012-SLLR-SLLR-2005-V-2-NIMALARATNE-PERERA-vs-PEOPLES-BANK.pdf
Nimalaratne Perera /s People's Bank (Gamini Amaratunga, J)
67
CA
NIMALARATNE PERERAVS
PEOPLE S BANKCOURT OF APPEALAMARATUNGA J.
CALA 124/2001,
C. ANURADHAPURA 174/65MMAY 12,2003,
JUNE 17TH, 30TH, 2003
Money Lending Ordinance – Section 5 – Introduction of Law of EnglandOrdinance, 22 of 1986 – Parate Execution of Property – Can the Bank recoveras interest a sum exceeding the principal sum lent ? Banking Business ?-People's Bank Act No. 29 of 1961 Amended by 32 of 1986 – 29 D – Resolution- Parate Execution.-Banking?
HELD-
Section 5 Introduction of Law of England Ordinance enacts that theamount recoverable on account of interest or arrears of interest shouldin no case exceed the principal sum. However there is nothing toprevent the Bank from recovering at any time arrears of interest equalto the principal however much interest the Bank may have previouslyreceived.
The Bank cannot recover any interest in arrears exceeding the principalat the time action is brought, but if the interest is paid from time totime, there is no limit to the amount the Bank may receive.
By Ordinance 22 of 1986 English Law relating to Banks and Bankingwas introduced into Ceylon and in all questions which arise in Ceylonwith respect of the Law of Banks and Banking the Law is the EnglishLaw, ‘Banking’ embraces every transaction coming within thelegitimate business of a Banker.
The accounts maintained by the Petitioner with the Peoples Bankwere current accounts and the law applicable is therefore EnglishLaw and under English Law compound interest is recoverable.
Limitation placed by Section 5 on the amount recoverable as interesthas no application to interest recoverable relating to a bankingtransaction.
6 S
Sri Lanka Law Reports
(2005) ? Sri L R.
The Board of the Bank is not bound by the limitation spelt out inSection 5 – The Board is entitled to pass a Resolution to recover thetotal of the capital sum remaining unpaid together with the agreedinterest thereon.
APPLICATION for Leave to Appeal from an Order of the District Court ofAnuradhapura.
Cases referred to :
Sinnathamby Cumaravely and another vs Muttutamby Sitlarapuvlapulle- 1881 – 4 SCC 28
Tennant vs Union Bank of Canada – 1894 AC 31
National Bank of India vs Stevenson – (1913) 16 NLR 496
Kalinga Indatissa with Rani! Samarasuriya for Petitioner.
Rohan Sahabandu with Ms. Sitari Jayasundera for Respondent.
September 3, 2004GAMIN! AMARATUNGA, J
This is an application for leave to appeal against the order of the learnedDistrict Judge of Anuradhapura refusing to issue an injunction restrainingthe respondent Bank from auctioning the properties described in theschedule to the plaint to recover the money due to the Bank from thepetitioner.
The Petitioner is a businessman who had two current accounts in theAnuradhapura branch of the respondent Bank. He has obtained severalloans from the Bank and according to the plaint the total amount of theloans obtained by him from the Bank totaled up to Rs. 28.50.000. TheBoard of Directors of the Bank, by virtue of the powers vested in it by thePeople’s Bank Act No. 29 of 1961 as amended, adopted two resolutionsto sell by public auction the properties mortgaged to it as security, torecover the amounts due to the Bank from the petitioner. According to thetwo resolutions the amounts due from the petitioner were Rs. 6,84,130,and Rs. 20,00,000 together with interest (at the rate of 28% and 29%) upto the date of payment.
CA Nimalaratne Perera Vs People's Bank (Gamini Amaratunga, J) 69
The Petitioner in his plaint alleged that he had paid more than rupeestwo million as interest for the loans he had taken. In his plaint the petitioneradmitted that a part of the loan he had obtained from the Bank remainedunsettled. However in his plaint or in the petition filed in this Court he hasnot specified the amount that remained due from him to the Bank. In hisplaint the petitioner averred that under section 2 of the Money LendingOrdinance, (Cap. 80 CLE 1956 Revision) the Bank could not recover asinterest a sum exceeding the sum lent. He therefore sought from theDistrict Court a declaration that the Bank was not entitled to recover fromhim as interest a sum exceeding the principal sum- lent to him. Asconsequential relief he sought an interim injunction restraining the Bankfrom auctioning the properties described in the schedule to the plaint.
The-Court in the first instance issued an enjoining order restraining theBank from holding the auction in terms of the resolution passed by itsBoard of Directors. After the Bank filed its objections to the petitioner'sapplication for an interim injunction, the learned District Judge, for thereasons set out in his order dated 4.4.2001, refused the petitioner'sapplication for an interim injunction. The petitioner now seeks leave toappeal against the said order.
