RUHUNU AGRO FERTILIZER CO. LTD
COURT OF APPEALJ.A.N. DE SILVA, J.
CALANo. 119/98CA 701/98
DC ANURADHAPURA No. 16297/MS •16™ AUGUST, 1999.
Civil Procedure Code, S. 53, S. 704(2), S. 705(1) (2), S. 706 – SummaryProcedure – Liquid claims – Leave to defend – Without security – Triableissues – Notice of dishonour – Should it be given – Discretion of Court -Bills of Exchange Ordinance S. 73, S. 73(1), S. 75 – Countermand ofpayment – Debt Recovery Act, No. 2 of 1990, S. 25.
The Plaintiff Petitioner instituted action for the recovery of a certainsum with interest under Section 53 Civil Procedure Code claimingthat the Respondent had issued ten cheques in favour of thePetitioner Company without funds. The Court permitted the DefendantRespondent to file answer unconditionally.
On Appeal, it was contended that Court had erred in law by coming tothe conclusion that it was necessary to ascertain the reasons for theDefendant Respondent to countermand the cheques and also toascertain whether there were funds in the Bank to meet the payments,on the ten cheques. It was further contended that it was not necessaryfor the Plaintiff Respondent to give Notice of Dishonour.
The Defendant Respondent contended that the Plaintiff Petitioner hasviolated S. 705 (1), Civil Procedure Code and that Notice of Dishonourhad not been given, and that, he had infact raised a triable issue.
(1) In terms of S. 705( 1) Civil Procedure Code the condition precedent tothe issue of summons is that the documents on which the action is basedmust on presenting the plaint, be produced to Court, and that thePlaintiff must make an affidavit that the sum which he claims is justlydue. The documents marked are only copies and they are unstamped.Court could not have issued summons under S. 705(2).
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(2) The legislature had intended to give the Judge the discretion as toimposing terms with which the appeal Court should not interfere. TheDefendant has raised a triable issue – non-issuance of the Notice ofdishonour by the Plaintiff Petitioner and in such an event leave must begiven unconditionally.
Per Jayawickrama, J.
“On a consideration of S. 704(2). 706 of the Civil Procedure Code itappears that when the Defendant who swears to a fact which, if trueconstitutes a good defence, he must be allowed to defend unconditionallyunless there is something on the face of the proceedings which lead theCourt to doubt the bona fides of the Defendant."
S. 704(2) Civil Procedure Code should not be made use of as apunishment for not honouring one’s obligations and the words ’unlessthe Court thinks his defence not to be prima facie sustainable or feelsreasonable doubt as to his good faith, – “means that the Court has thediscretion to decide the question whether the Defendant should beallowed to appear and defend without security.
It is not clear whether the cheques were drawn without sufficientfunds in the Bank as the drawer had stopped payment regarding certaincheques on the basis that the Plaintiff Petitioner refused to continue thesupply of fertilizer. In such a situation the drawer is entitled to notice ofdishonour unless such notice is excused or waived.
APPLICATION for Leave to Appeal from the order of the District Court ofAnuradhapura.
Cases referred to :
Wijesinghe vs. Perera -2C.L. W. 506
Paintathain vs. Nadar – 37 NLR 101
Ramaswamy Chetty vs. U. L. Marikkar – 5 NLR 310
Isadeen & Co., vs. Wimalasuriya – 62 NLR 299
Chula Bandra with T. De Silva for Petitioner.
H. M. P. Heralh with J. A. Wimalasena for the Defendant Respondent
Cur. adv. vult.
RuhunuAgro Fertilizer Co. Ltd. v. Kapila
October 29, 1999.
JAYAWICKRAMA, J.This is a leave to appeal application against the orderdated 19.05.98 of the learned District Judge of Anuradhapurapermitting the respondent to file his answer on or before29. 06. 98 without security.
The plaintiff petitioner instituted an action praying forJudgment and decree in favour of the plaintiff petitioner for therecovery of Rs. 155,935/- with interest calculated at the rateof 25% on the said sum. The petitioner filed this action undersection 53 of the Civil Procedure Code claiming that therespondent had issued ten cheques in favour of the petitionercompany as averred in the plaint for the fertilizer supplied tothe respondent during the period commencing from 19. 06. 96to 04. 12. 96.
