049-SLLR-SLLR-2005-V-2-KIRAN-ATUAPATTU-vs-PAN-ASIA-BANK-LIMITED.pdf
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KIRAN ATAPATTUVSPAN ASIA BANK LIMITEDCOURT OF APPEALWIMALACHANDRA, J.
CALA 299/2004
D. C. COLOMBO 1010/DR
NOVEMBER 09, 2004
Debt Recovery Special Provisions Act’2 of 1990 – Section 30 amended by 4 of1994 – Section 6(2) (C) – Do overdrafts come within the meaning of the provisionsof the Debt-Recovery Law ? -What is a Debt ? -Can the Bank charge compoundinterest ?- Evidence Ordinance (Amendment) Act -14 of 1995 – EvidenceOrdinance Special Provisions Act -34 of 1997 – Computer Printouts – Method ofproving – Is an affidavit necessary ?- Evidence Ordinance Section 90 (C) – CivilProcedure Code – Section 705(1) Affidavit to state “Justly due?” Interestexceeding capital – legality ?- Conditional leave to defend – Can it granted ? -Sustainable defence to grant leave to appear and defend action?
The plaintiff Respondent (Bank) instituted action against the DefendantPetitioner under the Debt Recovery Special Provisions Act to recover a certainsum. The trial court entered Decree Nisi in favour of the plaintiff. The Defendantsthereafter moved for unconditional leave to appear and defend. The Defendantwas ordered to deposit Rs. 3.5 Million as a precondition to the grant of leave toappear.
It was contended that –
The Debt. Recovery Special Provisions Law does not apply to overdrafts ;
The Bank cannot charge compound interest ;
The Statement of Claim is not admissible as it is a computer printout ;
That the affidavit does not contain the words that, the monies are lawfullydue ;
that the interest claimed exceeds the capital.
Held –
Whether one calls the sum borrowed on overdraft or a loan if it is capableof being ascertained it falls within the meaning of ‘debt,’ on his ownexplanation the sum borrowed by the Defendant and the interestcomponent can be ascertained. Term debt in Section 30 includesoverdrafts, if the amount is capable of being ascertained or is ascertainedat the time of institution of action.
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Kiran Atapattu vs Pan Asia Bank Limited
(Wimalachandra J.)
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Compound interest is recoverable. Roman Dutch Law prohibitions againstcompound interest is no longer in force in Sri Lanka.
In terms of Section 6 – Evidence Ordinance (Amendment) 14 of 1995 – Theplaintiff is entitled to produce computer printouts if they are accompaniedby an affidavit of a person occupying a responsible position in relation tothe operation of the relevant machine. The Plaintiff had in fact filed anaffidavit.
There is nothing in Section 705 (1) of the Code that the Plaintiff shallmake an affidavit that the sum is lawfully due to him from the Defendantthereon it only states that he must make an affidavit that the sum which heclaims is justly due. In any event the Defendant should not be grantedunconditional leave to defend merely because such word was not used.
Section 21 of the Principal Act lays down that the institution may receiveas interest, a sum of money in excess of the money claimed as principal.
Section 6(2) does not permit unconditional leave to defend the action.The minimum requirement is the furnishing of security.
Defendant-Appellant does not disclose a sustainable defence to grantleave to appear and defend the action.
APPLICATION for leave to appeal from an Order of the District Court of Colombo.
Cases referred to :
National Bank of India Ltd., vs Stevenson – 1913 16 NLR 496
Matikar vs Supramaniam Chettiar – 44 NLR 409
Paindathan vs Nadar 37 NLR 101
Peoples Bank vs Lanka Queen Inti (Pvt) Ltd., 1999 1 Sri LR 233
National Development Bank vs Chrys Tea (Pvt) Ltd., and another 2000 2Sri LR 206
Romesh de Silva P C., with Palitha Kumarasinghe for Defendant Petitioner-Petitioner.
Harsha Amarasekera with K. Pieris for Plaintiff Respondent-Respondent
February 19, 2005.
Wimalachandra, J.
This is an application for leave to appeal from the order of the AdditionalDistrict Judge of Colombo dated 27.07.2004.
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Briefly, the facts relevant to this application are as follows
The plaintiff-respondent (plaintiff) instituted the action bearing No. 1010/DR in the District Court of Colombo against the defendant-Petitioner(defendant) under the Debt Recovery (Special Provisions) Act. No.02 of1990 to recover a sum of Rs. 10,518,434/69 and interest thereon. TheAdditional District Judge of Colombo entered, decree nisi in favour of theplaintiff, and it was served on the defendant. The defendant filed petitionand affidavit along with certain documents and moved for unconditionalleave to appear and defend action. The District Court by its order dated
refused to grant unconditional leave and ordered the defendantto deposit a sum of Rs. 3.5 million to the credit of the case within threemonths from the date of the order, as a precondition to the grant of leave toappear and show cause. It is against this order the defendant has filed thisapplication for leave to appeal.
