048-SLLR-SLLR-2006-V-1-EASSUWARAN-AND-OTHERS-vs.-BANK-POF-CEYLON.pdf
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Eassuwaran and Others vs
Bank of Ceylon (Fernando, J.)
365
EASSUWARAN AND OTHERSvs
BANK OF CEYLONSUPREME COURTS. N. SILVA, CJTILAKAWARDENA, J ANDRAJA FERNANDO, JSC APPEAL NO. 25/2004CA (LA) NO. 146/2003D.C. COLOMBO CASE NO. 917/DR17TH JANUARY, 2005
Debt Recovery — Debt Recovery (Special Provisions) Act, No. 2 of 1990 —Jurisdicion of the District Court and jurisdiction of the Commercial High Court—High Court of the Provinces (Special Provisions) Act, No. 10 of 1996 —Transaction in respect of which the District Court has jurisdiction — Whether aloan facility may be sued in the District Court or whether only a fixed loan canbe sued in the District Court.
Plaintiff respondent (Bank) gave Eassuwaran Brothers Food (Pvt) Ltd. aloan facility of 100 million rupees, on the guarantee provided by the defendant-appellant (petitioners) and sued the defendants thereon for Rs. 114.1 millionand interest in the District Court under the Debt Recovery (Special Provisions)Act, No. 2 of 1990.
The defendants applied under section 6(2)C of the Debt Recovery Act forunconditional leave to defend. The District Judge ordered them to deposit Rs.38 million as a pre-condition for filing answer. The defendants then applied tothe Court of Appeal with leave against that order on the basis that the DistrictCourt had no jurisdiction over the claim as it was not in relation to a fixed termloan but related to a credit or overdraft facility. The defendants argued that thejurisdiction over that claim was in the Commercial High Court under the HighCourt of the Provinces (Special Provisions) Act, No. 10 of 1996. The Court ofAppeal dismissed the appeal.
HELD:
(1) The claim was a debt within the meaning of section 21 (2) of the DebtRecovery (Special Provisions) Act, No. 2 of 1992 and such debt wasexcluded from the jurisdiction of the High Court of the Provinces(Commercial High Court) by the First Schedule to the High Court ofthe Provisions (Special Provisions) Act, No. 10 of 1996.
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(2006) 1 Sri L R.
(2) In the circumstances, the District Court had jurisdiction over the claimof the plaintiff respondent.
APPEAL from a judgment of the Court of Appeal.
M.A. Sumanthiran with Prasansani Bandaranayake for defendants petitioner(appellants).
M. K. Muthukumar with Kumara Seneviratne for the plaintiff respondent.
Cur.adv.vult.
October 06,2005RAJA FERNANDO, J.
The Plaintiff-Respondent-Respondent Bank (hereinafter referred to asthe Plaintiff Bank)filed action in the District Court of Colombo under theDebt Recovery (Special Provision) Act No. 2 of 1990 to recover a sum ofRs. 114.1 million from the Defendant-Petitioners-Petitioners (hereinafterreferred to as the Defendant-Petitioner).
The Plaintiff-Bank’s case was that Eswaran Brothers Food (Pvt.) Ltd. alimited liability company obtained a loan facility of Rs. 100,000,000(Hundred million) from the Plaintiff-Bank on the guarantees provided bythe Defendant-Petitioners and that Eswaran Bros. Food (Pvt.) Ltd., defaultedin the repayment of the loan facilities granted to them and the sum of Rs.114,111,103.46 as at 02.09.2001 and a further interest at 21.5% on Rs.97,172,734 from 03.09.2001 plus B.T.T. and defence levy thereon is due tothe Plaintiff-Bank.
Upon action being instituted together with an affidavit from an authorizedofficer of the Plaintiff Bank and the other documents supporting this claimthe Court entered decree nisi which was served on the Defendant-Petitioners.
The defendant-petitioners filed papers seeking unconditional leave toappear and defend the action under Section 6(2)C of the Debt Recovery(Special Provisions) Act.
The learned Addl. District Judge by his order dated 24.4.2003 orderedthe defendant-petitioners to deposit Rs. 38 million (1/3rd of Rs. 114.1million the amount claimed in the plaint) by way of security within 90 daysof the Order to be permitted to file answer.
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Eassuwaran and Others vs
Bank of Ceylon (Fernando, J.)
367
Being aggrieved by the said order the defendants-petitioners soughtleave to appeal from the Court of Appeal on the ground that the learnedAddl. District Judge erred in not addressing his mind to the fact that thesubject matter of the purported action is a series of commercial transactionscoming under the exclusive jurisdiction of the High Court of the WesternProvince exercising civil jurisdiction (Commercial High Court) under ActNo. 10 of 1996 and that action in respect of such commercial transactionscannot be instituted under the Debt Recovery (Special Provision) Act No.2 of 1990 in the District Court.
