Sri Lanka Law Reports
(1993) 1 Sri L.R.
ESQUIRE (GARMENTS) INDUSTRIES LIMITED
v.BANK OF INDIA
G. P. S. DE SILVA, C.J., KULATUNGA, J.
AND RAMANATHAN, J.
SC APPEAL NO. 53/92
CA REV. APPLICATION, NO. 1019/91 WITH CA LA NO. 224/91DC COLOMBO, NO. 92958/M19 MARCH, 1993.
Civil Procedure – Execution of decree pending appeal – Settlement Security- Can defendant retract from it – Sections 23 of the Judicature Act and 763(1) and (2) of the Civil Procedure Code.
When an application for execution of a decree pending appeal is made inthe exercise of rights conferred under section 23 of the Judicature Act andsection 763 (1) of the Civil Procedure Code the District Judge may makeany of the following orders :
. Order execution or stay it, if he sees fit to order a stay, subject,however, to the appellant furnishing a bond to abide the judgment of theCourt of Appeal upon the appeal (s. 23 Judicature Act).
. Order execution; and if sufficient cause is shown by the appellant,require security to be given for the restitution of the property which maybe taken in execution or the payment of the value of such property andfor the due performance of the decree or order of the Court of Appeal(s. 763 (1) of the C.P.C.).
. Order stay of execution upon such conditions as it may deemfit, where –
the judgment-debtor satisfies the court that substantial loss mayresult to him unless an order for stay of execution is made ; and
the judgment-debtor gives security for the due performance ofthe decree or order as may be ultimately binding on him. (s. 763(2) of the C.P.C.).
Where after two abortive attempts to execute the decree pending execution,the parties arrived at a settlement on 01. 08. 91 whereby they agreed that theexecution of the decree be stayed subject to the defendant tendering securityby a bank guarantee before the end of 30. 10. 91 and if no such security wastendered, execution could proceed without further notice, and the defendantwithout tendering such security attempted to reagitate the matter urging that it
SCEsquire (Garments) Industries Limited v. Bank of India (Kulatunga, J.)
was not possible to furnish a bank guarantee and that if writ was issued withoutadequate security payable by the plaintiff irreparable loss and damage would becaused to the defendant.
There was no accidental slip or omission on the part of the District Courtin making its order dated 01. 08. 91 when it failed to require the plaintiffto give security prior to writ being issued.
The defendant-appellant could not be permitted to retract from thesettlement; and the District Judge had no power to vary it.
The object of the defendant-appellant in neglecting to give security andmaking further applications was to delay execution of the writ and obtainundue advantage at the expense of the plaintiff-respondent.
Case referred to :
Sumanadeva v. Sediris (1990) 1 Sri LR 27 (CA).
APPEAL from order of the Court of Appeal.
S. Mahenthiran for defendant-appellant.
I. S. de Silva with Prasanna Jayawardena for plaintiff-respondent.
Cur. adv. vult.
April 28, 1993.
This appeal relates to a dispute concerning the execution of decreein the above action pending appeal. Judgment was entered by theDistrict Court against the defendant (a garments manufacturingcompany) in a sum of Rs. 43 Million in favour of the plaintiff. Anappeal to the Court of Appeal from the said judgment is presentlypending in that Court. In the meantime, on 06. 10. 89 the plaintiffapplied to the District Court for execution of decree pending appealpresumably in the exercise of his rights under s. 23 of the JudicatureAct and s. 763 (1) of the Civil Procedure Code. Upon such applicationit was competent for the District Judge to have made any of thefollowing orders : 1
(1)order execution or stay it, if he sees fit to order a stay, subject,however, to the appellant furnishing a bond to abide thejudgment of the Court of Appeal upon the appeal (s. 23Judicature Act).
Sri Lanka Law Reports
(1993) 1 SriLR.
order execution ; and if sufficient cause is shown by theappellant, require security to be given for the restitution ofthe property which may be taken in execution or the paymentof the value of such property and for the due performanceof the decree or order of the Court of Appeal, (s. 763 (1)of the C.P.C.).
order stay of execution upon such conditions as it may deemfit, where –
the judgment – debtor satisfies the Court that substantialloss may result to him unless an order for stay of executionis made; and
the judgment – debtor gives security for the dueperformance of the decree or order as may be ultimatelybinding on him. (s. 763 (2) of the C.P.C.).
