SELAN BANK PLC vs SAMANELIYA TEAS (PRIVATE) LIMITED AND 3 OTHERS

017-SLLR-SLLR-2009-V-1-SELAN-BANK-PLC-vs-SAMANELIYA-TEAS-PRIVATE-LIMITED-AND-3-OTHERS.pdf


134
Sri Lanka Law Reports
[2(X)9] 1 SRIL.R.
SELAN BANK PLCvs
SAMANELIYA TEAS (PRIVATE) LIMITED AND 3 OTHERS
SUPREME COURTSHIRANEE TILAKAWARDENE. J.
SALEEM MARSOOF, J ANDBALAPATABENDI, JSC (C. H. C.) APPEAL NO. 43/2007SC (HCLA) NO. 36/2007HC (CIVIL) NO. 159/06/01OCTOBER 22nd, 2008
Evidence Ordinance – Section 90(e) – Section 130(3) -Inspection of books byorder of Court or Judge – Section 65 – Cases in which secondary evidencerelating to documents may be given – Section 66 – Rules as to notice toproduce documents – Civil Procedure Code – Section 104.
The Respondent had obtained banking facilities amounting toRs. 29,700,000/= from the Appellant-Bank by entering into four mortgagebonds drawn in favour of the Appellant-Bank. Subsequendy, the Respondentdefaulted the repayment of the loan facilities. The Appellant-Bank demandedthat a sum of Rs. 52,811,385/74 with interest at 22% per annum be paidimmediately. The Board of Directors of the Bank also passed a resolution torecover the amount due to the Bank by auctioning the properties mortgagedto the Bank.
The Respondent challenged the correctness of the amount claimed by theBank by filing action against the Bank in the Commercial High Court ofColombo, seeking inter alia an order from the Court directing the Bank toproduce a Statement of Accounts in respect of the outstanding amount dueto the Bank. In the alternative the Respondent also sought an order fromCourt to obtain a Statement of Accounts in respect of the loan facilities interms of Section 90(e) of the Evidence Ordinance. The High Court Judgeallowed this application. The Appellant-Bank appealed against this order.
The Supreme Court granted leave on the question of law, namely, whetherthe judgment of the High Court Judge was in error in permitting theapplication made under Section 90(e) of the Evidence Ordinance andconsequently, requesting the Bank to produce a Statement of Accounts inrespect of the banking facilities obtained by the Respondent.
sc
Selan Bank PLC vs Samanettya Teas (Private) Limited and 3 others
(Shiranee Tilakawardena, J.)
135
Held:
The ambit and object of Section 90(e) is clearly, for the originalentries in the ledgers to be examined and clearly specifies that therequest should refer to an already existing original or primary entry ofBanker’s Books or business of a Bank.
Per Shiranee Tilakawardena, J. –
“It is important to note, however, that while Section 90(e), as guidedby Section 63 of the Evidence Ordinance, affords a-great deal of accessto the internal documents of a bank, the breadth of this allowanceis not without limit. What are noticeably missing from the list ofdiscoverable material in Section 90(e) and from the definition ofSecondary Evidence in Section 63 – are any derivative creations, thatis, items which have to be created or brought into existence makinguse of entries in books of accounts which have been maintained by theBank in the ordinary course of business”.
“Statement of Accounts” sought by the Respondent does not fall underthe definition of Primary Evidence, nor is it covered by the definitionof Secondary Evidence and therefore the judicial discretion cannot bemade under Section 90(e) of the Evidence Ordinance to compel thepreparation and delivery of such statement.
Section 65 and 66 of the Evidence Ordinance, taken together, explicitlyset out that the access to Secondary Evidence is only possible,inter alia, (1) where the Primary Evidence is not obtainable due todestruction or disappearance or (2) where the party possessing thePrimary Evidence fails to produce it despite issuance of a notice ofrequest to such party to do so.
APPEAL from an order of the Commercial High Court, with leave being
granted.
Case referred to:
Macdonnell vs. Evans (1852)
Williams vs. Summer Field
Kuvera de Soysa with S. Haleemdeen, Sumedha Mahawanniarachchi
and Asela Rekawa for Defendant-Petitioner
Gamini Marapana, P C. with Navin Marapana for the Plaintiff-
Respondents.
cur.adv.vult
136
Sri Lanka Law Reports
[2009] 1 SRIL.R.
February 16, 20096HIRANEE TILAKAWARDENE, J.
This Court granted the Defendant-Petitioner Bank(hereinafter referred to as the “Petitioner Bank”) leave toappeal on 16th October 2007 on a question of law set outin Paragraph 9 (b) of the Petition dated 02.10.2007, namelywhether the Judgment of the High Court Judge dated14.09.2007 was in error for permitting the applicationmade under Section 90(e) of the Evidence Ordinanceand consequently requiring the petitioner to produce aStatement of Accounts in respect of the facilities obtained by theplaintifF-Respondent (hereinafter referred to as the“Respondent”).