The defendant admits that he obtained banking facilities amounting toRs. 6 million from the plaintiff. (vide “F15" annexed to the petition) Headmits that the said sum of Rs. 6 million has not been repaid. Thesefacilities were granted to the defendant upon requests made by him. (Videdocuments marked ‘B1 ’, ‘C1 ’, ‘C2’, ‘C3’).
Under the provisions of the Debt Recovery Act, No. 02 of 1990 wherethe debt (the capital plus interest) exceeds Rs. 150,000 the provision ofthe Act could be made use of to recover such amounts. Accordingly theaforesaid overdrafts obtained by the defendant from the plaintiff and theaccrued interest could be recovered as a debt under the Debt RecoveryAct, No. 02 of 1990.
Admittedly, the defendant has obtained banking facilities from theplaintiff. The plaintiff was entitled to charge the interest on the said bankingfacilities. It is admitted that the defendant has not paid the capital sumsborrowed by him and the interest thereon.
The learned President’s Counsel for the defendant in his writtensubmissions, submitted that the defendant has obtained only overdraftsand not loans which do not come within the meaning of section 30 of theDebt Recovery (Special Provisions) Law. In terms of section 30 of the Act,No. 02 of 1990, 'debt' means a sum of money which is ascertained, orcapable of being ascertained at the time of the institution of the action,
Kiran Atapattu vs Pan Asia Bank Limited
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and which is in default. In the instant case, out of the total sum ofRs. 10,518,434.69, the capital sum borrowed by the defendant isRs. 6,000,000 (Six Million Rupees), which he has admitted as being due.The balance portion of the aforesaid sum claimed by the plaintiff is theinterest component.
The plaintiffs action is based on the default of the defendant to payback the monies due to the bank. The defendant has not disputed the factthat the sums lent to him by the plaintiff in the .form of over-drafts isRs. 6 million and he has not repaid the entire Rs. 6 million. Accordingly,there is no dispute as to the amount of Rs. 6 million that the defendantobtained from the plaintiff-bank. As regards the interest, though the defendantseeks to dispute the amount of the interest, he does not deny the nonpayment of interest. The defendant has filed along with his petition andaffidavit a document marked “R2” prepared by Thilakaratne & Co., a firm ofChartered Accountants, a summary of the facilities he obtained from thebank and the total interest component on the facilities obtained. Accordingto “R2” the interest component is Rs. 5,409,678.48. Therefore, on his ownexplanation, the sum borrowed by the defendant and the interest componentcan be ascertained. It is to be noted that the discrepancy between whatthe plaintiff claims and the defendant has admitted as due is only a sum ofRs. 86,127.29. However according to the defendant’s calculation, theamount due on account of capital which is Rs. 5,108,756.21 according to“R2” and the amount due as interest which is Rs. 5,409,678.48 is clearlyascertained. It is to be noted that according to “R2” he has shown thecapital amount as Rs. 5,108,756.21 but he has admitted that the overdraftfacilities he obtained from the plaintiff amounting to Rs. 6 million has notbeen paid. Accordingly, in these circumstances, it is my view that theamount borrowed by the defendant and the interest component isconsidered capable of being ascertained. Therefore whether one calls thesum borrowed an overdraft or a loan, if it is capable of being ascertained itfalls within meaning of debt under section 30 of the debt Recovery (SpecialProvisions) Act. Accordingly, there is no merit in the submissions madeby the learned President’s counsel for the Defendant that the capital sumclaimed by the plaintiff does not fall within the meaning of "debt” in termsof section 30 of the Debt Recovery (Special Provisions) Act. It is my furtherview that the term ‘debt’ described in section 30 includes overdrafts, if the
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amount is capable of being ascertained or is ascertained at the time ofinstitution of the action.
It has been argued by the learned President’s Counsel for the defendantthat the plaintiff-bank has charged compound interest and the defendantis not obliged to pay compound interest. In the case of National Bank ofIndia Ltd. Vs. Stevenson (,), it was held that;
“the rights and liabilities of the parties in connection with theaccount current were ; in terms of Ordinance No. 22 of 1866,which introduced into this Island the English law of banks andbanking, governed by that law, and not the Roman Dutch; andthat, therefore, the charge of compound interest was not, as such,unmaintainable.
While under the Roman Dutch law compound interest was notallowed, even though it had been expressly stipulated for, underthe English law it was allowed where, inter alia, there was anagreement, express or implied, to pay it, or where its allowanceswas in accordance with a custom of a particular trade or business.
