028-SLLR-SLLR-1999-V-1-PEOPLES-BANK-v.-LANKA-QUEEN-INTL-PRIVATE-LIMITED.pdf
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People's Bank v. Lanka Queen Int'l Private Limited
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PEOPLE'S BANK
v.LANKA QUEEN INT'L PRIVATE LIMITED
COURT OF APPEALDE SILVA, J„
WEERASURIVA, J.
A. REV. NO. 674/95
C. COLOMBO NO. 155/DRDECEMBER 1, 1998.
Debt Recovery (Special Provisions) Act No. 2 of 1990 amended by 4 of 1994- S. 4 (1), 6 (2) Procedure for recovery of debts – Decree Nisi entered – Showcause – Leave to appear and defend – application supported by affidavit only.
The learned Additional District Judge allowed the defendants to appear and showcause against the Decree Nisi entered in terms of section 6 (2) of Act No. 2of 1990 as amended by No. 4 of 1994. The defendant-respondent did not filean application for leave to appear and show cause.
Held:
Act No. 2 of 1990 was amended by Act No. 4 of 1994. S. 6 (2) of theoriginal Act was repealed and the word 'Application' which appeared inthe original section has been qualified with the following words:
"Upon the filing of an application for leave to appear and show causesupported by affidavit." Thus it is mandatory for the defendant to file anapplication for leave to appear and show cause, further such applicationmust be supported by an affidavit which should deal specifically with theplaintiffs claim and state clearly and concisely what the defence to theclaim is and what facts are relied upon to support it.
Amended S. 6 (2) does not permit unconditional leave to defend the claim,the minimum requirement according to S. 6 (2) C is for the furnishingof security.
Per De Silva, J.
"In the absence of an application to show cause in writing, it is possibleto say that there is no proper application supported by an affidavit beforecourt."
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APPLICATION in Revision from the order of the Additional District Judge, Colombo.Y. Wijetilake, DSG, for petitioner.
Romesh de Silva, PC with Harsha Amarasekera for respondent.
Cur. adv. vult.
January 29, 1999.
DE SILVA, J.
This is an application seeking to revise the order of the learnedAdditional District Judge of Colombo dated 15. 09. 95 wherein sheallowed the defendants to appear and show cause against the decreeNisi entered in terms of section 6 (2) of the Debt Recovery Act (SpecialProvisions) No. 2 of 1990 as amended by Act No. 4 of 1994.
The matter arose in the following manner. The People's Bank, theplaintiff-petitioner in this case instituted action against the defendant-respondent, under the provisions of the Debt Recovery (SpecialProvisions) Act No. 2 of 1990 as amended by Act No. 9 of 1994to recover an aggregate sum of US $ 1,074,743.08 with interest.
Decree Nisi was entered against the defendant and after serviceof the same the defendant filed two affidavits and moved to file answerand defend unconditionally. When this matter came up for inquirybefore the District Court the plaintiff-petitioner raised two preliminaryobjections in that the defendant-respondent did not comply with theprovisions of section 6 (2): viz.
That the defendant-respondent did not file application for leaveto appear and show cause.
That the defendant-respondent did not deal with the plaintiff'sclaim and failed to disclose a defence which is prima faciesustainable.
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People's Bank v. Lanka Queen Infl Private Limited
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The Debt Recovery Act, No. 2 of 1990 as amended by ActNo. 9 of 1994 has provided for a special procedure for the recoveryof debts by lending institutions. Action under Debt Recovery Act canbe instituted by presenting a plaint and not a petition. The plainthas to be accompanied by an affidavit. According to section 4 (1)of the Debt Recovery Act all that is required to be sworn or affirmedto in the affidavit are words to the effect that the sum claimed inthe plaint is justly due to the institution from the defendant. In additionto the above a decree Nisi, the required stamps, agreements, instru-ments or documents sued upon or relied on by the institution alsoshould be filed. Under the Debt Recovery Act, an action could befiled only by a lending institution as defined in section 30 of the Actand only for the recovery of a debt. Debt means a sum of moneywhich is ascertained or capable of being ascertained at the time ofthe institution of the action.
The only question that has to be decided by this court in this caseis whether the defendant-respondent strictly followed the procedurelaid down in section 6 (2) of the Debt Recovery Act when the decreeNisi was served on him.
Debt Recovery (Special Provisions) Act, No. 2 of 1990 was broughtinto operation on the 6th of March, 1990. Section 6 of Act No. 2 of1990 reads as follows :
“6 (1). In an action instituted under this Act the defendant shallnot appear or show cause against the decree Nisi unless he obtainsleave from the court to appear and show cause.
6 (2). The court shall upon the application of the defendant giveleave to appear and show cause against the decree either, –
upon the defendant paying into court the' sum mentioned inthe decree Nisi; or
upon the defendant furnishing such security as to the courtmay appear reasonable and sufficient for satisfying the sum
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mentioned in the decree Nisi in the event of it being madeabsolute; or
upon affidavits satisfactory to the court that there is an issueor a question in dispute which ought to be tried. The affidavitof the defendant shall deal specifically with the plaintiff's claimand state clearly and concisely what the defence is and whatfacts are relied on as supporting it."
