LEECHMAN & COMPANY LTD. v. RANGALLA CONSOLIDATED LIMITED

027-SLLR-SLLR-1981-2-LEECHMAN-COMPANY-LTD.-v.-RANGALLA-CONSOLIDATED-LIMITED.pdf


CA Leechman & Company Ltd. v. Rangalla Consolidated Limited (Soza J.) 373
LEECHMAN & COMPANY LTD.
V.
RANGALLA CONSOLIDATED LIMITED
COURT OF APPEAL
SOZA, J AND SENEVIRATNE, J.
C. A. APPLICATION NO. 2132/80WITH C. A. APPLICATION LA. 99/80JUNE 11.12,16 AND 18. 1981.
Garnishee order — s. 230 Civil Procedure Code — prohibitory notice under s. 228 (a) ofthe Gvil Procedure Code — execution proceedings — inherent powers — ft 839 C. P. C. —concurrence.
It is the Fiscal who must sign the prohibitory notice but even if the Registrar signs it thevalidity of the notice will not be affected where the Registrar and the Fiscal are one andthe same person. Nor will the notice be bad because it was addressed to the Chairman,Land Reform Commission when it should have been addressed to the Land ReformCommission because no prejudice was caused and the objection was dot taken at theearliest opportunity.
In execution proceedings the Court will look at the substance of the transactionand will not be disposed to interfere on technical grounds especially where the objectionwas not taken at the earliest opportunity.
A garnishee is one who has money or property in his possession belonging to ajudgment-debtor or owes a debt to the judgment-debtor. The debtor of the judgment-debtor may be summoned by the Court to. show cause why he should not pay to thejudgment-creditor the debt due from him to the judgment-debtor or so much thereof asmay be sufficient to satisfy the judgment. Jf such debtor does not dispute the debtdue or claimed to be due from him and fails within such time as may be allowed by thecourt to pay into court the amount due from him to the judgment-debtor or an amountequal to the judgment, whichever is less, or if he does not appear upon summons then
I
the court may order execution to issue to levy the amount.due from such debtor or somuch thereof as may be sufficient to satisfy the'judgment. The garnishee proceedingswill be confined to cases in which the debtor would have had no defence if he had beensued by his own creditor, the judgment-debtor. Where the debtor of the judgment-deb-tor can set up a ddim or set off against the judgmentdebtor or bona fide disputes theexistence of a debt no garnishee order can issue. It is not a sufficient defence for the deb-tor of the judgment-debtor to say that there are other debts of the judgmentdebtorwhich have to be satisfied.
The right of the Minister to determine the manner and mode of payment given himby s. 42J(3) of the Land Reform Law does not entitle him to reduce the amount ofthe payment or order rateable settlement.
When the substantive law is altered during the pendency of an action, the rights ofthe parties are decided according to the law as it existed when the action was begununless the new statute shows-a clear intention to vary such rights.Garnishment it anexecutory process of Court. It does not proceed on the basis of the garnishee beingbound by the decree but on the basis that he is a party prohbited and cast with statu-tory obligations as a debtor of the judgment-debtor. Section 839 CPC merely saves theinherent powers of the Court to make such orders as may be necessary for the ends of
374
Sri Lanka Law Reports
[1981] 2S L.R.
justice or to prevent abuse of the process of court. Where no provision exists it is theduty of the Judge and it Jies within his inherent power to make such order as the justiceof the case requires. On any point dealt with by the Code, the Court cannot disregardthe letter of the enactment according to its true construction.
The Civil Procedure Code supersedes the Roman Dutch law on the question of con-currence and therefore only decree holders have a status to claim money held in court.
A pure question of law which does not require the ascertainment of new facts canbe raised for the first time in appeal.
Caws referred to '
Pieris v. The Commissioner of Inland Revenue (1963) 65 NLR. 457. 458.
a. Nanayakkara v. Sulaiman (1926) 28 NLR 314.
Choice Investments Ltd. v. Jeromnimon (Midland Bank Ltd.) Garnishee11981} 1 All ER 225, 226,227.
Gurusamy Pill ay v. Palaniappen (1907) 3 ACR 15.
Usoof v. Sinna Umma (1909) 3 Weerakoon 46.
Supramanian Chetty v. Cave & Co. (1930) 32 NLR 25.
Jay a wee ra v. Abdul Coder (1934) 36 NLR 269.
Saibo v. Peiris (1932) 34 NLR 133.
Paulusz v. Perera (1933) 34 NLR 438.
Hukum Chand Bo id v. Kamalanand Singh (1905) 33 Cal. 927.
Karunaratne v. Mohideen (1941) 43 NLR 102.
Victor de Silva v. Jinadasa de Silva (1964) 68 NLR 45,48.
Konamalai v. Sivakolunthu (1891) 9 SCC 203.
Raheem v. Yoosoof Lebbe (1902) 6 NLR 169.
Mend 's v. Peiris (1915) 18 NLR 310.
Meyappa Chetty v. Weerasooriya (1916) 19 NLR 79.
Sellappa Chettiar v. Arumugam Chettiar (1942) 43 NLR 508.
A. G. v. De Croos (1925) 26 NLR 451,454.
Deerananda Thero v, Ratnasara Thero (1956)20 NLR 7, 14.
Application in Revision from the order of the District Judge of Colombo.
H. W. Jayewardene Q.C. with Chula de Silva and Lakshman Perera for plaintiff petitio-ner.
1st respondent absent and unrepresented.
C. Ranganathan Q. C. with H. L. de Silva and Niranjan Slnnethamby for 2nd respondent.J. Weerasekera with G. P. Mahinkanda for 3rd Respondent.
August 5, 1981.
Cur. adv. vult.
CA Leech man & Company Ltd. v. Rangalfa Consolidated Limited (Sot a J.) 375
SOZA, J.
