. Inthe circumstances, the contention of learned counsel for the defendant-respondent that the contents of the promissory note should be rejectedin toto is untenable.
Section 704 (1) of the Civil Procedure Code provides that –
"… the defendant shall not appear or defend the actionunless he obtains leave from the court . . .
Section 704 (2) provides that –
"The defendant shall not be required, as a condition of his beingallowed to appear and defend, to pay into court the sum mentionedin the summons or to give security therefor, unless the court thinkshis defence not to be prima facie sustainable or feels reasonabledoubt as to its good faith".
Amerasekera v. Amarasinghe (Weerasuriya, J.)
It is manifest on an examination of section 704 (2) that, it requiresthe court to consider the petition and affidavit together with anydocument annexed and decide whether the defendant has discloseda prima facie sustainable defence. However, this section further requiresthe court to consider that even if the defendant discloses a primafacie sustainable defence, whether such defence is bona fide. In otherwords, if court is doubtful of its genuineness, the defendant may berequired to furnish security before being permitted to appearand defend. Vide C. W. Mackie & Co., Ltd. v. Trans LankaInvestments Ltd.1’1.
In the case of Anamalay v. Allierf2) it was held that in an actionunder chapter Llll of the Civil Procedure Code, the court cannot orderthe defendant to bring the money into court as a condition of beingallowed to defend unless the defence set up is bad in law or thecourt has reasonable doubt as to its good faith.
In the case of Ramaswamy Chetty v. Uduma Lebbe Marika/<3> itwas held that where the defence set up by the defendant to an actionon a promissory note appears on the face of his affidavit to be goodin law and no reasonable doubt exists as to the bona tides of thedefence, it is the duty of the District Court to permit him to appearand defend without security.
In the case of Rengasamy v. Pakeeefr'1 it was held that wherethe defendant in an action by summary procedure on a liquid claim,has sworn to things which, if proved, will be a good defence, he shouldbe allowed to defend unconditionally, unless there is something onthe face of the proceedings which leads the court to doubt the bonatides of the defence.
Upon an examination of these authorities, it would be clear thateven if the defendant has made out a good defence unless thedefendant has not made out a bona fide defence, court would notpermit unconditional leave to appear and defend the action.
Thus, it would be seen that even if the defence is prima faciesustainable, court has to examine the further issue whetherreasonable grounds exist to doubt good faith in such a defence. Inthe case of Supramanian Chetty v. Krishnasamy Chetty<5) it wasobserved that the Court should consider whether the defendant's
Sri Lanka Law Reports
 3 Sri LR.
affidavit is satisfactory. It is noteworthy that, in that case the questionwas whether the defendant had paid Rs. 1,300 out of Rs. 2,000 owingon a formal acknowledgment and he swore that he had paid. However,his affidavit was not supported by receipts and accounts. In the caseof De Silva v. De Silver at 223 Howard, CJ, quoted with approvalthe observations of Lord Blackburn in the case of Wallingford v. TheDirectors of the Mutual Societym:
“Now I think what we have to see here is, what is it that theJudge is to be satisfied of, in order to induce him to refuse tomake the order for the plaintiff to sign judgment. . . He may fallfar short of satisfying a Judge that there is a defence upon themerits; still he may do so if he discloses such facts as may bedeemed sufficient to entitle him to defend. . . I think that whenthe affidavits are brought forward to raise that defence they must,if I may use the expression, condescend upon particulars. It is notenough to swear 7 say I owed the man nothing'. Doubtless, if itwas true that you owed the man nothing as you swear that wouldbe a good defence. But that is not enough. You must satisfy theJudge that there is reasonable ground for saying so. So again,if you swear that there was fraud, that will not do. It is difficultto define it, but you must give such an extent of definite factspointing to the fraud as to satisfy the Judge that those are factswhich make it reasonable that you should be allowed to raise thatdefence" . . .
The defendant-respondent in her affidavit seeking leave to appearand defend had averred that promissory note in question was a falseand fraudulent document made up for the purpose of this action andthat in any event no consideration whatsoever passed between herand the plaintiff-respondent.
It is highly relevant to observe that the defendant-respondentin her affidavit had not specifically denied the execution of thepromissory note. What she had averred in paragraph 4 of her affidavitwas that, she denied the averments "in paragraphs 2, 3, 5, 6, 7 &8 of the plaint and the corresponding paragraphs of the affidavit. Itwould be thus clear that apart from a general statement denying the
CAAmerasekera v. Amarasinghe (Weerasuriya, J.)259
several averments in the plaint, there was no specific averment todeny the execution of the promissory note. Further, while assertingthat the promissory note was a false and a fraudulent document, therewas no specific averment that her signature does not appear on theinstrument. The absence of a specific averment denying her signatureon the promissory note assumes great significance in view of theprovisions of section 30 (1) of the Bills of Exchange Ordinance whichprovides that –
"Every party whose signature appears on a Bill is prima faciedeemed to have become a party thereto for value".
Section 30 (1) of the Bills of Exchange Act of 1882 of the UnitedKingdom is identical to section 30 (1) of our Act, Byles on Bills ofExchange (26th edition chapter 19 page 243) while commenting onpresumptions as to consideration states as follows :
“If a man seeks to enforce simple contract he must, in pleading,aver that it was made on good consideration, and must substantiatethat allegation by proof. But to this rule, bills and notes are anexception. . . In the case of other simple contracts, the lawpresumes that there was no consideration till a considerationappears; in the case of contracts on bills or notes, aconsideration is presumed till the contrary appears or at leastappears probable. . . .
The defendant-respondent in paragraph 7 of the affidavit hadaverred that no consideration whatsoever passed between her andthe plaintiff-petitioner in any such transaction as pleaded in the plaint.Having regard to the absence of a specific averment denying thesignature on the promissory note, this denial of consideration hasno meaningful effect. This assertion by the defendant-respondent doesnot have the effect of rebutting the presumption as spelt out in section30 (1) of the Bills of Exchange Ordinance.
The averment in the affidavit of the defendant-respondent that thepromissory note in question was a false and a fraudulent documentdoes not by itself furnish any material, in the absence of other
Sri Lanka Law Reports
 3 Sri LR.
circumstances to buttress that allegation. By making a gneralstatement of fraud without specifying particulars or grounds of suchfraud, one cannot discharge the burden of satisfying court of aprima facie sustainable defence and presence of good faith. In thecase of De Silva v. De Silva (supra) it was held that in an actionwhere the defendant's affidavit indicates that his defence is not primafacie sustainable, he should be required to give security as a conditionof his being allowed to appear and defend.
It was observed in the case of C. W. Mackie & Co., Ltd. v. TransLanka Investments Ltd. (supra) that at the stage of considering theapplication of the defendant-respondent for leave to appear anddefend, court is not called upon to inquire into the merits of thecases of either party.
A careful examination of the defendant-respondent's affidavitreveals that reasonable doubts arise about the genuineness of thedefence disclosed with regard to the plaintiff's action. She had madea general statement of fraud but she had not 'condescended' uponany particulars of such fraud.
For these reasons, I set aside the order of the learned AdditionalDistrict Judge of Colombo dated 21. 08. 1996. The defendant-respond-ent is directed to deposit the full sum claimed in the plaint by theplaintiff-petitioner before she is permitted to appear and defend theaction.
WIGNESWARAN, J. – I agree.