The Court of Appeal refused the application for special leave and thedefendant petitioners filed special leave to appeal application No. SC SpecialLeave to Appeal No. 62/2004 in this court and obtained special leave fromthe court on 25.03.2004 on the following questions.
Was the Court of Appeal wrong in holding that the District Courthad jurisdiction in respect of this matter ?
Does the definition of “debt" in terms of the Debt Recovery (SpecialProvisions) Act include the transaction which is the subject matterof this action ?
It is the submission on the Defendant-Petitioners that Debt Recovery(Special Provision) Act is not applicable to claims based on recovery oncredit facilities or on overdraft facilities and that Debt Recovery (SpecialProvision) Act is applicable only to fixed/term loans where the amount dueis clearly ascertainable.
The position of the Plaintiff-Bank is that the claim falls well withinprovisions of the Debt Recovery (Special Provision) Act and therefore theDistrict Court has jurisdiction.
The High Court of the Provisions (Special Provision) Act No. 10 of 1996
in Section 2 states :
“Every High Court established by Article 154P of the Constitution for aProvince shall, with effect from such date as the Minister may, by Orderpublished in the Gazette appoint, in respect of such High Court haveexclusive jurisdiction and shall have cognizance of and full power to-hear and determine, in the manner provided for by written law, all actions,applications and proceedings specified in the First Schedule to thisAct, if the party or parties defendant to such action resides or reside, orthe cause of action has arisen, or the contract sought to be enforced wasmade, or in the case of applications or proceedings under the CompaniesAct, No. 17 of 1982 the registered office of the Company is situated, withinthe Province for which such High Court is established”.
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Sri Lanka Law Reports
(2006) 1 Sri L R.
According to the above provision High Court shall have exclusivejurisdiction in respect of all matters specified in the First Schedule.
The First Schedule to this Act reads :
“(1) All actions where the cause of action has arisen out of commercialtransactions (including causes of action relating to banking, the export orimport of merchandise, services affreightment, insurance, mercantileagency, mercantile usage, and the construction of any mercantile document)in which the debt, damage or demand is for a sum exceeding three millionrupees or such other amount as may be fixed by the Minister from time totime, by Notification published in the Gazette, other than actions institutedunder the Debt Recovery (Special Provisions) Act No. 2 of 1990.”
Thus it is clear from the wording of the First Schedule that if the claimin the plaint is one that comes within a “debt” under the Debt Recovery(Special Provision) Act No. 2 of 1990 as amended by Act No. 9 of 1994the District Court will have jurisdiction.
In Section 21(2) of Act No. 9 of 1994, “debt” is defined as ‘a sum ofmoney which is ascertained or capable or being ascertained at the timeof the institution of the action, and which is in default, whether the samebe secured or not, or owed by any person or persons, jointly or severallyor as principal borrower or guarantor or in any other capacity, andalleged by a lending institution to have arisen from a transaction inthe course of banking, lending, financial or other allied businessactivity of that institution, but does not include a sum of money owedunder a promise or agreement which is not in writing
The matter to be ascertained in this appeal is : Does the.sum claimedin the plaint come within the definition of a debt as stated in the DebtRecovery (Special Provision) Act ?
The Plaintiff Bank is a Lending Institution in terms of Section 30(a) ofthe Debt Recovery (Special Provision) Act (vide P1 attached to the Plaint).
The Defendant-Petitioners are guarantors for the loan facility granted toEassuwaran Brothers (Pvt.) Ltd. by the Plaintiff-Bank (vide P4 attached tothe plaint).
In paragraphs 79 and 81 of the plaint of the Plaintiff-Bank the sumclaimed has been set out and the details of the computation is alsospecified.
This sum is alleged by the Plaintiff-Bank as having arisen from atransaction in the course of Banking, lending, financial or other alliedbusiness activity.
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Vishvanath vs
Divisional Secretary, Madhurawala and Others (Bandaranayake, J.)
369
The original loan application, the Guarantee Bond together with thespecific requests by the Principal borrower for sub loans under the aboveloan agreement have been produced together with the Plaint marked P4to P 72(a).
On the material before Court there was sufficient evidence to show thatthe transactions which were referred to in the Plaint of the Plaintiff-Bankfell well within the definition of "debt” in terms of the Debt Recovery (SpecialProvisions) Act No. 2 of 1990 as amended by Act No. 9 of 1994 and thatthe Defendant-Petitioners are the guarantors of the loan.
In the circumstances it is clear that the District Court had the jurisdictionto hear and determine this matter under the Debt Recovery (SpecialProvision) Act No. 2 of 1990 as amended by Act No. 9 of 1994.
The appeal of the Defendant-Petitioner-Petitioner is accordinglydismissed with costs.
S. N. SILVA, C. J. — I agree.
TILAKAWARDANE, J. — I agree.
Appeal dismissed.