We are in this case called upon in the exercise of our revisionarypowers to set aside the order made by the learned District Judgeof Colombo on 25th September 1980 during execution procee-dings rejecting an application of the petitioner-company (thejudgment-creditor in this case) that the Land Reform Commis-sion be directed to pay it an amount sufficient to satisfy thedecree out of the funds which that institution holds as compen-sation on account of two estates of the defendant-companyvested in it by virtue of the Land Reform (Amendment) LawNo. 39 of 1975. The petition for revision before us has beenfiled by Leechman & Co. Ltd. the plaintiff-judgment-creditornaming Rangalla Consolidated Ltd. the original defendant as 1strespondent, Vinitha Ltd. a party which came into the case as aresult of a notice issued on it on the orders of the Learned DistrictJudge of Colombo as 2nd respondent and the Land ReformCommission a party summoned under section 230 of the CivilProcedure Code as 3rd respondent.
The action in which the decree sought to be executed in thiscase was entered was filed by Leechman & Co. Ltd. a companyincorporated in Sri Lanka as plaintiff in the District Court ofColombo against Rangalla Consolidated Ltd. a public companyincorporated under the laws of England and having its registeredoffice at 202, Bishop's Gate, London EC 2 England, for therecovery on a first cause of action of a sum of Rs. 419,478/33with interest thereon being agency fees alleged to be due on a con-tract of agency with the defendant company and on a secondcause of action of a sum of Rs. 56,244/- with interest thereon forthe wrongful termination of the said contract. The contract con-cerned the management of two estates belonging to the defen-dant company in Sri Lanka namely Elkaduwa Group and RangallaGroup. The defendant company while admitting the contract ofagency denied the claims set out in the plaint, and counter-claimedby way of reconvention a sum of Rs. 474,238/27 being lossesincurred owing to the negligence of the plaintiff company. On15.7.1975 when the case came up before the District Judge ofColombo the plaintiff company dropped its claim on the 2ndcause of action while the defendant company gave up its claim inreconvention and the remaining dispute on the first cause ofaction was referred to the arbitration of Mr. M. C. Sansoni aretired Chief Justice. On 10.5.1976 the arbitrator made his awardholding that the defendant company was liable to pay the plaintiffcompany Rs. 412,614/66 with legal interest thereon from the dateof plaint, namely, 13.10.1969 till payment in full along with costsof action and costs of the arbitration — see P2. The award wasreceived in Court on 28.5.76 but its validity was disputed by thedefendant company. After inquiry the court by its order of
376
Sri Lanka Law Reports
{1981J 2S.L.R.
13.12.1976 upheld the award, and decree (P3) as of this date wasentered on 2.2.77 in terms of the award. In the meantime by theLand Reform (Amendment) Law No. 39 of 1975 which becamelaw on 17.10.1975 Elkaduwa Group and Rangalla Group belon-ging to the defendant company were vested in the Land ReformCommission which however became liable to pay compensationin respect of the said estates. On 25.6.77 the plaintiff company(hereafter sometimes referred to as the judgment-creditor) filed anapplication under Section 496(3) of the Administration of JusticeLaw No.44 of 1973 (amended by Law No. 25 of 1975) whichwas then in operation for execution of the decree (Journal EntryNo. 102). The Court ordered notice to show cause why writshould not be issued on the defendant company (hereafter some-times called the judgment-debtor). Eventually notice was issuedfor service on the judgment-debtor through its attorney. TheFiscal reported service of notice to Court and upon this on
the Court ordered writ to issue (J. E. 108). Attempts toget the Land Reform Commission to deposit sufficient moneyfrom the compensation it held payable to the judgment-debtor, tosatisfy the decree proved abortive. On 27.11.1978 the Attorneys-at-Law for the Judgment-creditor wrote to the Registrar's Fiscal(sic) of the District Court of Colombo calling upon that official toissue a prohibitory notice on the Chairman of the Land ReformCommission seizing in his hands the moneys it held payable to thedefendant in this case.
Writ in fact was issued on 2.3.1979 (J. E. 108A) and theFiscal in a memorandum filed of record in the District Courtproceedings noted that he had received the writ on the same day.The Fiscal also made an entry on the same memorandum statingthat he received letter dared 27.11.1978 of the Attorneys-at-Lawfor the judgment-creditor requesting that a prohibitory notice beissued on the Land Reform Commission on 2.3.1979. Under thedate 6.8.79 the Fiscal made the following entry in the memoran-dum referred to
"Wide section 226 (proviso) it is not necessary to demand
payment as defdt. is out of Ceylon. Proh. notice issued —
(1)
(2)
(3)
Chairman L.R.C. } Under regd. ewer
Process server James to post on Court notice Board."
The prohibitory order that was in fact issued was presumablyunder section 229(a) of the Civil Procedure Code and was dated6.3.1979. It prohibited the defendant from receiving from theChairman of the Land Reform Commission any money up to theextent of the claim and costs due on the decree entered in thiscase. It also prohibited the Chairman of the Land Reform Commi-
CA Leech man & Company Ltd. v. Rangalla Consolidated Limited (SozaJJ 377
ssion from making payment of the said money or any part thereofto any person. The order in question has been drawn up in subs-tantial conformity with Form 44 provided in the First Scheduleof the Civil Procedure Code. The defendant referred to was thejudgment-debtor in the case and a creditor of the Land ReformCommission in respect of the compensation referred to. The LandReform Commission was a debtor of the defendant.
On a separate sheet filed of record in the lower court procee-dings process server James has noted the fact that the notice inquestion was posted on the notice board of the District Court.The writ of execution dated 2.3.1979 issued to the Fiscal is filedof record obviously after its return, with the following endorse-ment on its back under date 8.3.1979.
“It is not necessary to demand payment when defdt. is out of
Ceylon – vide proviso to section 226 C.P.C.''