In his petition presented to this Court the petitioner has set out threegrounds upon which he sought to assail the order of the learned Judge.Those three grounds are,
that the Judge failed to appreciate the legal principles involvedin the issue of injunctions ;
the Judge failed to appreciate that the payments made by thepetitioner exceed twice the amount of the principal sum loanedand advanced to the petitioner.
The Judge failed to appreciate the impact of section 5 of theIntroduction of Law of England Ordinance, (Cap 79 CLE, 1956Revision)
An examination of the order of the learned Judge clearly shows that thelearned Judge has correctly appreciated and properly applied the legalprinciples relating to the issue of injunctions to the facts of the petitioner'scase. There is no merit in the submission that the learned Judge hasfailed to appreciate the legal principles relevant to the issue of interim•injunctions.
70
Sri Lanka Law Reports
(2005) 7 Sri L R.
Items No. 2 and 3 above are linked and the validity of submission madein No. 2 above would depend on the interpretation one would place on theprovisions of section 5 of the Introduction of Law of England Ordinance.Before I proceed to examine the provisions of the said section 5,1 wish tomake the following observation. In the District Court the petitioner'scontention was that in view of the provisions of section 2 of the MoneyLending Ordinance, the Bank was not entitled to recover as interest anysum exceeding the principal sum lent. The learned Judge in his order hadvery clearly analyzed the provisions of section 2 of the Money LendingOrdinance and had demonstrated that section has no relevance to thepetitioner’s case at all. In this Court the petitioner has jettisoned thesubmission based on section 2 of the Money Lending Ordinance and hasrelied on section 5 of the Introduction of law of England Ordinance whichspells out a limitation similar to the limitation prescribed in section 4 of theMoney Lending Ordinance.
Section 5 of the Introduction of Law of England Ordinance (cap 79, C.L. E. 1956 Revision) enacts that the amount, recoverable on account ofinterest or arrears of interest shall in no case exceed the principle. Theprinciple embodied in this section has received judicial interpretation asfar back as in 1881. In Sinnathamby Cumaravely and another vs. MuttutambySittarapuvalpulle’, Carley C. J. referring to this principle said "there ishowever, nothing to prevent the obligee of a bond from recovering at anytimearrears of interest equal to the principle, however; much interest he mayhave previously received. He cannot indeed recover any interest in arrearsexceeding the principal at the time of actions brought; but if the interestis paid from time to time. There is no limit to the amount he may receive.(emphasis added)
By Ordinance No. 22 of 1866, English Law relating to Banks and bankingwas introduced into Ceylon and in all questions which arise in Ceylon withrespect of the law of banks and banking, the law to be administered is thesame as would be administered in England in the like case. The expression'banking' embrace every transaction coming within the legitimate businessof a banker. Tennant vs. Union Bank of Canada2. Maintaining a currentaccount between a bank and a customer and granting a loan or otherbanking facilities are legitimate businesses relating to banking andaccordingly the law applicable is the English Law.
CA Nimalaratne Perera Vs People's Bank (Gamini Amaratunga, J) 7 l-
The accounts maintained by the petitioner with the respondent werecurrent'accounts. Therefore, the law applicable to the transactions is theEnglish law. According to English Law compound interest is recoverable.In National Bank of India vs. Stevenson 3 the question arose whether inSri Lanka a bank could charge compound interest. It was argued thatalthough it is possible under the English Law, which is also applicable inCeylon, the operation of that part of English Law stands removed by reasonof section 3 {present section 5) of Ordinance No. 5,1852, (Introduction ofLaw of England Ordinance) which limits the amount of interest recoverable.This argument was specifically rejected by Pereira J.This decision clearlyshows that the limitation placed by section 5 of the Introduction of Law ofEngland Ordinance on the amount recoverable as interest has noapplication to interest recoverable relating to a banking transaction.
Further, I hold that when the Board of Directors pass a resolution undersection 29D of the People's Bank Act No. 29 of 1961 as amended by ActNo. 32 of 1986, the Board is not bound by the limitation spelt out in section5 of the Introduction of Law of England Ordinance. The Board is entitled topass a resolution to recover the total of the capital sum remaining unpaidtogether with the agreed interest thereon.
For the reasons set out above I hold that section 5 of the Introduction ofLaw of England has no application or relevance to the petitioner's case. Inview of this finding it is not necessary for me to consider or answer thesecond submission urged by the petitioner in support of this leave to appealapplication.
In the result I hold that there is no merit in this leave to appeal application.
I accordingly refuse leave to appeal and dismiss this application with costsin a sum of Rs. 10,000.
Application dismissed