018-SLLR-SLLR-2010-V-1-PEOPLES-BANK-AND-SEVEN-OTHERS-v.-YASASIRI-KATHURIARACHCHI.pdf
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People’s Bank and seven others v. Yasasiri Kasthwnarachchi
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PEOPLE’S BANK AND SEVEN OTHERSV. YASASIRI KASTHURIARACHGHISUPREME COURTTILAKAWARADANE, J.SRIPAVAN, J., ANDRATNAYAKE, J.
S. C. APPEAL NO. 11/2010S. C. (SPL.) L.A. NO 294/2009C. A. (WRIT) NO. 188/2009JUNE 30th, 2010JULY 2nd, 9th 2010
Constitution Article 4(c) – Civil Procedure Code – Section 34, 207and 406 – principle of res judicata – a final judgment passed bya competent court, having jurisdiction, will bar a subsequent ac-tion between the same parties upon the same cause of action?Collateral estoppel – Parate execution – Peoples Bank Act 29 of1981 – 32 of 1996
The Court of Appeal issued a restraining order against the Respondent- Appellants from proceeding with the auction and sale of the propertyscheduled on 7th November 2009, until the final determination of theaforesaid application by the Court of Appeal.
The Supreme Court granted Special Leave to Appeal on the following
issues –
Does the order of the Court of Appeal dated 5th November 2009nullify and/or stay and/or suspend the Court of Appeal judgmentin the Writ Application bearing No. 1268/98 and the judgment ofthe Supreme Court in Case No. S.C. (Spl.) L.A. 60/08?
Does the Commercial High Court of Colombo Case No. 213/07/MRbar the Respondent – Appellant from proceeding with the sale bypublic action of properties set out in the Resolution dated 10th July1997?
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Held:
The decision of the Supreme Court dated 3rd December 2008denying leave to appeal against the judgment of the Court ofAppeal decision dated 29th February 2008, whereby the Court of Ap-peal held that the Parate Resolution dated 10th July 1997 was validand refused to quash the said Resolution is final and conclusiveand cannot be reviewed and or rescinded by any other Court. Thejudgment of the Supreme Court in S.C. (Spl.) L.A. 60/08 |C.A.Application 1268/98 acts as a complete bar to a proceeding by thesame party which once again seek to question the validity of ParateResolution dated 10th July 1997.
In light of the judgment of the Supreme Court in S.C. (Spl.) L.A.60/08, the later Application in C.A. Writ 188/09 cannot alsosucceed in view of the principle of ‘collateral estoppel’ whereby aparty is barred from re-litigating an issue already finally determinedagainst such party in an earlier decision.
When there is a strong prima-fade case in favour of the partyseeking the relief, it is permissible to grant interim relief which givesubstantially the whole of the relief claimed in the action.
Per Shiranee Tilakawardane, J., –
“The Petitioner – Respondent has also raised the objection that thisCourt, in granting an interim order to proceed with the sale by theRespondent -Appellant, has acted per incuriam – or that this Courtcannot by way of interim order grant the final relief prayed for in anApplication.
In this context it is relevant to refer to the decision of the Court ofAppeal in Shell Gas Lanka Limited v. Samyang Lanka (Pvt.) Limitedwhere the Court held that it is permissible to grant interim re-lief which gave substantially the whole of the relief claimed in theaction, especially as the facts in this case disclose plainly thatthere is a strong prima facie case in favour of the party seeking therelief.”
The Petitioner – Respondent was presented with ample opportunityto raise issues of fraud and illegality against the Resolution.
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Having failed to raise such an argument in the intervening years, thebelatedness of this defence clearly reflects that this is an after-thought and indicative of a concoction and clearly manipulativeand abuse of legal process.
Case referred to:
Shell Gas Lanka Limited v. Samyang Lanke (Put.) Limited – (2005) 3 Sri
L.R. 14
APPEAL from an interim order of the Court of Appeal.