The person who signed the prohibitory notice, however,described himself as Registrar of the District Court of Colombo —see P4.
The following facts clearly emerge from the record:
The Fiscal was put in motion by an application dulymade for execution of decree to the Court which madethe decree sought to be enforced (s.496(1) AJ.L. ands.223 C.P.C.).
The application for execution of decree was in substan-tial conformity with the requirements of the law opera-tive then and even now (s.496(3) AJ.L. and s.224 C.P.C.)
The applicant being the unsatisfied judgment-creditor wasentitled to obtain execution of the decree (s.496(5)AJ.L. and s.225(1) C.PjC.).
On 29.9.1978 the court presumably satisfied on points(2) and (3) ordered writ to issue (s.225(3) C.P.C.)
Writ was in fact issued in proper form {Form 43 of theFirst schedule C.P.C.) from the Court on 2.3.1979 andthe Fiscal received it on the same day (s.225(3) C.P.C.).
No demand was made of the judgment-debtor beicause itwas a company with residence out of Sri Lanka — (pro-viso tos.226 C.P.C.).
378
Sri Lanka Law Reports
11981] 2S.L.R.
This was a debt not secured by a negotiable instrument.The seizure was made by a written prohibitory order sentby registered post to the judgment-debtor and to theChairman, Land Reform Commission. It was signed by an
* official under the designation of Registrar (s.229(1) and(a) C.P.C.)
A copy of the order was posted on the Court noticeboard (s.229 C.P.C.).
It will be seen therefore that there has been except in twomatters compliance to the letter with the requirements prescri-bed by sections 223, 224, 225, 226 and 229 of the Civil ProcedureCode with special reference to what is laid down in sub-section (a)of section 229. One debatable natter is. the requirement that theFiscal should sign the prohibitory notice. The Fiscal and hisdeputy are officials who earlier functioned under the provisions ofthe Fiscals Ordinance No. 4 of 1867 as amended from time totime (Cap. 11 L.E.C. — 1956 Revision). Under section 4 of theFiscals Ordinance it was lawful for the Fiscal or Deputy Fiscal toappoint by writing under his hand any person to execute processin any particular case and process by that ordinance included allcitations, monitions, summonses, mandates, subpoenas, notices,writs, orders, warrants and commands issued by the Court. TheAdministration of Justice Law No. 44 of 1973 came into forceon 1st January 1974 and by its section 3 Chapter 1, the FiscalsOrdinance was repealed. By virtue of section 39(1) of the Admi-nistration of Justice Law, to each court established under the newlaws provision was made for the appointment of a Registrar, Fiscaland such other officers as may be necessary for the administrationof such court and the performance of its duties including the ser-vice of process and the execution of decrees and other orders.It is a matter of common knowledge that the Registrar of everycourt was invariably appointed as Fiscal. Under section 62 of theJudicature Act No. 2 of 1978, Chapter 1 of the Administration ofJustice Laws was repealed but of course this did not bring the Fis-cals Ordinance back to life. Section 52 of the Judicature Act likesection 39 (1) of the Administration of Justice Law before it, provi-ded for the appointment of Registrars, Fiscals and other officersfor the administration of every court and the performance of itsduties including the service of its process and execution of itsdecrees and orders. The old practice was adhered to and everyRegistrar was appointed Fiscal. In fact the writ of execution andsome of the later precepts to serve process filed of record in theinstant case are addressed to the Registrar/Fiscal by the Courtitself and this shows recognition of the dual capacity of thisofficial. The letter of the Attorneys-at-Law for the plaintiff dated
moving for a prohibitory notice was addressed, as Ihave already noticed, to the "Registrar's Fiscal." This letter was in
CA Leechman & Company Ltd. v. Rangalla Consolidated Limited (Soza J.) 37L
fact addressed to the Fiscal. The prohibitory order was signedunder the description Registrar by an official who was bothRegistrar and Fiscal. The official who signed the prohibitorynotice was in fact the Fiscal whatever the description he gavehimself.
In any event any irregularity in the matter of signing thenotice and addressing it to the Chairman, Land Reform Com-mission need not be considered fatal in view of section 8 of theCivil Procedure (Special Provisions) Law No. 19 of 1977. By Sec-tion 8(1) of this law no party to any action, application or othermatter instituted in or made to any civil court shall be non-suitedwhere no prejudice is caused by reason of non-compliance withany of the provisions of the Administration of Justice Law or theCivil Procedure Code if the requirements are substantially comp-lied with. No prejudice has been caused by the fact that the offi-cial who signed this prohibitory notice addressed it to the Chair-man, Land Reform Commission and not to the Commission andsigned it under the description of Registrar. These objections werenot specifically taken before the District Judge. When the lawyersfor the Commission filed their objections that the prohibitorynotice was bad obviously they did not contemplate the objectionsthat were formulated before us on the grounds of the Registrarsigning the notice or the notice being addressed to the Chairman.
A party aggrieved must either show that he has taken an objec-tion, such as these at the hearing below or state in his affidavitthat he had no knowledge of the facts which would enable him todo so. The judgment-debtor and the Land Reform Commissionknew how the prohibitory orders were signed and addressed butdid not take the point in the lower court. Had it been so taken,this court would have had the advantage of knowing what theDistrict Judge had to say about the question. He would haveknown best whether the Registrar of his Court was not also theFiscal. The judgment-creditor would then have been able to placeevidence before the Court to meet the point. Further, the Chair-man of the Land Reform Commission wrote to the judgment-creditor letter P8 dated 3.9.1979 which inferentially is an admi-ssion of the validity of the prohibitory notice. The Chairmanconcedes he is "prohibited and restrained from making paymentof the said debt or any part thereof to any person whatsoever."The present objections are in the teeth of the earlier concession.So far as the judgment-creditor was concerned he had soughtcompliance in terms of the section from the correct official.As Sansoni, J. (later C.J.) stated in Peiris v The Commissioner ofInland Revenue,1
380
Sri Lanka Law Reports
[1981 j 2 S L R
"It is well settled that an exercise of power will be referableto a jurisdiction which confers validity upon it and not to ajurisdiction under which it will be nugatory."
