Sri Lanka Law Reports
 3 Sri LR
CAR MART LTD. AND ANOTHERvPAN ASIA BANK LTDCOURT OF APPEALAMARATUNGA, J. ANDWIMALACHANDRA, J.
D.C. COLOMBO 1003/DR.
Debt Recovery Act, No 2 of 1990, section 22 – Amended by Act, No. 9 of1994, section 6 (3) – Decree nisi – Could the recoverable amount includepenal interest? – If it is included does it affect the jurisdiction of the court? -Limitation on jurisdiction?
The decree nisi entered included penal interest. It was contended before thetrial judge that in view of section 22, no sum of money which constitutes apenalty for default is recoverable in an action instituted for recovery of a debtin terms of the procedure laid down in the Act and therefore there is no validplaint before court. The trial court rejected this position.
The proviso to section 6 (3) empowers the court to vary the decree nisi atthe end of the action. If the defendant at the end of the case satisfiescourt that a sum of money is not legally due from him or a sum is notlegally recoverable from him, the court has the power to makeadjustments to the decree nisi before making it absolute.
APPLICATION for leave to appeal from an order of the District Court ofColombo.
Kushan de Alwis for petitioner.
S. F. A. Cooray with C. Silva for respondent Bank.
Car Mart Ltd. and Another v Pan Asia Bank Ltd
December 10, 2004.
AMARATUNGA, J.This is an application for leave to appeal against the order of the 01learned Additional District Judge of Colombo directing thedefendant-petitioners to deposit a sum of Rupees 6,100,000/- inorder to grant leave to appear and defend the action filed by theplaintiff Bank, (the Bank) under the Debt Recovery Act, No. 2 of1990 as amended by Act, No.9 of 1994. The total sum sought to berecovered in the action is Rs. 18,563,155.64 and the sum of Rs.6,100,000/- ordered by court is one third of the total amount soughtto be recovered by the action.
After the plaint was filed, the court, under and in terms of the 10Debt Recovery Act, has entered a decree nisi on 02.09.2003.Thereafter the defendant-petitioners have filed objections to thedecree nisi and both parties have agreed to conclude the inquiry bytendering written submissions. After considering the writtensubmissions the learned Judge has made the order against whichthe petitioners now seek leave to appeal.
The main contention of the learned counsel for the petitionerswas that the decree nisi entered by court was bad in law in that theaction was not properly constituted according to the provisions ofthe Debt Recovery Act. In order to challenge the legality of the 20plaint, the learned counsel submitted that the plaint has beenprepared in contravention of the provisions of section 22 of theDebt Recovery Act, which reads as follows:
“ No sum of money which constitutes a penalty fordefault in payment or delay in payment of a debt shallbe recoverable in an action instituted for recovery ofsuch debt in terms of the procedure laid by this Act. ”
The learned counsel pointed out that the total amount sought tobe recovered by the Bank includes penal interest charged by theBank.The learned counsel invited the court’s attention to the bundle 30of documents marked X14 filed with the plaint in support of theaverments set out in the plaint. The document marked X14contains bank statements relating to the account of the 1stdefendant-petitioner, which is the account relating to the debtsought to be recovered in the action. The learned counsel pointed
Sri Lanka Law Reports
 2 Sri L.R
out that in many pages of the bundle marked X 14, there areparticulars of the penal interest charged by the Bank and the totalsum sought to be recovered in the action includes the amountscharged as penal interest.
The learned counsel therefore submitted that since the totalamount sought to be recovered in the action includes the penalinterest, which, in view of section 22 the Bank cannot recover in anaction filed under the Debt Recovery Act, and the whole plaint wasbad in law and accordingly there was no proper legally valid plaintbefore court to enable the court to enter a legally valid decree nisi.The learned counsel contended that section 22 contained alimitation on the court’s jurisdiction to entertain and maintain anaction to recover an amount which includes a penalty for default inpayment or delay in payment of the defendants' debt. He thereforesubmitted that the learned Judge should have grantedunconditional leave to the defendants to enter and defend theaction. It was on that basis that the learned counsel sought leaveto appeal against the order dated 19.08.2004.
The learned counsel for the respondent Bank contended thatsection 22 of the Debt Recovery Law is not a provision whichaffects the jurisdiction of court. He contended that if the Legislatureintended to limit the jurisdiction, the Legislature would have usedwords such as 'no action shall be instituted or maintained under theprocedure laid down by this Act to recover any sum of money whichincludes a penalty for default in payment or delay in payment of anydebt.' Relyirtg on the wording of section 22 the learned counselsubmitted that the section merely prevented the court fromincluding any sum in its decree which constitutes a penalty. Hecontended that if a defendant satisfies court that a part of the sumclaimed by the plaintiff is a penalty, the court has to exclude thatsum from the decree absolute it will enter at the action. Hesubmitted that that is the correct interpretation to be given tosection 22 of the Act.
The learned counsel for the petitioners replying to the abovelegal submission made by the learned counsel for the Banksubmitted that after the court has entered decree nisi for the totalamount claimed by the Bank, at the end of the action the court has
Car Mart Ltd. and Another v Pan Asia Bank Ltd
to either make the decree nisi absolute in its original form or todischarge it but the court has no power to vary the amount set outin the decree nisi by entering in the decree absolute a sum lesserthan the sum specified in the decree nisi.
The proviso to section 6(3) of the Debt Recovery Act (insertedby amending Act, No. 9 of 1994) provides an answer to thesubmission of the learned counsel for the petitioners. The provisois as follows:
“ Provided that a decree nisi, if it consists of separate parts maybe discharged in part and made absolute in part… ”
This provision is similar to section 388(2) proviso of the CivilProcedure Code. The proviso to section 6(3) empowers the court tovary the decree nisi at the end of the action. If the defendant at theend of the case satisfies court that a sum of money is not legallydue from him or a sum not legally recoverable from him (such asthe sum referred to in section 2Z) the court has power to makeadjustments to the decree nisi before making it absolute. If thecourt has no such power it would lead to an injustice.
The decree nisi entered by court is in VIII parts. The court hasgranted leave to the defendants to appear and defend afterdepositing a sum of Rs. 6,100,000/- in court. After depositing thissum it is open to the defendants to show that penal interest isincluded in the sums claimed by the plaintiff Bank. Then the courthas the power under section 6(3) proviso read with section 22 toexclude the sum sought to be recovered as a penalty from thedecree absolute.
For the-foregoing reasons this court is unable to accept thesubmissions of the learned counsel for petitioners that the plaintiffBank's action is not properly constituted and that at the end of theaction the court has no power to vary the amount set out in thedecree nisi. We therefore hold that there is no reason to grant leaveto appeal. Accordingly we refuse leave to appeal and dismiss thisapplication with costs in a sum of Rs. 10,000/-
WIMALACHANDRA, J -1 agree.