DAYARATNE vs. STATE MORTGAGE AND INVESTMENT BANK

026-SLLR-SLLR-2005-V-3-DAYARATNE-vs.-STATE-MORTGAGE-AND-INVESTMENT-BANK.pdf


138
Sri Lanka Law Reports
(2005) 3 Sri L. R.
DAYARATHNEvs
STATE MORTGAGE AND INVESTMENT BANKCOURT OF APPEALSRIPAVAN, J, ANDBASNAYAKE, J.
CA 1417/2004JULY 1,2005AUGUST 1,2005
Writ of certiorari – Resolution passed to parate execute property – Stamp DutyAct, Section 16 – Can the Bank recover anything other than the considerationsecured under the Mortgage Bond?
The petitioner sought a writ of certiorari to quash the resolution on the basisthat the Mortgage Bond is stamped only to the value of Rs. 600,000 and theBank cannot recover anything more than Rs. 600,000 and the sum due asinterest on the outstanding loan cannot be recovered.
HELD:
Sections 16 and 17 of the Stamp Duty Act have to be interpreted strictly. It isclear that duty is payable only on the principal amount and not on the interest.The mortgage must be stamped to the value of the principal sum only, and nostamp duty is required to be paid on the interest payable. It is untenable to sayno interest could be recovered.
APPLICATION for a writ of certiorari/mandamus.
A. S. K. Senatharachchi for petitioner.
Milinda Gunatilake, State Counsel with W. K. Perera, State Counsel forrespondents
Cur.a,..'.vult.
CA
Dayarathne vs State Mortgage and Investment Bank(Basnayake, J.)
139
September 14, 2005BASNAYAKE, J.
The petitioner in this case was awarded a loan of Rs. 600,000 by therespondent bank on the mortgage bond No. 2039 dated 24.12.1997 markedP1. The petitioner states that he paid a sum of Rs. 360,000 by way ofinterest and principal and defaulted payments. Thereafter the Board ofDirectors of the Respondent Bank had passed a resolution on 08.12.1999in terms of the State Mortgage and Investment Bank Act to sell the mortgagedproperty by public auction (P3) and the petitioner was informed by letter(P4) that the date of the sale was fixed for 10.07.2004. According to thisletter the amount due as at 10.07.2004 was Rs. 1,004,566.88. The petitioneris moving to have the resolution quashed by way of a writ of certiorari and isalso seeking a writ of mandamus to compel the respondent to acceptwhatever dues in terms of section 16 of the Stamp Duty Act No. 43 of 1982.
The respondent filed objections along with documents marked R1 toR13 and prayed for a dismissal of the petitioner's application. At the hearingthe only argument put forward by the learned counsel for the petitionerwas that the bank cannot recover anything other than the considerationsecured under the mortgage bond. The learned counsel rests his argumenton section 16 of Stamp Duty Act. The learned counsel submits that themortgage bond is stamped only to the value of Rs. 600',000 and the bankcannot recover anything more than Rs. 600,000 and as such the sum dueas interest on the outstanding loan cannot be recovered. To that extent hesubmits that the resolution is bad in law and is liable to be quashed.
The learned State Counsel submits that in terms of section 17 of theStamp Duty Act no stamp duty is required to be paid on the interestpayable. He submits that section 16 is only a “charging provision" whichprescribes that the mortgage must be stamped to the value of the principalsum only.
Sections 16 and 17 of the Stamp Duty Act are as follows :
Section 16“A bond or mortgage for the payment or repayment of money to belent, advanced or paid shall be charged, where the total amount securedor to be ultimately recoverable is in any way limited, with the samestamp duty as on a bond or mortgage for the amount so limited. Where
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Sri Lanka Law Reports
(2005) 3 Sri L R.
the total amount recoverable is unlimited, the bond or mortgageshall be available for the recovery of such an amount only as iscovered by the stamp duty paid on the instrument”.
Section 17
“Where interest is expressly made payable by the terms of aninstrument, such instrument shall not be chargeable with stampduty higher than that with which it would have be chargeablehad no mention of interest been made therein” (emphasis added)
The aforesaid two sections have to be interpreted strictly. These sectionsdeal with the imposition of stamp duty on instruments. By looking at thesections it is clear that duty is payable only on the principal amount andnot on the interest. Therefore it is untenable to say that no interest can berecovered. Hence this application cannot be maintained and is thereforedismissed with costs fixed at Rs. 10,000
SRIPAVAN J. — /agree.
Application dismissed.