In the case of Nanayakkara v Sulaiman (1 (a)) it was held that inexecution proceedings the Court will look at the substance of thetransaction and will not be disposed to interfere on technicalgrounds. Especially where no objection has been taken at theearliest possible opportunity technicalities will be allowed onlyvery exceptionally to prevail in execution proceedings. Accor-dingly all preliminary steps up to the stage of the garnishee procee-dings under section 230 of the Civil Procedure Code must be heldto have been duly complied with.
I will now discuss the controversy in regard to the validity ofthe garnishee proceedings in this case which more or less lie at thecentre of the dispute. In the English case of Choice InvestmentsLtd. v Jeromnimon (Midland bank Ltd. garnisheeP Lord Den-ning M. R. explained the word 'garnishee' as follows:
"The word 'garnishee' is derived from the Norman-French. Itdenotes one who is required to 'garnish,' that is, to furnish,a creditor with the money to pay off a debt. A simple instancewill suffice. A creditor is owed £ 100 by a debtor. The debtordoes not pay. The creditor gets judgment against him for the£ 100. Still the debtor does not pay. The creditor then discovers that the debtor is a customer of a bank and has £ 150 athis bank. The creditor can get a 'garnishee' order against thebank by which the bank is required to pay into court or directto the creditor, out of its customer's £ 150, the £ 100 whichhe owes to the creditor."
The garnishee therefore is the person garnished, that is, theperson against whom process of garnishment is issued. He is onewho has money or property in his possession belonging to a judgment-debtor or who owes the judgment-debtor a debt which isattached in his hands. The garnishment itself is a warning to aperson in whose hands the effects of another are attached, notto pay or deliver the money in his hands to the judgment-debtorbut to appear and answer the judgment — see Black's Law Dictio-nary.
In Sri Lanka garnishee proceedings are provided for in section229 and 230 of the Civil Procedure Code. Section 230 is linkedwith the steps taken under section 229(a). Under subsection (1) ofsection 230 a debtor prohibited under clause (a) of section 229may upon an ex parte application of the judgment-creditor besummoned by the Court to show cause why he should not pay to
CA Leechman & Company Ltd. v. Rangalla Consolidated Limited (SozaJ.) 381
the judgment-creditor the debt due from him to the judgment-debtor or so much thereof as may be sufficient to satisfy thejudgment. Notice under this section, it must be observed, is sent toa debtor of the judgment-debtor. If such debtor does not disputethe debt due or claimed to be due from him, and fails within suchtime as may be allowed by the court to pay into court the amountdue from him to the judgment-debtor or an amount equal to thejudgment, whichever is less, or if he does not appear upon sum-mons then the court may order execution to issue to levy theamount due from such debtor or so much thereof as may be suffi-cient to satisfy the judgment. The key words in this section are"if such debtor does not dispute the debt due or claimed to bedue from him."
The section itself has been interpreted in a number of cases.The first case to which reference may be made is the case ofGurusamy Pi Hay v Paianiappen. ' (Wood Renton J. as he then was)who decided this case stated as follows at page 18:
"It is clear that the object of sec. 229 of the Civil ProcedureCode is to facilitate the expeditous recovery of the propertyof the judgment-debtor. Among the property which may be sorecovered the section, taken in conjunction with sec. 230,provides for the inclusion of debts due to the judgment-debtor as to whose existence there is no dispute. It appearsto me in principle that these sections should be confined tocases in which the debtor would have had no defence if he
had been sued by his own creditor, the judgment-debtor."
»
It was held in that case that where the debtor of the judgment-debtor can set up a claim or set off against the judgment-debtor,he cannot be made subject to an order under section 229 and sec-tion 230 of the Civil Procedure Code.
In the case of Usoof v Sinna Umma 4 a garnishee order had beenissued under section 230 and among the objections raised was thatthe debtor was disputing the debt and therefore no order could bemade under section 230. Hutchinson C.J. held that this was a validobjection.
In 1930 there was the case of Supramaniam Chetty v Cave &Co.5 In that case a garnishee order had been issued under section230 of the Civil Procedure Code. When the debtor of the judgment-debtor appeared and stated that there was no money of thejudgment-debtor in his hands the trial court refused to hold aninquiry into the question. Jayawardena A. J. who decided this casein appeal after referring to the fact that in various cases it hadbeen held that where a debtor disputes the debt due to the judg-ment-debtor the court had to stay its hand, added that there were
382
Sri Lanka Law Reports
[1981] 2S.L.R.
two requisites before the court could decide the matter: Firstthere must be a debt in existence and secondly that debt must bedisputed. In the case before His Lordship the debtor had deniedthe existence of the debt. Jayawardena A. J. took the view thatthe court had ample power to inquire into the matter. The appealwas allowed and the case was sent back leaving it to the debtorto prove that there was never a debt due.
Four years later in the case of Jayaweera v Abdul Cader6Dalton, J. referred to the earlier decisions and made, what I woulddescribe with very great respect, a not altogether successfulattempt to distinguish the case of Supramaniam Chetty v Cave &Co. (supra). He himself however took the view that where it isapparent that there is a bona fide dispute as to the existence ofthe debt by the debtor to the judgment-debtor the court had nopower to hold any inquiry but must discharge the debtor. Obvious-ly the reasoning behind this principle is that the court should nothold what would amount to a trial within a trial. Although Jaya-weera v Abdul Cader (supra) was decided by? a single Judge still thedecision accords with sound sense and with what the statute laysdown. Further, it is consistent with the earlier decisions exceptSupramaniam Chetty v Cave & Co. (supra). The decision in Jaya-weera v Abdul Cader (supra) must be regarded as laying downthe law correctly. If there is a bona fide dispute as to the existenceof the debt, that will provide a good defence to a garnishee sum-moned under section 230 of the Civil Procedure Code.