Held, further, that by reason of the custom with the banks, and ofthe acquiescence of the defendant mentioned above, he becameliable to pay the compound interest charged.”
C. G. Weeramantry in his book “The Law of Contract”, volume II atpage 925 states thus :
“The Roman Law prohibited compound interest so also theRoman Dutch Law did not allow compound interest even thoughexpressly stipulated for, but the Roman Dutch law prohibitionagainst compound interest is no longer in force in South Africaor in Ceylon.”
It was held in the case of Marikar Vs. Supramaniam Chettiar<2) thatcompound interest is recoverable under the law of Ceylon, although thequestion of such a charge may be considered on the reopening of atransaction.
In the circumstances the submissions made by the learned President'scounsel that the plaintiff cannot claim compound interest has no merit.
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Kiran Atapattu vs Pan Asia Bank Limited
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Another defence of the defendant is that the statement of accountsmarked “A” annexed to the plaint showing the claim of the plaintiff amountingto Rs. 10,518,434.69. is not admissible as it is a computer print out andthe plaintiff has not taken steps to produce the same as required in termsof the Evidence Ordinance (Amendment) Act, No. 14 of 1995. In the writtensubmissions filed, the learned President’s Counsel submitted that theplaintiff has not filed an affidavit in terms of the Evidence (Special Provisions)Act, No. 34 of 1997 as to the admissibility of the computer print out marked“A”.
In terms of Section 90(c) of the Evidence Ordinance the only way ofproving entries in a banker’s book is by either producing the originals orcertified copies of the entries thereon. The learned counsel for the plaintiffin his written submissions brought to the notice of Court that in each pageof the said statement of account marked “A” the same officer of the plaintiff-bank who has deposed to the affidavit filed with the plaint has certified thatthe statements contained in the said accounts are correct and-are thosetaken from the books maintained by the plaintiff bank in the ordinary courseof banking business. In terms of section 6 of the Evidence Ordinance(Amendment) No. 14 of 1995, the plaintiff is entitled to produce computerprint-outs if they are accompanied by an affidavit of a person occupying aresponsible position in relation to the operation of the relevant machine.The learned counsel for the plaintiff states that the plaintiff has in fact filedsuch an affidavit together with the plaint, deposed by the manager of therelevant “Metro” branch who is the same person who has certified the footof each page of the statement of account marked “A”.
In these circumstances l am of the view that the submissions of thelearned President’s Counsel about the validity of the statement of accountmarked “A” is not well-founded.
Another objection of the defendent is that the affidavit filed by the plaintiffdoes not contain the words that the monies are “lawfully” due to the plaintiff.
There is nothing in section 705(1) of the Civil Procedure Code that theplaintiff shall make an affidavit that the sum which he claims is “lawfully”due to him from the defendant thereon. It only states that he must makean affidavit that the sum which he claims is “justly” due to him from thedefendant.
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However in the case of Paindathan Vs. Nadar'2' the Supreme Courtheld that in an action under chapter Llll of the Civil Procedure Code it is notessential that the plainitiff should actually use the word “justly” in hisaffidavit in support of the plaint. It was further held that the defendantshould not be granted unconditional leave to defend merely because suchword was not used.
Another objection taken by the defendant is that the interest claimedby the plaintiff exceeds the capital. In this regard attention is drawn tosection 18 of the Debt Recovery (Special Provisions) (Amendment) Act,No. 9 of 1994 which amended section 21 of the principal Act. which readsas follows :
“Notwithstanding anything to the contrary in this Act or in anyother law, an institution may recover as interest in an actioninstituted under this Act, a sum of money in excess of the sum ofmoney claimed as principal, in such action.”
In any event, the defendant’s lawyers by their letter dated 12.08.2003marked “F15” admitted that the defendant has obtained Rs. 6 million fromthe plaintiff-bank. Admittedly, the defendant has not repaid the said sumof Rs. 6 million. It is to be noted that the full amount claimed by the plaintiffis Rs. 10,518,434.69. Accordingly, the interest component is well belowthe capital sum of Rs. 6 million.
It is clear from the documents annexed to the plaint and the documentsannexed to the petition filed by the defendant in support of this applicationfor leave to appeal and especially the letter dated 12.08.2003 marked“F15”, that the defendant has obtained banking facilities to the extent ofRs. 6 million. It appears that the defendant has not repaid this money tothe plaintiff. Even the interest on the said capital sum of Rs. 6 million hasnot been paid. Therefore there is no doubt that the defendant has notrepaid the capital sum of Rs. 6 million obtained from the plaintiff-bank. Bythe letter dated 12.08.2003 marked “F15” the defendant through his lawyerswhilst admitting that he borrowed Rs. 6 million, requested the plaintiff toreduce the rates of interest charged by the plaintiff-bank.