S.A. ParthaUngam, P.C., with Kushan D Alwis, Hiran Jayasuriya and
Nishkan ParthaUngam for the Respondent – Appellants.
Faiz Musthapa, P.C., with Anil Silva, P.C., and Riyad Ameen for
Petitioner – Respondent.
Cur.adv.vult.
July 09th 2010
SHIRANEE. TILAKAWARDANE, J.The Appeal is filed against the interim order of the Courtof Appeal, dated 5th November 2009 in CA Writ Application188/2009, wherein a Stay Order was issued restraining theRespondnet-Appellants from proceeding with the auction andsale of the property scheduled on 7th November 2009, untilthe final determination of the Application bearing No. CA WritNo 188/09 by the Court of Appeal.
This Court granted Special Leave to Appealon 11th February2009 on the question of law set out in paragraph 31 (b) and
of the Petition; granted relief in terms of paragraph (c) and
of the prayer to the Petition dated 16th December 2009 anddirected that the record in Court of Appeal Writ No. 188/09be sent to this Court forthwith.
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This Court granted Special Leave to Appeal specificallyon the following issues;
Does the order of the Court of Appeal date d 5th N ovemb er2009 nullify and/or stay and/or suspend the Courtof Appeal judgment in the Writ Application bearingNo. 1268/98 and the judgment of this Court, inSupreme Court Case No. SC (SPL) LA 60/08?
Does the Commercial High Court of Colombo CaseNo. 213/07/MR bar the Respondent-Appellant fromproceeding with the sale by public auction of proper-ties set out in the Resolution dated 10th July 1997?
The 1st Respondent-Appellant adopted the Resolution(marked as P5) dated 10th July 1997 in terms of Section 29Dof the People’s Bank Act No. 21 of 1961 as amended by ActNo. 32 of 1986 for the recovery of a sum of Rs. 165,091,129/35 payable by Yahsodha Holdigs (Pvt) Limited, (herein-after referred to as the Company). The Resolution P5 referredto Mortgage Bonds bearing Nos: 3185, 3186, 3567, and 3568and the 1st Respondent-Appellant sought to sell by publicauction the properties mortgaged under the said MortgageBonds.
On 1st December 1998, the Company instituted a WritApplication before the Court of Appeal bearing CA Applica-tion No. 1268/98 seeking a Writ of Certiorari to quash thesaid Resolution dated 10th July 1997. The Writ was canvassedonly on two grounds (1) that it was a third party mortgage -and (2) that the Respondent-Appellant had no power to sellthe properties as they were not specified in the original offerletter and consequently the Resolution was ultra vires. TheCourt of Appeal by its judgment dated 29th February 2008,
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dismissed this Application and held against the Company onboth grounds.
Special Leave to Appeal against the judgment was deniedby the Supreme Court on 3rd December 2008. It is importantto note that following the decision of the Supreme Court todeny special leave to Appeal on the judgment, the Resolutionis finally deemed to be valid in law and capable of executionby the 1“ Respondent-Appellant.
Thereafter the Respondent-Appellant published noticesof auction sale to sell by public auction the several propertiesreferred to in the Parate Resolution dated 10th July 1997.
In the meantime a case for the execution of the mort-gage bonds bearing No. HC (Civil) No: 213/2007 MR wasfiled by the Respondent-appellant on 9th July 2007 before theCommercial High Court. The Respondent-Appellant in hissubmissions specifically stated that this step was taken dueto the delay in delivery of the Court of Appeal Judgment incase No. CA Application No. 1268/98, the uncertainty of itsoutcome, coupled with the fear that in the meantime that evenregular action on the Mortgage Bonds would be prescribed inLaw. The Company filed answer in the case on 15th January2009. That case is presently pending judicial determinationbefore the Commercial High Court. Counsel for Respondent-Appellants submitted that the Petitioner-RespondentCompany could pursue whatever monetary claims throughtheir claim in reconvention and recover any monies, if theyare due.