In the instant case the judgment-creditor made an applicationunder section 230 of the Civil Procedure Code when it found thatthe Land Reform Commission was undecided on the question ofbringing in the compensation due to the judgment-debtor. Thecourt then summoned the Land Reform Commission to showcause why it should not pay the judgment-creditor the debt duefrom it to the judgment-debtor or so much thereof as may besufficient to satisfy the judgment (seeJ.E. 113, 113A).
It is conceded that the Land Reform Commission holds in itshands the compensation due on the vesting of Elkaduwa Groupand Rangalla Group belonging to the judgment-debtor. The simplequestion is, has the debtor, in this case, the Land Reform Commi-ssion bona fide disputed the debt ? In my view it has not. To saythat there are other creditors of the judgment-debtor and there isnot enough money to go round, is not a denial of the debt. TheLand Reform Commission has not expressly denied the debt.Liability to pay and inability to pay are two-different things. TheLand Reform Commission offered to pay 60% of the debt. Thisobviously is on the footing that it recognises and admits its lia-bility to pay the debt. Its plea of inability to pay is an entirely
CA Leechman & Company Ltd. v. Rangalla Consolidated Limited (Soza J.) 383
different matter and can be easily resolved as the Land ReformCommission holds enough money of the judgment-debtor in itshands to satisfy the decree.
The plea of the Land Reform Commission that the compen-sation is insufficient to pay all the creditors can be substantiatedonly on the footing that it is obliged to deduct the amount due-toVinitha Ltd. the 2nd respondent. But is it ? The 1st respondentrepudiates liability to pay Vinitha Ltd. In addition the claim ofVinitha Ltd. on the face of it seems prescribed. The Land ReformCommission by its insistence on satisfying this disputed liabilityis putting its own bona fides under a cloud.
The obligation to deduct the liabilities imposed on the LandReform Commission by section 42B{5) of the Land Reform(Amendment) Law No. 39 of 1975 should not be understood as aduty to accept blindly the profit and loss account, balance sheetand other information supplied by the statutory lessees (hereVinitha Ltd.) under section 42 (C) (3) of the same law. The LandReform Commission has also a duty by the previous owner todeduct only such debts as can be regarded as properly establishedand must therefore be circumspect especially where the claim isfor the benefit of the statutory trustee. The liabilities which theLand Reform Commission is duty bound to meet are admitted lia-bilities or only liabilities established as on a court decree. A dis-puted liability as here and on the face of it prescribed is not aliability of the Commission until the claimant has it properlyresolved for instance by recourse to Court proceedings. Leave outthe alleged debt to Vinitha Ltd., and there is enough money topay all the other creditors. Therefore even inferentially it cannotbe said that there is a bona fide dispute as to the existence of thedebt to the judgment-debtor. There is no express denial of thedebt. Nor even by implication.
I will deal presently in greater detail with the provisions of theLand Reform Law but suffice it to say for the present that eventhese provisions do not help the Land Reform Commission out ofthe obligation to pay the amount decreed in this case. Here Iwould like to refer to the case of Saibo v. Peiris.1 In this case LyallGrant J observed that an examination of section 230 of the CivilProcedure Code points to the inference that the only cause whicha debtor prohibited under clause(a) of section 229 is allowed toshow against remitting money to court is that he is not indebted.In that case the debtor had appeared in answer to the notice andclaimed that the money which he held of the judgment-debtorconstituted the salary of a public servant which was not seizableunder section 218(h) of the Civil Procedure Code. The Courttook the view that so f»r as the debtor was concerned it did not
384
Sri Lanka Law Reports
{1981] 2S.L.R.
lie in his mouth to raise a defence which the judgment-debtorhimself could have raised. That was a matter for the judgment-debtor. This decision went against the garnishee.
It is one thing for the debtor to say that the money he holds isinsufficient to pay all the creditors and quite another and a diffe-rent thing to say he does not owe any money to the judgment-debtor. In the instant case the Land Reform Commission onbeing summoned says the former but not the latter and this isdemonstrated by the fact that the Commission by its letter dated3.9.1979 written to the judgment-debtor accepted the prohibitorynotice and only wanted a court order to pay the money intocourt. In fact after considerable vacillation (see P6, P7, P8 and P9)the Commission by the letter of 4.10.1979 said it was unable tomake the payment as the liabilities exceeded the amount of com-pensation. Eventually on 13.6.1980 the Commission on an orderof Court made of consent deposited to the credit of this case thesum of Rs. 1,338,903/- being the amount of compensation paya-ble by it to the account of the judgment-debtor (see J.E. 119 and120 and the account sheet). This sum is more than enough tosatisfy the decree in this case.