On 21. 01. 98 the learned District Judge having beensatisfied with the plaint, affidavit and documents of thepetitioner issued summons returnable on 19. 03. 98.On 17. 03. 98 the respondent had filed an affidavit seekingpermission from court to appear and defend the action. Atthe inquiry parties made oral and written submissions andthereafter learned District Judge made his order on 19. 05. 98permitting the respondent to file his answer on or before29. 06. 98 without paying to court the sum mentioned in thesummons or giving any security there for. The reasons for the
order of the learned District Judge is as follows :
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Learned counsel for the plaintiff petitioner submitted thatthe plaintiff petitioner presented ten cheques for payment tothe Sampath Bank, Anuradhapura branch and some of thecheques were returned to the plaintiff petitioner with theendorsement “Refer to Drawer" and some cheques werereturned with the endorsement “Payment stopped by Drawer”and another cheque was returned with the endorsement“Effects not Realised”. It is to be noted at this stage that someof the cheques which were dated 19.06.96 were tendered forpayment on 14.11.96 i. e. about five months after the datesstated on these cheques. Some cheques which were dated20.06.96 were tendered for payment on 01.11.96. Anothercheque dated 06.07.96 was tendered for payment on 25.10.96.Likewise most of the cheques were tendered for payment longafter the dates given in the cheques. Although the plaintiffpetitioner in his plaint averred that these cheques had beenreturned by the Bank indicating the non-availability of moneyin the account of the defendant respondent, five cheques werereturned with the endorsement “Payment stopped by theDrawer”. Learned counsel for the plaintiff petitioner submittedthat it was not necessary for the plaintiff petitioner to givenotice of dishonour to the defendant respondent, as requiredunder section 48 of the Bills of Exchange Ordinance. Thelearned counsel contended that the learned District Judge haderred in law by coming to the conclusion that it was necessaryto ascertain the reasons for the defendant respondent tocountermand the cheques and also to ascertain whether therewere sufficient funds in the Bank account to meet thepayments on the ten cheques and thereby learned DistrictJudge had decided to inquire into the merits of the defendantrespondent’s affidavit. Learned counsel further submittedthat the issuance of cheques without funds in the account hasnow been declared an offence punishable under section 25 ofthe Debt Recovery (Special Provisions) Act No. 2 of 1990 andclearly it has indirectly amended the relevant provision of theBills of Exchange Ordinance, namely sections 48 and 75.
RuhunuAgro Fertilizer Co. Ltd. u. Kapila
Learned counsel for the defendent respondent submittedthat in the instant case according to the journal entries of theDistrict Court what had been produced are photocopies ofdocuments violating section 705 (1) of the CPC and none ofthese documents have been served on the defendant. It wasfurther contended that the plaintiff company had not statedthat the sum claimed is justly due and that the plaint did notaccompany an affidavit to the effect that the instruments wereproduced and therefore has acted in violation of the abovesection. He contended that the non compliance with the aboveimperative provisions are fatal to the issue of summons. Hefurther submitted that the important triable issue is whetherthe notice of dishonour was given to the defendant and as thisrequirement had not been complied with leave to defendshould be given.
Learned counsel for the defendant respondent submittedthat the plaintiff petitioner has not complied with rule 3(1) ofthe Supreme Court rules, in that all the relevant proceedingshad not been filed and that there is no proper affidavit by theplaintiff filed with the plaint.
According to section 705 (1) of the Civil Procedure Codethe condition precedent to the issue of summons is that thedocuments on which the action is based must on presentingthe plaint, be produced to the court and that the plaintiff mustmake an affidavit that the sum which he claims is justly dueto him from the defendant. In the instant case the documentsmarked as PI to P12A are only the copies of the documents onwhich this action is based and further a minute on the firstpage of the case record of the District Court states that stampshave not been tendered to court. The minute is as follows:-
Further although in the plaint it is stated that thedocuments marked (23Z 1 – oj 12 <j) are being tendered alongwith the plaint, according to a minute in the record, only
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P12 and P12A had not been tendered.
In view of the above mentioned facts, it is abundantlyclear that the plaintiff had not complied with the imperativeprovisions in section 705 (1) of the Civil Procedure Code. As theinstruments had not been properly stamped, the court shouldnot have issued summons under section 705 (2).
It was held in Wifesinghe vs. Pereraf" that in order to entitlea person to sue under Chapter 53 of the Civil Procedure Code,it is not sufficient to set out in the affidavit in support of theplaint merely that an amount is due on the instrument suedupon, but it must be stated that the sum claimed is “justlydue”. In Paintathain vs. Nadar121 it was held that it is sufficientif the facts set out in the affidavit show that the sum claimedwas rightly and properly due.
In an action by way of summary procedure the defendanthas no right to appear or defend the action unless he obtainsleave from the Court for the purpose. If he defaults in obtainingleave to appear the plaintiff is entitled to a decree for any sumnot exceeding the sum mentioned in the summons, withinterest up to the date of the payment and costs.
According to section 704 (2) of the Civil Procedure Codethe defendant cannot be required as a condition of his beingallowed to appear and defend, to pay the sum mentioned inthe summons or to give security therefor, unless the courtthinks his defence not to be prima facie sustainable, or feelsreasonable doubt as to his good faith. In Ramaswamy Chettyvs. U. L. Marikar131 it was held, where the defence set out by thedefendant appears on the face of his affidavit to be good in lawand no reasonable doubt exists as to the bona fides of thedefence, it is the duty of the court to permit him to appear anddefend without security.
photostats of PI to PI 1 have been tendered. The relevantminute is as follows:-
Ruhunu Agro Fertilizer Co. Ltd. v. Kapila
In Izadeen & Co. vs. Wimalasuriya141 it was held, that thedefendant was entitled to defend the action unconditionally,where of the two promissary notes sued on the claim, one ofthem was admitted by the defendant who, however, pleadedthat the other had been discharged by grant of a fresh notewhich had not matured.