The said action in the Commercial High Court wasinstituted without prejudice to its rights under CA WritApplication 1268/98. Clearly the High Court case has been
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instituted by the 1st Respondent-Appellant as a precautionarymeasure in order to avoid the mortgage bonds from beingprescribed, during the pendency of the Writ ApplicationNo. 1268/98, as at that time there was no certainty of itsoutcome.
On 25th March 2009, the Petitioner-Respondent, beingthe Managing Director of the Company, instituted the presentWrit Application bearing No. 188/09 on 25th March 2009, inthe Court of Appeal, on the principal ground that, “while thedispute is being adjudicated by the Commercial High Courtin case No. HC (Civil) 213/07 MR, which is exercising judicialpower, the Respondent-Appellant cannot act in a mannerwhich would result in usurpation of that power and make theexercise of that power a nullity,” (vide paragraph 41(c) of thePetition marked A.]
The Counsel for the 1st Respondent-Appellant specificallysubmitted that the present Application is a blatant attempt tochallenge and assail the same Parate Resolution adopted bythe 1st Respondent-Appellant on 10th July 1997, upon whichthe Court of Appeal and the Supreme Court had deliveredfinal judgment, declaring it a valid Resolution.
The Court of Appeal issued notice on the Writ ApplicationNo. 188/09 on 15th June 2009. Interestingly, Hon. AnilGooneratne J, Judge of the Court of Appeal in his Order stated;
“I am inclined to refuse notice in this Application moreparticularly, for the reason that there was a prior judicialpronouncement between the same parties, on the sameissue and the Application in hand is filed with slightvariation.
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However this Writ Application needs to be handled verycarefully and my brother the Hon. President of this Courthad the occasion to discuss this matter with me on manytimes prior to finalizing this Order”.
It is a pity that this view expressed by Hon. AnilGooneratne J was not given effect to.
After the objections had been filed in the Court of Ap-peal in the above case, the 1st Respondent-Appellant by letterdated 20th October 2009 fixed the sale for 7th November 2009.In response, the Petitioner-Respondent filed an Application foran interim stay order against the sale on 28th October 2009.The Court of Appeal granted an interim order staying the saleof property by the 1st Respondent-Appellant on 5th November2009. This Appeal has been filed by the Respondent- Appellantagainst this Order of the Court of Appeal.
In the present Appeal, the Counsel for the Respondent-Appellants also argued that the Petitioner-Respondent hasbreached the principle of “uberrima fides” and thereforeunder the law the Stay Order dated 28th October 2009 couldnot have been granted by the Court of Appeal.
The Respondent-Appellant contends that by institutingthe Writ Application CA 188/09, the Petitioner -Respondenthas sought to quash the Parate Resolution dated 10th July1997, which he could not do in Law. In this Application dated25th March 2009, the Petitioner-Respondent has prayedfor a Writ of Certiorari to quash the Resolution dated 10thJuly 1997 and an interim order deliberately restricting theRespondent -Appellant from auctioning the property whichformed the subject matter of the said Resolution.
In the said Writ Application CA No: 188/09 the Petitioner-Respondent has further stated specifically that the mortgage
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bonds which formed the subject matter of the Parate Resolutiondated 10th July 1997 (paragraph 38) were inter alia “fraudulentand illegal’ and unenforceable in law and therefore could nothave formed the subject matter of the said Resolution.”