In default of the defendant obtaining such leave for appearanceand showing cause the court shall make the decree Nisi absolute,and the provisions of section 389 of the Civil Procedure Code (chapter101) shall, mutatis mutandis, apply to such order. For this purpose,the Judge shall endorse the words “decree Nisi made absolute" (orwords to the like effect) upon the decree Nisi and shall date and signsuch endorsement.
This section as found in the principal enactment does notspecifically lay down the procedure that has to be followed by thedefendant when applying for leave to appear and show cause. Itappears that a defendant could either make a written or an oralapplication for that purpose.
By Act No. 9 of 1994 section 6 (2) of the original Act was repealedand the following new subsection was introduced. The new subsection6 (2) reads thus : "6 (2). The court shall upon the filing by the defendantof an application for leave to appear and show cause supported byaffidavit which shall deal specifically with the plaintiff's claim and stateclearly and concisely what the defence to the claim is and what factsare relied upon to support it, and after giving the defendant anopportunity of being heard, grant leave to appear and show causeagainst the decree Nisi, either –
upon the defendant paying into court the sum mentioned inthe decree Nisi; or
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People's Bank v. Lanka Queen Inti Private Limited
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upon the defendant furnishing such security as to the courtmay appear reasonable and sufficient for satisfying the summentioned in the decree Nisi in the event of it being madeabsolute; or
upon the court being satisfied on the contents of the affidavitfiled, that they disclose a defence which is prima faciesustainable and on such terms as to security, framing andrecording of issues, or otherwise as the court thinks fit."
This new subsection clears any doubt that would have prevailedearlier in respect of the procedure a defendant has to follow inapplying for leave to appear and show cause. On an examination ofthe amendment introduced in subsection 6 (2) it is abundantly clearthat the word "application" which appeared in the original section hasbeen qualified with the following words : "upon the filing of anapplication for leave to appear and show cause supported by affidavit".This shows that –
it is mandatory for the defendant to file an application forleave to appear and show cause.
such application must be supported by an affidavit whichdeals specifically with the plaintiff's claim and state clearlyand concisely what the defence to the claim is and whatfacts are relied upon to support it.
This section does not permit unconditional leave to defend the caseas the defendant-respondent has requested from the District Court.The minimum requirement according to subsection (c) is for thefurnishing of security.
If the defendant satisfies (a) and (b) above then the defendantshould be given an opportunity of being heard. The court will haveto decide on one of the three matters specified in the above section.They are:
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the court may order the defendant to pay into court the summentioned in the decree Nisi. Thus, even where the require-ments as stated above are complied with, the court has thepower and the authority to order the defendant to pay thefull sum mentioned in the decree Nisi beforepermitting the defendant to appear and defend.
Alternative to (a) above, the court can order the defendantto furnish security which, in the opinion of the court isreasonable and sufficient to satisfy the decree Nisi in theevent it being made absolute. The difference between thisprovision and the (a) above is that instead of paying the fullsum mentioned in the decree Nisi, it will be sufficient forthe defendant to furnish security, such as banker's draft, andthen defend the action.
the third alternative is where the court is satisfied on thecontents of the affidavit filed, that they disclose a defencewhich is prima facie sustainable and on such terms as tosecurity, framing of issues or otherwise permit the defendantto defend the action. Thus, it is imperative that before thecourt acts on section 6 (2) (c) it has to be satisfied;
with the contents of the affidavit filed by the defendant;
that the contents disclose a defence which is prima faciesustainable; AND
determine the amount of security to be furnished by thedefendant, and permit framing and recording of issues orotherwise as the court thinks fit.
It was the contention of the petitioner's counsel that it is notrepugnant to the provisions of 6 (2) to file only an affidavit settingout the defendant's position with a request for leave to defend.
CAPeople's Bank v. Lanka Queen Int'l Private Limited
(de Silva, J.)^239
I am unable to agree with this submission. As the section stands,the averments set out in the application must be supported by anaffidavit. Therefore in the absence of an application to show causein writing as contemplated by section 6 (2) it is possible to say thatthere is no proper application supported by an affidavit before court.If this interpretation is not given the amendment would becomesuperfluous.
As pointed out earlier the institution of an action under the DebtRecovery Act is by plaint supported by an affidavit under section4 (1) of the Act. Similarly the defendant's application in writing todefend and show cause disclosing a defence which is prima faciesustainable after dealing with the plaintiff's case must be supportedby an affidavit. In the absence of an application the affidavit cannotstand alone in terms of section 6 (2) of the Debt Recovery Act,No. 9 of 1994.
For the. above reasons I set aside the order made by the learnedAdditional District Judge permitting the defendant-respondent tocontinue with the case. I direct the trial Judge to take steps in termsof section 6 (3) and make the decree Nisi absolute. Application ofthe plaintiff-petitioner is allowed with costs.
WEERASURIYA, J. – I agree.
Application allowed.
Trial Judge directed to make the decree Nisi absolute.