Accordingly there is an admission by the defendant that the amountmentioned in the plaint is due to the plaintiff, and he had appealed to the
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bank to reduce the rates of interest charged. In this situation when thedocuments, especially the document marked “F15” indicate that thedefendant had acknowledged the capital sum borrowed from the plaintiff'bank and when he only disputes the computation of interest, and in thesecircumstances it is not obnoxious to the section 6(2)(c) of the Debt Recovery(Special Provisions) Act to order the defendant to furnish security for leaveto appear and defend.
It is to be observed that whilst the defendant admitting that he borrowedRs. 6 million from the plaintiff and that he has not repaid the'said sum andinterest thereon, he is now relying on technical defences to obtain leave toappearand defend unconditionally.
It is to be observed that the learned Judge has made order granting thedefendant leave to appear and defend upon furnishing security in a sum ofRs. 3.5 million which is 1 /3rd of the amount claimed by the plaintiff. Asstated above, the defendant has admitted that the bank granted him Rs. 6million, which sum has not been repaid by him. The section 6(2) of theDebt Recovery (Special Provisions) Act provides for the affidavit of thedefendant to deal specifically with the plaintiff’s claim on its merits. In theinstant case the defendant has relied on technical objections and notrevealed his defence, if he has any, to the claim made by the plaintiff. Hehas taken refuge mostly on the technical objections set out in his affidavit.The defendant has not set up any plausible defence relating to a triableissue.
In the case of People’s Bank V. Lanka Queen INT’L Private Ltd (3). itwas held that the amended section 6(2) (amended by Act, No. 4 of 1994)does not permit unconditional leave to defend the claim. The minimumrequirement according to section 6(2)(c) is the furnishing of security.
In the aforesaid case Justice De Silva has made a comprehensiveanalysis of section 6(2) as amended by Act No. 9 of 1994. De Silva, J.held that the amended section 6(2) does not permit unconditional leave todefend the claim, the minimum requirement according to section 6(2)(c) isfor furnishing of security.
De Silva, J. referring to section 6(2) made the following observation atpages 237-238.
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“This section does hot permit unconditional leave to defend the caseas the defendant-respondent has requested from (he District Court.The minimum requirement according to subsection (c) is for thefurnishing of security.
If the defendant satisfies (a) and (b) above then the defendant shouldbe given an opportunity of being heard. The court will have to decide onone of the three matters specified in the above section. They are:
The Court may order the defendant to pay into courl the summentioned in the decree Nisi. Thus, even where the requirementsas stated above are complied with, the court has the power and theauthority to order the defendant to pay the full sum mentioned in thedectee Nisi before permitting the defendant to appear and defend.
Alternative to (a) above, the court can order the defendant to furnishsecurity which, in the opinion of the court is reasonable and sufficientto satisty the decree Nisi in the event it being made absolute. Thedifference between this provision and the (a) above is that insteadof paying the full sum mentioned in the decree Nisi, it will be sufficientto the defendant to furnish security, such as banker's draft, andthen defend the action.
the third alternative is where the court is satisfied on the contents ofthe affidavit filed, that they disclose a defence which is prime faciesustainable and on such terms as to security; framing of issues orotherwise permit the defendant to defend the action. Thus, it isimperative that before the court acts on section 6(2)(c) it has to besatisfied ;
with the contents of the affidavit filed by the detenant;
that the contents disclose a defence which is prima facie
sustainable;AND
Hi. determine the amount of security to be furnished by the defendant,and permit framing and recording of issues or otherwise as thecourt thinks fit.
In the case of National Development Bank Vs. Chrys Tea (Pvt) Ltd.
and another(4) this Court held that;
(i) Under Section 6(2)(a) or 6(2)(b) the Court has no discretion to ordersecurity which is not sufficient to satisfy the sum mentioned in thedecree nisi.
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Rodrigo vs. The Finance Co. Ltd. and another
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(ii) Section 6(2)(c) is the only section which permits the Court discretionto order security which would be a lesser sum than the summentioned in the decree nisi.
In the instant case, it is my considered view that the defendant’saffidavit does not disclose a sustainable defence to grant leave to appearand defend the action. Furthermore, l am bound by the judgements in theaforesaid cases of People’s Bank V. Lanka Queen /NTL Private Ltd. (Supra)and National Development Bank Vs. Chrys Tea (Pvt.) Ltd. andanother.(Supra)
This Court therefore sees no reason to interfere with the order of the learnedAdditional District Judge dated 27.7.2004. The application for leave toappeal is accordingly dismissed with costs fixed at Rs. 50000 payable bythe defendant to the plaintiff.
Application dismissed.