It is now necessary to see what impact the provisions of theLand Reform Law No. 1 of 1972 as amended by the LandReform (Amendment) Law No. 39 of 1975 have on the questionbefore us. The amendments to the Land Reform Law effected in1975 consisted of the addition of a new part entitled Part MIAsetting out special provisions relating to the estate lands ownedby public companies in new sections numbered 42A to42M. Thejudgment-debtor in the case before us is a public company andtherefore the new sections 42A to 42M apply to it. By virtue ofsection 42A every estate land owned or possessed by a publiccompany was deemed to vest in and be possessed by the LandReform Commission with effect from 17.10.1975 which is thedate on which the new provisions came into operation. ElkaduwaGroup and Rangalla Group owned and possessed by the judgment-debtor were deemed to vest in and be possessed by the LandReform Commission with effect from 17.10.1975. Under sub-section 5(a) of section 42B the rights and liabilities of the formerowners, in this case the judgment-debtoc under any contract oragreement, express or implied, which related to the purposes ofthese estate lands and which subsisted on the day immediatelyprior to 17.10.1975 and the other rights and liabilities of theowner which related to the running of these estate lands andwhich subsisted on such day became the rights and liabilities ofthe Commission. The amounts required to discharge all these lia-bilities had to be deducted from the amount of compensationpayable in respect of these estate lands. The rights and liabili-
CA Leechman & Company Ltd. v. Rangalla Consolidated Limited (Soto J.) 385
ties referred to in section 42B would ordinarily be disclosed in theprofit and loss account and balance sheet up to the date of vesting,which the agency house or organization managing the estate landbefore the vesting and after it for the Commission as statutorytrustee, had to furnish under subsections (1) (e) and (3) of section42C. Section 42J provides for the payment of compensation inrespect of every estate land vested in the Commission — see sub-section (1). Under subsection 3 of this section the manner andmode of payments of compensation had to be determined by theMinister in consultation with the Minister of Finance and theMinister of Planning and Economic Affairs. From the amount ofcompensation payable the Commission was under a duty after rea-sonable notice to the owner to pay any sum certified as due to theCommissioner of Inland Revenue and to the Commissioner ofLabour — see subsection 6(a) and (b).
The following arguments were advanced on the basis of theseprovisions:
Compensation has not been finalised and awaits theMinister's determination as to the manner and mode ofpayment under section 42J(3). The Minister's determina-tion becomes very relevant as the liabilities exceed theassets.
As the Land Reform Commission became vested with therights and saddled with the liabilities of the judgmentdebtor with effect from 17.10.1975 and decree wasentered on 13.12.1976 the proper course for the judg-ment creditor to have followed was to have the Commi-ssion substituted in the room of the judgment-debtor oradded as a party defendant. As this was not done theLand Reform Commission not being a party to the actionis not bound by the decree in this case.
There is a statutory duty imposed on the Land ReformCommission to deduct all liabilities from the amount ofcompensation payable and it is not possible to do thisexcept on a rateable basis as the amount of compensation
is insufficient to meet all the liabil ities.
In regard to the first point, there is material to show that com-pensation has been assessed at a flat rate of Rs. 663/- per acre.During the argument it was revealed that compensation at thesame rate had been agreed upon for estate lands between represen-tatives of the sterling public companies and the Land ReformAuthorities. The figure of Rs.663/- per acre was a standard rate forall estate lands of public companies subject to fluctuations wherespecial considerations came into play. There is no reason to doubt
386
Sri Lanka Law Reports
[1981J 2S.L.R.
the authenticity of the statement that compensation had beenfixed for Elkaduwa Group and Rangalla Group at Rs. 663/- peracre. It is true that counsel who appeared for the judgment-credi-tor at the hearing of 12.5.1980 had mentioned that the totalacreage for which compensation had been fixed may not be cor-rect as uncultivated extents where buildings stood had been leftout. But there can be no question that compensation was fixed bythe time the matter came up on 12.5.1980, at Rs. 1,400,750/- outof which certain deductions had already been made leaving abalance of Rs. 1,358,903/-. The Attorney for the Land ReformCommission mentioned that this sum was in its custody but pay-ment in full satisfaction of the decree could not be made as thetotal claims of all creditors amounted to Rs. 1,747,624/-. He wasprepared to pay 60% of the claim of the Judgment-creditor. Hehowever agreed to deposit the sum of Rs. 1,358,903/- in court. Healso added he will file a list of claimants. It is clear from thesecircumstances that a definite amount of compensation due onaccount of the vesting of the judgment-debtor's estate lands hadcome into the hands of the Land Reform Commission. UnderSection 42J(3) true enough the Minister can determine the mannerand mode of payment. But it is not open to him to reduce theamount of the payment. The statute does not give him this power.Payment must be made of the amount determined as compensa-tion but the manner and mode of payment can be fixed by theMinister. For instance, he can determine tnat payment be madein bonds or in instalments. But he cannot vary the amount of thepayment or order rateable settlement. Under the guise of deter-mining the manner and mode of payment he can in no wiseinterfere with the amount of compensation or the quantum of theclaims of creditors. The section gives him no such powers.
On the second point it must be bbrne in mind that the suit inwhich the decree sought to be executed was entered was filed longbefore the land reform law was even thought of. The parties to thesuit agreed to arbitration on 15.7.1975 before the Land Reform(Amendment) Law No. 39 of 1975 became operative. The agree-ment was to abide by the award of the arbitrator.
Clause 3 of the agreement reads as follows:
"The award of the Arbitrator as to the sum so found to havebeen properly and necessarily incurred and due and owing, ifany, from the defendant to the plaintiff will be accepted byboth parties without question and without any dispute as tothe legality of the arbitration or the award."
There were agreements as to interest and costs of arbitrationand costs of suit also. It is significant that the present 2nd respon-dent was at this time acting as ag^nt of the judgment-debtor.
CA Leechman & Company Ltd. v. Rangalla Consolidated Limited (Soza J.) 387
It must be borne in mind that a precise and definite formulafor the determination of the action had already been entered intoby the parties on 15.7.1975 before the Land Reform Law cameinto force. By the time the amended Land Reform Law came intoforce the plaintiff in the case had already a vested right — its claimhaving become a chose in action. The new legislation had noretrospective effect. Substantive rights in a pending action will notordinarily be affected by a change in the substantive law. As Max-well states in his work The Interpretation of Statutes 12th Ed.(1969) pp. 220,221, in general when the substantive law is alteredduring the pendency of an action, the rights of the parties are deci-ded according to the law as it existed when the action was begun,unless the new statute shows a clear intention to vary such rights.Further, the liability of the defendant company was according tothe agreement of the parties to be fixed with reference to and interms of the arbitrator's award which, subject to jurisdictionaldefects, would become the decree of court. To have broughtin the Land Reform Commission at the stage of the arbitrationwould have unnecessarily hampered the 'arbitration. Further,as the liability was one incurred by the defendant company beforethe vesting and the rights of parties would be determined as theywere at the time the action was instituted, the plaintiff had theoption open to it of proceeding against the defendant companyalone. The Land Reform Commission is not in this case as aparty bound by the decree but as a party prohibited and cast withstatutory obligations as a debtor of the judgment-debtor undersections 229(a) and 230 of the Civil Procedure Code. Garnishmentis an executory process of court. It does not proceed on the basisof the garnishee being bound by the decree such as a party to theaction would be.