The defendant objected to the application for execution of decreeand stated, inter alia, that he is ready and willing to furnish securityfor the due performance of the decree or order as may be ultimatelybinding on him. After inquiry, the District Court by its judgment dated08. 09. 90 allowed execution of the decree. This was challenged bythe defendant in the Court of Appeal. Acting in revision, the Courtby its judgment dated 08. 01. 91, set aside the District Judge's orderholding that substantial loss may result to the defendant havingregard, inter alia, to the danger to the economic viability of hiscompany and the loss of employment to the employees which mayoccur by the closure of the factory upon execution of the decree.The Court directed that execution be stayed provided security is given;and directed the defendant to give security by a bank guarantee inan amount considered necessary by the District Judge in terms ofs. 763 (2) of the C.P.C.
When the record was returned to the District Court, the learnedDistrict Judge after further inquiry made order dated 08. 02. 91 thatsecurity be given in Sri Lankan Rupees equivalent to the value ofUS Dollars in the decree "to be determined by the valuation of theCentral Bank of Sri Lanka at the time". This order was challengedby the defendant by way of revision on the ground that it was contraryto law, and vague; and that the District Court had failed to quantify
Esquire (Garments) Industries Limited v. Bank of India (Kulatunga, J.)133
or nominate security. The Court of Appeal by its judgment dated 16.05. 91, agreed that the District Judge had failed to specify and quantifythe amount to be furnished as security, set aside the impugned orderand sent back the record to the District Judge to nominate theamount of security to be furnished by the defendant by way of abank guarantee.
When the matter came up before the District Judge on01. 08. 91, parties came to a settlement whereby they agreed, interalia, that the execution of decree be stayed subject to the defendanttendering security by a bank guarantee in a sum of Rs. 20 Million,before the end of 31.10.91; if no such security was tendered on orbefore 31. 10. 91, parties agreed that the plaintiff was entitled to takeout writ without further notice to the defendant. The Court orderedthat execution of decree be stayed accordingly and allowed executionin the event of a breach of the conditions of settlement.
Instead of tendering security as agreed, the defendant filed anapplication dated 17.10.91 stating :
that in making its order dated 01.08.91 nominating securityto be given by the defendant, (for stay of execution) the Courthad by an error failed to require the plaintiff to give security priorto writ being issued, for the due performance of the decree ororder of the Court of Appeal in the event of the defendant beingsuccessful in appeal ;
that in terms of s. 763 (1) of the C.P.C. it was imperativeto require the plaintiff to give such security ;
that despite several efforts in that behalf the defendant hadnot been able to obtain a bank guarantee ; and
that if writ was issued without adequate security, irreparableloss and damage would be caused to the defendant.
In the circumstances, the defendant prayed that in the event ofwrit being issued, the plaintiff be directed to tender security in asum of Rs. 40 Million by cash or a bank guarantee.
Sri Lanka Law Reports
(1993) 1 Sri L.R.
On a motion by the defendant's Attorney-at-Law, the said petitionwas called and supported before the Roll Court on 21. 10. 91 whenthe Additional District Judge ordered notice to issue to the plaintiff,returnable on 02.03.92.
On 15.11.91 a motion was filed on behalf of the plaintiff movingfor the issue of writ of execution. It was supported by Counsel on19.11.91 in Court No. 2 in which Court Counsel for the defendantwas also present. Counsel for the plaintiff submitted that as thedefendant had failed to give security in terms of the settlement dated01.08.91, the plaintiff was entitled to the writ of execution, withoutfurther notice to the defendant. Counsel for the defendant submittedthat if writ was to issue, it was imperative in terms of s. 763 (1)of the C.P.C. to require the plaintiff to give security; that the Courthad already issued notice on that question for 03.02.92 and movedfor time to make further submissions. The Court ruled that in viewof the settlement between the parties it had no power to make adifferent order and directed writ to issue.
The defendant sought leave to appeal to the Court of Appeal fromthe said order of the District Court and also applied to have it setaside by way of revision. The Court of Appeal by its judgment dated02. 06. 92 dismissed the revision application for the failure by thedefendant, in breach of Rule 46 of the Supreme Court Rules, to filea copy of the impugned order of the District Judge or even to applyunder Rule 50 for permission to rectify his default. The Court alsoupheld the order made by the District Judge and refused theapplication for leave to appeal. The defendant appealed to this Court.