In the petition submitted to the Court of Appeal in theApplication No. 1268/98, the Petitioner-Respondent hasclearly admitted that facilities were granted to the companyby the 1st Respondent-Appellant and that the property morefully described in the mortgaged bonds bearing Nos. 3185,3186, 3567 and 3568 – which form the subject matter of theParate Resolution – were mortgaged to the 1st Respondent-Appellant and specifically states that the “mortgage bondswere executed” in respect of facilities obtained by thePetitioner-Respondent. Significantly this Application did notallude to the Bonds being “fraudulent and illegal’, but insteadat paragraph 9, explicitly conceded that “the property morefully described in the schedule hereto was mortgaged to the1st Respondent-Appellant”, the annexed affidavits dated 17thMarch 2008, was signed by the Petitioner-Respondent in thepresent case as the Chairman and Managing Director of theCompany.
Therefore, with regard to the very same Parate Resolutionthe Petitioner Respondent and has taken up a positionwhich wholly contradicts its previous position taken in thecase bearing No. 1268/98, a case that finally ruled on theResolution.
The Respondent-Appellant submits that under thecircumstances the Petitioner -Respondent has breachedthe principle, of “uberrima fides” of utmost good faith andthat the Court of Appeal erred in granting an Interim Orderstopping the auction of the said properties.
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In response, the Petitioner-Respondent submitted thatthe allegation of suppression is totally unfounded and thatthe Petitioner-Respondent has specifically disclosed in CAApplication No. 1268/98 in which reference was made tothe relevant mortgage bond in the instant Application. ThePetitioner Respondent also submitted that the issue ofuberrima fides was not included as a ground when grantingleave to appeal and as such cannot be raised by theRespondent-Appellant.
Having considered the arguments raised by both parties,it is abundantly clear that the Petitioner-Respondent inseeking to quash the Parate Resolution dated 10th July 1997by way of Writ Application No. 188/09 has taken up a whollynew position which contradicts the original position takenup in the previous Writ Application filed on the same sub-ject matter bearing number No. 1268/98. Close scrutiny ofthe arguments reveal clearly that the Petitioner-Respondenthas pleaded contradictory and mutually inconsistent facts inorder to subvert the sale of properties scheduled for 10th July2010 by the Respondent-Appellant.
The main issue in this case which was the validity of theParate Resolution dated 10th July 2010 was raised in the WritApplication 1268/98 and the Court of Appeal by its decisiondated 29th February 2008 held the Resolution was valid andrefused a Writ of Certiorari to quash the said Resolution. TheSupreme Court on the 3rd December 2008 denied leave toappeal against the judgment of the Court of Appeal. There-fore the Resolution dated 10th July 1997 has been determinedconclusively to be valid and executable by the decision of thisCourt on 3rd December 2008. This is final and conclusive andcannot be reviewed and/or rescinded by any other Court.
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It is clear that the present Writ Application by thePetitioner-Respondent is a deliberate and calculated attemptto prevent the Respondent-Appellant from proceeding withthe auction sale and to circumvent and pervert the effect ofthe decision of the Court of Appeal and this Court in the saidWrit Application No: 1268/98, affirmed by this Court. I findthat the Court of Appeal has erred in granting the interimstay order which had the effect of subverting the expressintention and direction of the decision in the Writ ApplicationNo. 1268/98 on the same subject matter and between, ineffect, the same parties.
In this context, the Petitioner-Respondent has raisedfurther the argument that while the Petitioner in CAApplication 1268/98 was the company – Yashoda Holdings,the Petitioner in the instant case is not the company but thePetitioner -Respondent, who is the Managing Director of theCompany and therefore he was not a party in that case andhe is a third party.
It is significant to note at this juncture, that as set outabove, that the very same Parate Resolution dated 10th July1997 was challenged by the Company – Yashodha HoldingsPvt. Limited by way of the Writ Application No. 1268/98 on1st December 1998.
Petitioner-Respondent is the same Chairman/ManagingDirector of the company -Yashodha Holding Pvt. Limited andthe Company is fully owned and controlled by the Petitioner-Respondent. All the benefits from the company accrue to thePetitioner-Respondent and his family. Despite the corporateveil, the Company – Yashodha Holdings and the Petitioner-Respondent are in fact one and the same entity and representthe same interest. Clearly this was pith and substance of the
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finding by the Court of Appeal in its Judgment delivered on29th February 2008 in Writ Application No. 1268/98.