To say that the Land Reform Commission is not bound bythe decree is irrelevant and not a defence. The only defence avai-lable is that the debt is being bona fide disputed — see Saibo v.Peiris (supra) and Jayaweera v. Abdul Cader (supra). This defencethe Land Reform Commission has not taken either expressly or byimplication.
The statutory duty to deduct liabilities should not be unders-tood to mean a duty to deduct disputed liabilities. In the matterof the application for leave to appeal the judgment-debtor in itsobjections dated 22.1.1981 and in the affidavit of one of itsdirectors of the same date denies that any sum is owed by it toVinitha Ltd. the 2nd respondent. Unless the claim of VinithaLtd. is admitted or has been adjudicated upon and embodied in adecree of court the Land Reform Commission would be steppingoutside the pale of its legal rights and obligations to seek to deductsuch a claim from the amount of compensation. Senior counsel at
388
Sri Lanka Law Reports
[1981J 2S.L R.
one stage contended that there was an admission of the claim byan agent of the judgment-debtor. This so-called admission has beenmade by a firm of auditors in a letter 2RI dated 13.3.1981 butthis letter was written at a time when they were on their ownshowing no longer auditors or accountants of the judgment-debtor. This unauthorised admission is of no avail against theobjections and affidavit filed on behalf of the judgment-debtor.
The Land Reform Commission has, to put it shortly, no autho-rity to pay claims disputed by the party against whom they arebeing made. No one has constituted the Land Reform Commissionan adjudicator of disputes between the owners of lands vested in itand their creditors. Even if indirectly it seeks to do this it isarrogating to itself powers it does not have.
And then there is the submission that the claim of the 2ndrespondent is on the face of it prescribed. Whether it is or not,the repudiation of the liability by the judgment-debtor is clear.Therefore the Land Reform Commission is under no statutoryobligation to deduct the claim of Vinitha Ltd. In this situation theplea that the compensation is insufficient to meet the liabilitiesof the judgment-debtor is without substance. In these circums-tances the objections raised by the Land Reform Commissioncannot relieve it of its obligations to submit to garnishment.
I will now come to the question of the status of the 2nd res-pondent Vinitha Limited to participate in the proceedings. Thelearned District Judge on being informed by the Land ReformCommission that there were other creditors who had to be satis-fied look a step for which there is no provision in the Civil Proce-dure Code. He directed that a list of such creditors be filed andwhen this was done he directed that notice be issued on thesecreditors. Fortunately only one creditor responded to the noticeand that was Vinitha Ltd. I shudder to think what would havehappened if all the creditors had turned up and if some of themadvanced competing claims inter se. All this was done despiteopposition by the judgment-creditor. Thereafter the learned Dis-trict Judge went on to hold an inquiry for which procedure toothere is no provision in our Civil Procedure Code.
Learned counsel for the 2nd respondent submitted that undersection 839 of the Civil Procedure Code it was open to the DistrictJudge to in debito justitiae to do that real and substantial justicefor the administration of which alone the court exists. Thereforethe Judge was right in the course of action he took. Section 839 ashas been pointed out in more than one decided case does notcreate new powers but merely saves the inherent powers of thecourt to make such orders as may be necessary for the ends of
CA Leech man & Company Ltd. v. Rant,
justice or to prevent abuse of the process of the court — see forinstance the case of Paulusz v Perera.8
A Woodroffe J. laid down in the case of Hukum Chand Boidv Kamalanand Singh9 the Civil Procedure Code binds all courts sofar as it goes but it is not exhaustive. The Legislature cannot anti-cipate and make provision to cover all possible contingencies. Thepower and duty of the Court in cases where no specific rule existsto act according to equity, justice and good conscience remainunaffected. In the exercise of its inherent powers the Court mustbe careful to see that its decision is,based on sound general princi-ples and is not in conflict or inconsistent with them or the inten-tions of the Legislature. Howard. C. J. adopted Woodroffe J.'s enunciation in the case of Karunaratne v. Mohideep.' c In thecase of Victor de Silva v. Janadasa de Silva11 Manickavasagar J.explained these principles as follows:
”… our Code is not exhaustive on all matters; one cannotexpect a Code to provide for every situation and contingency;if there is no provision, it is the duty of the Judge, and it lieswithin its inherent power to make such order as the justice ofthe case requires.”
The inherent powers of the court were preserved in section151 of the Indian Code of Civil Procedure 1908 and our section839 is a verbatim reproduction of it brought in by an amendmentof 1921. The inherent powers are not to be used for the benefitof a litigant who has his remedy under the Code of Civil Proce-dure. On any. point specially dealt with by the Code the Courtcannot disregard the letter of the enactment according to its trueconstruction.