At the hearing before us the learned Counsel for the defendant-appellant submitted that in the event of an order for execution ofdecree pending appeal being made, s. 763 (1) of the C.P.C. enjoinsthe judgment – creditor to give security for restitution in the eventof the appeal being successful ; that in making its order dated 01.08. 91 pursuant to a settlement, the District Court had overlookedthe fact that the defendant-appellant is entitled under s. 763 (1) tobe so secured ; and that this was an error which that Court hadthe power under s.189 read with s. 839 of the C.P.C. to correct asit was an accidental slip or omission. He cited in support the decisionin Sumanadeva v. Sediris(,).
Esquire (Garments) Industries Limited v. Bank of India (Kulatunga, J.)135
Learned Counsel for the plaintiff-respondent submitted that in everyproceeding held in relation to the plaintiff-respondent's application forexecution of decree pending appeal, ending with the settlement dated01. 08. 91, the defendant-appellant consistently sought a stay ofexecution subject to the giving of security by him ; that he obtainedan order from the Court of Appeal to that effect; that the requirementas to the plaintiff-respondent giving security was never the subjectmatter of relief sought in the Court of Appeal ; that the requirementfor the judgment – creditor to give security contained in s. 763 (1)is a protection, which the judgment – debtor may waive ; that in theinstant case the defendant-appellant had by his conduct waived thisprotection ; that in the circumstances, the order made in terms ofthe settlement agreed to on 01. 08. 91 was final and binding andcould not be varied particularly for the reason that the said ordergave effect to a direction by the Court of Appeal ; and that as suchthe order dated 19.11.91 made by the learned District Judge andthe Judgment of the Court of Appeal which affirmed the said orderare correct.
I am of the view that there is no accidental slip or omission here;nor is there any deprivation of a right to which the defendant-appellantwas entitled in terms of s. 763 (1) of the C.P.C. The impugned orderwas the culmination of efforts by the defendant-appellant himself inseveral judicial proceedings. It was made by way of settlement, agreedto by the parties. The defendant-appellant cannot be permitted toretract from the settlement and the District Court had no power tovary it. If the said order was erroneous the proper course was tochallenge it in a higher Court. More particularly, it is to be notedthat the requirement of s. 763 (1) for the giving of security by thejudgment – creditor in the event of an order for execution is notautomatic but conditional upon the appellant showing sufficient causetherefor. Here the appellant satisfied the Court that execution ofdecree may result in substantial loss to him ; having regard, interalia, to the loss of employment which would occur by the closureof his factory in the event of execution. On that basis, he obtainedan order from the Court of Appeal for stay of execution on conditionof his giving security by way of a bank guarantee. If he was unableto obtain a bank guarantee in the sum which he himself agreed todo, the plaintiff-appellant was entitled to the issue of writ. In thatevent, the defendant-appellant has no right to demand security
Sri Lanka Law Reports
(1993) 1 SriLR.
from the plaintiff-respondent ; and in the circumstances, thedefendant-appellant must take the full consequences of the executionof the decree.
Before concluding this judgment, I wish to refer to the fact thatthe defendant-appellant has not placed any material before the originalCourt or the Court of Appeal or this Court in support of the avermentthat despite several efforts in that behalf he was unable to obtaina bank guarantee. He has not produced any documentary evidenceeg. correspondence with banks. In the written submissions filed on22. 09. 92 on behalf of the defendant-appellant, it is stated that hisbank had liquidity problems and later "crashed". This was repeatedbefore us by learned Counsel for the defendant-appellant. In theabsence of proof of such facts, I am unable to consider this sub-mission. On the other hand, paragraph 16 of the affidavit dated17.10.91 filed in the District Court on behalf of the defendant-appellantstates that the defendant company is a 100% export oriented garmentindustry and it has several orders to the value of US Dollars580,000 to execute. If so, the defendant-appellant is a viablecompany with dependable sources of revenue, and being thus credit-worthy the defendant-appellant might have been able to obtaina bank guarantee, if a genuine effort in that behalf was made. Thefailure to give such security in such circumstances tends to givecredence to the allegation made in the written submissions filed onbehalf of the plaintiff-respondent against this appeal that the objectof the defendant-appellant in neglecting to give security and makingfurther applications was to delay execution of the writ and to obtainundue advantage at the expense of the plaintiff-respondent.
For the foregoing reasons, I dismiss the appeal and affirm thejudgment of the Court of Appeal with costs fixed at Rs. 5,000.
G. P. S. DE SILVA, C.J. – I agree.
RAMANATHAN, J. – I agree.
ESQUIRE (GARMENTS) INDUSTRIES LIMITED v. BANK OF INDIA