I find that this argument by the Petitioner-Respondentis without merit. The learned Judges of the Court of Appealhave found specifically in their decision dated 29th February2008 in CA Writ Application 1268/98 that the Petitioner -Respondent – Mr. Yasasiri Kastutiarachchi, cannot beconsidered as a third parly as against the Company – YashodaHoldings. The effect of this decision is that the Petitioner -Respondent and the Company are considered to be one andthe same entity for the purpose of the present Writ ApplicationNo. 188/09.
I find that the judgment of this Court in SC (SPL) LA60/2008 [C. A. Appl 1268/98] acts as a complete bar to aproceeding by the same party which once again seeks toquestion the validity of Parate Respondent dated 10th July1997.
The decision of the Supreme Court is binding on alllower Courts. For modem legal systems, judicial precedentsare relevant information for anyone seeking to find law.Furthermore, precedent rules have emerged in accordancewith which the “ratio decidendi” of a superior Court mustbe applied by Courts lower in a judicial hierarchy. The deci-sion of the Supreme Court has the distinct advantage of be-ing final on the question of the Resolution passed by the 1stRespondent – Appellant.
I further hold that the Respondent-Appellant, in light ofthe judgment of this Court in SC (SPL) LA 60/08, the laterApplication in CA Writ 188/09 cannot also succeed in view ofthe principle of ‘collateral estoppel’, whereby a party is barredfrom re-litigating an issue already finally determined againstsuch party in an earlier decision.
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The Petitioner-Respondent has also raised the objectionthat this Court, in granting an interim order to proceed with thesale by the Respondent-Appellant, has acted per-incuriam -or that this Court cannot by way of interim order grant thefinal relief prayed for in an Application.
In this context it is relevant to refer to the decision of theCourt of Appeal in Shell Gas Lanka Limited v. Samyang Lanka(Pvt) Limited (1), where the Court held that it is permissibleto grant interim relief which gave substantially the whole ofthe relief claimed in the action, especially as the facts in thiscase disclose plainly that there is a strong prima facie case infavour of the party seeking the relief.
The Petitioner-Respondent further submitted that theproceedings with the auction sale during the pendency ofthe Commercial High Court Case No. 213/2007 offends therule of separation of powers enshrined in Article 4 (c) of theConstitution.
However in this context it is pertinent to note that thepowers that are being challenged are the judicial powersexercised by the apex Court and therefore this submission isnot tenable in law.
The Respondent-Appellant has also raised the issueof undue delay on the part of the Petitioner-Respondent inraising the issue of fraud and illegality with respect to theResolution dated 10th July 1997. Between the date whenCA Writ Application No. 1268/98 was filed and the date ofthe present Writ Application No. 188/09 the Petitioner -Respondent was presented with ample opportunity to raiseissues of fraud and illegality against the Resolution.
Having failed to raise such an argument in the interveningyears, the belatedness of this defence clearly reflects that this
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is an afterthought and indicative of a concoction and clearlymanipulative and abuse of the legal process.
In all these circumstances I answer the 1st question oflaw on which Special leave was granted in the affirmative andthe 2nd Question of Law in the negative. I allow the appealof the Respondent-Appellants and set aside the order of theCourt of Appeal in Writ Application bearing No. 188/09 dated5th November 2009.
I further hold- that the 1st Respondent-Appellant isentitled to proceed with the sale by public auction under theResolution of the 1st Respondent-Appellant dated 10th July1997. I also order costs in a sum of Rs. 100,000/= to bepaid by the Petitioner-Respondent to the l8t Respondent-Appellant.
SRIPAVAN J. – I agree.
RATNAYAKE, J. – I agree.
1st Respondent appellant entitled to proceed with the sale bypublic auction.
Appeal allowed.