The Respondent was a customer of the Ratnapura Branchof the Petitioner Bank, had maintained the Account bearingNo. 0070000052296 since 1994, and had obtained severalloan facilities by mortgaging his properties. The Respondenthad obtained a total sum equal to Rupees Twenty-Nine MillionSeven Hundred Thousand (Rs. 29,700,000/=) by enteringinto four mortgage bonds drawn in favour of the PetitionerBank.
The Respondent eventually failed to service these loanfacilities in accordance with the agreed-upon paymentschedules required of them. In response the Petitioner Bank,by letter dated 5th May 2006 and addressed to the Respondent,demanded that a sum equal to Rupees Fifty – Two MillionEight Hundred Eleven Thousand Three Hundred EightyFive and Seventy Four Cents (Rs. 52,811,385.74) (the “DebtAmount”) with annual interest at the rate of Twenty-Twopercent (22%) to accrue from 01.01.2006 be paid immediatelyto the Petitioner Bank. Consequently the Board of Directorsof the Petitioner Bank had passed a resolution to recoverthe Debt Amount by auctioning the movable and immovableproperties belonging to the Respondent.
sc
Selan Bank PLC vs Samaneliya Teas (Private) Limited and 3 others
(Shiranee Tilakawardena, J.)
137
The Respondent challenged the request on the Amountof the Debt and made representations to the Petitioner Bank,eventually filing an action in the Commercial High Court ofColombo against the Petitioner Bank and three (3) othersseeking, inter alia, that the resolution dated 21.06.2006 ofthe Board of Directors of the Petitioner Bank be declared nulland void.
In connection with the above action, the Respondentmade application seeking an order from the High Courtdirecting the Petitioner Bank to produce a Statement ofAccounts in respect of the aforesaid outstanding amounts interms of section 104 of the Civil Procedure Code. The applicationwas refused.
The Respondent also sought, in the alternative, toobtain the Statement of Accounts in terms of Section 90(e) ofthe Evidence Ordinance. The High Court Judge by his Orderdated 14.09.2007 allowed this application and ordered thePetitioner Bank to produce a Statement of Accounts withregard to the facilities obtained under the relevant mortgagebonds. The application for leave was preferred against thisOrder.
The substantive question posed to this Court is whethera direction can be made under Section 90 (e) of theEvidence Ordinance to entitle the Respondent to a statement ofAccounts depicting the outstanding balance of the principleand interest as at 31.12.2005 on Bonds marked A3-A6.Essential to a determination of the answer, is (1) an analysisof the nature of the evidence being requested and (2) adetermination of the Respondent’s compliance, or lack thereof,with the statutory requirements for the granting of suchrequests.
Section 90(e) of the Evidence Ordinance allows a partyto make application for, and a Court to so approve, access
138
Sri Lanka Law Reports
[2009] 1 SRI L.R.
to “the ledgers, day books, account books and all otherbooks used in the ordinary business of a bank”, where suchbank is party to that proceeding. Depending on the specificdirective of the Court Order, access to these “banker’s books"can be (1) the inspection of the “Primary Evidence”, that is,the original books and ledgers themselves, or (2) limited tothe inspection/receipt of “Secondary Evidence” – includ-ing “certified copies, counterparts, accurate mechanicalreproductions, and first-hand oral accounts” – of such books.Section 90(e)’s mechanism of access to these items is both inconformance with, and guided by, the characterization anddefinition of Secondary Evidence made clear in Section 63 ofthe Evidence Ordinance.
It is important to note, however, that while Section90(e), as guided by Section 63, affords a great deal of accessto the internal documents of a bank, the breadth of thisallowance is not without limit, What are noticeably missingfrom the list of discoverable material in Section 90(e) andfrom the definition of Secondary Evidence in Section 63 -are any derivative creations, that is, items which have to becreated or brought into existence making use of entriesin books of accounts which have been maintained by theBank in the ordinary course of business. The Statement ofAccounts requested by the Respondent, which, intheirwords, isnecessary to explain “how (the Petitioner Bank) arrived” atthe Debt Amount, constitute precisely this type of derivativecreation or extraction of accounts and a creation of a newdocument. In order for the bank to provide such information,the Bank would need to calculate and prepare a statementof accounts showing the allocations of loan amounts thatconstitute the Debt Amount being sought.” For this reason,it is the Court’s considered opinion that the “Statement ofAccounts” sought by the Respondent does not fall underthe definition of Primary Evidence, nor is it covered by the
sc
Selan Bank PLC vs Samanettya Teas (Private) Limited and 3 others
(Shiranee Tilakawardena, J.)
139
definition of Secondary Evidence, and therefore a judicialdirection cannot be made under Section 90(e) to compel theperparation and delivery of such a statement.