The only provisions in the Civil Procedure Code under whichVinitha Ltd. could have participated in these proceedings aresections 350, 351 and 352. These sections deal with the questionof concurrence but apply only to decree-holders. The Roman-Dutch Law regarding concurrence has been superseded by theCivil Procedure Code. By the Roman-Dutch Law all creditors wereentitled to claim concurrence regardless of the dates of theirdecrees or application for execution or indeed whether they hadobtained decrees or not. But that principle is now superseded bythe provisions of the Civil Procedure Code. This has been affirmedin a series of cases notably Konama/ai v. Sivakulanthu,12 Raheenv. Yoosoof Lebhe,13 Mendis v. Peiris?4 Meyappa Chetty v.Weerasooriya1b and Sellappa Chettiar v. Arumugam Chettiar.16
What the learned District Judge has done on this case is tohark back to the days before the Civil Procedure Code and invite a
390
Sri Lanka Law Reports
[1981] 2S.L.R.
scramble by creditors, even those without decrees, which has theeffect of keeping at bay a creditor who has been vigilant enoughto obtain a decree. This is the very situation which the CivilProcedure Code seeks to avert. As Burnside C. J. said in the caseof Konamalai v Sivakulanthu (supra) at p. 204.
"I cannot think that the Legislature intended only to
provide for some claims, and to leave others unprovided for. Inmy opinion, for the future claims must be governed by theCode, and I should regard it as a misfortune if in addition tothe claims which the Code has provided for, the unsuitableprovisions of the Roman-Dutch Law must still be reckonedwith. It would, in my opinion, be contrary to the intent ofLegislature, and wholly at variance with the approved andcommon sense maxim vigil an tibus non dormientibus equitassubvenit."
Giving every credit to the desire of the learned District Judgeto do justice, I think he strayed too far afield in seeking to disposeof this matter by resorting to inherent powers in a manner so as tothwart the well laid down procedures of our Code. In fact theprocedure he adopted creates dangerous precedents and in effecthe adjudicates in favour of Vinitha Ltd. to the prejudice of thejudgment-debtor without hearing the parties on the dispute bet-ween them.
In the proceedings before us Vinitha Ltd. has been named asthe 2nd respondent. Learned senior counsel argued that his clienthad been brought into the case by notice issued by the court andthereafter made respondent in the proceedings before us. In thesecircumstances he is entitled to participate in the proceedings. Nodoubt these are considerations that should be taken into account.The 2nd respondent is entitled to be provided with an opportunityto justify its presence in the case. But this does not imply a waiveron the part of the judgment-creditor-petitioner of its right toobject to the status of Vinitha Ltd. in the case. Here I would liketo refer to the case of A. G. v. De Croos.' 7 In this case counsel hadobjected to the question of status being raised in appeal as thepoint had not been taken in the District Court or in the petition ofappeal. De Sampayo J. pointed out that as the question did notdepend on the ascertainment of new facts and it was purely aquestion of law it could be raised in the appellate Court. In theinstant case objection was taken in the District Court and evenin the petition filed before us.
There is also the case of Deerananda Thero v. Ratnasara77?ero18 where the Court said as follows:
CA Leechman & Company Ltd. v. Rangalla Consolidated Limited (Soza J.) 39I
"Where it is shown that the proceedings are illegal in the sensethat the court had no jurisdiction to proceed to make an orderthere is in my opinion no room for argument that it is too lateat this stage of appeal to object to the proceedings taken andthe order of court consequent upon these proceedings."
Where the point depends upon a question of fact which isdisputed and should be determined on evidence, then it cannot betaken up for the first time in appeal unless the facts necessary forthe determination appear in the evidence and are not in dispute atall. if the court in any case is itself satisfied it has no jurisdictionto entertain a matter it is its duty to give effect to its view takingif necessary the initiative upon itself.
The question whether Vinitha Ltd. the 2nd respondent has astatus to appear in this case is a question of law. It does notdepend upon the proof of any additional facts. Hence it canalways be taken up before us. The fact that the 2nd respondenthas been made a party to these proceedings does not resolve thequestion whether it is entitled to be made a party. The 2nd res-pondent was made a party to the proceedings in the District Courtin the teeth of protests by the judgment-creditor and thereforehad to be made a party to the proceedings before us and heardon the very question of its locus standi in the case.
As I said before the procedure adopted by the learned DistrictJudge is in conflict with what is enacted in the Civil ProcedureCode and accordingly cannot be justified as an exercise of inherentpowers. Under the Civil Procedure Code the 2nd respondent isnot entitled to participate in these proceedings even if its claimsare admitted. Under the Land Reform Law, the Land ReformCommission is under no obligation to treat a disputed claim as aliability and deduct it from the compensation. Therefore the 2ndrespondent has no locus standi in this case and no considerationneed be paid to its claims.
>
For the reasons I have given I set aside the order of the learnedDistrict Judge of 25.9.1980 and make order directing the 3rdrespondent to pay to the petitioner before us its full claim, costsand interest as embodied in the decree P3. As the compensationwith accrued interest due to the 1st respondent is in deposit in thiscase the petitioner will be entitled to receive the full amount of itsclaim, costs and interest as specified in the decree from theamount in deposit.
In the proceedings before us the opposition was led by the 2ndrespondent whom we heard at length on the full range of the caseon its own insistence that this was necessary if it is to justify its
392
Sri Lanka Law Reports
11981) 2 S L R
participation in the proceedings and establish its position that thepetitioner's application should be refused. The 3rd respondentmerely played a supporting role and the 1st respondent wasunrepresented. Hence I order that the 2nd respondent alone dopay the petitioner the costs of the proceedings before us and makeno order for costs against the 1st and 3rd respondents of theproceedings before us. Regarding the execution proceedings inthe District Court of Colombo, I order the 1st respondent to paythe costs of the petitioner from 25.6.77 till 2.3.1979 both datesinclusive, the 3rd respondent to pay the petitioner the costs from3.7.1979 till date of payment of the claim, costs and interest interms of my order and 2nd respondent to pay the petitioner thecosts from 11.7.1980 till date of payment as aforesaid. In respectof the proceedings in the District Court therefore the petitionerwill receive three sets of costs. The costs due from the 1st res-pondent will also be paid from the money in deposit.
SENEVIRATNE, J. I agree.
Order of District Judge set aside.