In the instant case the learned District Judge has givenhis reasons for allowing the defendant to defend the actionunconditionally. On a perusal of the provision of the CivilProcedure Code it is clear that the legislature had intended togive'the Judge in every such case the discretion as to imposingterms with which the Appeal Court should not interfere.
In the instant case the defendant respondent has statedthat he countermanded payment as the plaintiff petitionerrefused to continue the supply of fertilizer. Whether thedefendant respondent issued these cheques without sufficientfunds in his account is a matter to be determined by the court.
The learned District Judge held that the verification of thedefendant respondent's current account to ascertain whetherthere was sufficient funds to meet the payments in respect ofthe ten cheques is a matter to be ascertained by the court andtherefore that it was necessary to know reasons for thedefendant respondent to countermand payment on the saidcheques. Therefore the learned District Judge held that thenon-issuance of the notice of dishonour by the plaintiffpetitioner to the defendant respondent was a triable issueunder section 706 of the Civil Procedure Code and it permittedthe defendant respondent to appear and defend his caseunconditionally.
On a consideration of section 704 (2) and 706 of the CivilProcedure Code, it appears that when the defendant whoswears to a fact which, if true, constitutes a good defence, hemust be allowed to defend unconditionally unless there issomething on the face of the proceedings which lead the courtto doubt the bonaJides of the defendant. According to section
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73 of the Bills of Exchange, a cheque is a Bill of Exchangedrawn on “Banker payable on demand.” Sections 74 (1) statesthat, where a cheque is not presented for payment within areasonable time of its issue, and the drawer or the person onwhose account it is drawn had the right at the time of suchpresentment as between him and the Banker to have thecheque paid and suffers actual damage through the delay, heis discharged to the extent of such damage, that is to say, tothe extent to which such drawer or person is a creditor of suchBanker to a larger amount than he would have been had suchcheque been paid. According to Section 74 (2), in determiningwhat is a reasonable time regard shall be had to the nature ofthe instrument the usage of the trade and of Bankers, and thefacts of the particular case. In the instant case taking intoconsideration the defence taken by the defendant respondentthat the plaintiff petitioner refused to continue the supply offertilizer and the delay in presenting some of the cheques forpayment, one might come to the conclusion that it being abusiness transaction that there is a good defence to be triableby court.
According to section 75 of the Bills of Exchange the dutyand authority of a Banker to pay a cheque drawn on him by hiscustomers are determined by (a) countermand of payment; (b)notice of the customer’s death. In the instant case it is not clearwhether the cheques were drawn without sufficient fundsin the Bank as the drawer had stopped payment regardingcertain cheques on the basis that the plaintiff petitionerrefused to continue the supply of fertilizer. In such a situationthe drawer is entitled to notice of dishonour unless such noticeis excused or waived. In view of the defence taken by thedefendant, one cannot come to the conclusion whether thedishonour is due to the absence of effects in the Banker’s handor whether payment has been countermanded due to therefusal to continue the supply of fertilizer. Further there is nomaterial to conclude that there was an agreement between theparties on the mode of presenting the cheques for realization.It may be that the plaintiff-petitioner should present the
RuhunuAgm Fertilizer Co. Ltd. v. Kaptia
cheques for realization only after he supplied the fertilizer tothe defendant-respondent and in such case evidence could beled only at the trial stage.
When one considers the above facts it is clear that thedefence has raised a triable issue and in such an event leavemust be given unconditionally. In the instant case the learnedDistrict Judge has exercised his discretion on sound judicialgrounds. One cannot say that he has exercised his discretionarbitrarily. In such an event an appeal will not be entertainedby the Court of Appeal. On a perusal of the reasons givenby the learned District Judge one cannot say that he hasexercised his discretion arbitrarily or perversely.
It is true that the issuing of cheques without funds in theaccount had been declared an offence punishable undersection 25 of the Debt Recovery (Special Provisions) Act No. 02of 1990. The question whether the cheques were issuedwithout funds in the account is a triable issue where thelearned District Judge has to come to a conclusion on theevidence led before him. It should be mentioned here thatthe provision under section 704 (2) of the Civil ProcedureCode should not be made use of as a punishment for nothonouring one’s obligation and the words “unless the Courtthinks his defence not to be prima facie sustainable or feelsreasonable doubt as to his good faith” means that thelearned trial Judge has the discretion to decide the questionwhether the defendant should be allowed to appear anddefend without security.
In the instant case the learned District Judge has exercisedhis discretion on valid grounds. I would therefore affirm theorder of the learned District Judge and dismiss the Leave toAppeal and the application for revision with taxed costs payableby the plaintiff-petitioner to the defendant-respondent.
J. A. N. DE SILVA, J. – I agree.