Even if this Court were to assume that suchdocumentation were to somehow constitute SecondaryEvidence, the Respondent’s efforts to obtain such evidenceis buffeted by the fact that they have failed to comply withthe prerequisites for obtaining such evidence. 'Section 65 and66 of the Evidence Ordinance, taken together, explicitly setout that the access to Secondary Evidence is only possible,inter alia, (1) where the primary Evidence is not obtainabledue to destruction or disappearance or (2) where the partypossessing the Primary Evidence fails to produce it despiteissuance of a notice of request to such party to do so.E. R. S. R Coomaraswamy, in his book, The Law of Evidence(Volume II, Book 1), provides a succinct statement on thelimited availability of Secondary Evidence:
“Primary” evidence is evidence which the law requires tobe given first, secondary evidence which may be given inthe absence of the better evidence which the law requiresto be given first, when a proper explanation is given of theabsence of that better evidence.
This principle is further elaborated upon in the case ofMacdonnell vs. Evans111
The best evidence in the possession of the party producingthe document must be given. This is generally the originaldocument itself, and it is primary evidence of itscontents. It must, therefore, be produced, unless itsabsence is accounted for, in which case secondaryevidence would become the best evidence.
In none of the submissions provided before us is thereany evidence that the Respondent had attempted to obtain
140
Sri Lanka Law Reports
[2009] 1 SRI UR.
such material in a more traditional manner, that is by simplyasking for the statements of the Petitioner Bank of theindividual loan facilities. Had he done so, the Respondentwould have easily been able to reconstruct the aggregateamount outstanding on the loans and ofFer such findings inits initial plaint. While it is admitted that the Respondent hadrequested – and the Petitioner Bank did not provide – Statementof Accounts in a letter dated before the initial action,this request for a prepared summary and analysis isfundamentally different in character from a mere request forinformation. The distinction this Court makes between (a)obtaining certified statements by request to the Petitionerbank and (b) a request to the Petitioner Bank to essentiallyhave the bank summarize their internal records to showhow they arrived at the Debt Amount being demanded,while seemingly insignificant, is in fact an important one formultiple reasons.
First, the request for a Statement of Accounts is anaction by the Respondent that essentially shifts the burdento the Petitioner Bank, a move that belies the Respondent’sdiminished position as the party in default of the LoanAgreement. It is the Respondent who has defaulted and,accordingly, it is the Respondent who should be proactivelydetermining the outstanding amount whether through arequest for account balances of through a review of its owninternal bookkeeping.
Second, the request for a Statement of Accounts by useof Section 90(e) is an attempt to make use of a statutoryallowance which was never intended to serve as a customerservice option. The special rules regarding Bankers Booksare set out in chapter VI of the Evidence Ordinance and thesaid Chapter is structured on the English Banker’s BooksEvidence Act 1879. A historical analysis reveals that thisAct had a twofold purpose, which was to protect the bank-ers from the inconvenience of having to produce their books
sc
Seltm Bank PLC vs SamaneUya Teas (Private) Limited and 3 others
(Shiranee Tilakawardena, J.)
141
in court and to allow litigants to facilitate proof of thetransactions recorded therein. This purposecan be extrapolatedin our law to be seen as allowing bankers a limited immunity inaccordance with the duly of the banker to preserve thesecrecy of their customer’s accounts. Such a duty is notabsolute and is Subject to reasonable exceptions, the foremostof which is to act under compulsion of the law. However, thepower to order inspection of Bankers Book is a discretionarypower and should be exercised with great caution, a fact madeclear in Williams vs. Summerfleld, (Widgeiy, L. C. J):
"… an order under section 7 can be a very seriousinterference with the liberty of the subject. It can be agross invasion of privacy; it is an order which clearlymust only be made after the most careful thought and onthe clearest grounds.”
The significance of the application made by theRespondent is that he has sought to obtain information of“Statements of Accounts” made out of these original entries.Section 90(e) refers to particular entries in a banker’s bookand the Respondent has requested not for a specific entry butfor statement of accounts to be produced. The ambit and scopeof this section is clearly for the original entries in the ledgersto be examined and clearly specifies that the request shouldrefer to an already .existing original or primary entry ofbanker’s books of business of a bank.
Where the Bank is a. party as in the present case,normal procedural rules with regard to the Civil ProcedureCode would apply. To rule otherwise would be to deprive theparties of the full benefit of the testing of the credibility ofthe evidence placed before the Court. It would indeed bedisadvantageous to the Respondent who would then besaddled with the immunity of the Bank official who would
142
Sri Lanka Law Reports
[2009] 1 SRI LR.
not have to attend court and could rely on producing cer-tified copies of these statements, and not be able to scru-tinize the original ledgers of the Bank. The underlyingreason for these provisions is that the books of the Bank couldremain in the Bank and not be removed for the reason ofpublic convenience and maintenance of the confidentialityof the entries of other customers of the Bank and pertains to theduty of secrecy of the Banker to his customers. It also affords alimited immunity on the Bankers, limiting their responsibility,by section 130(3) of the Evidence Ordinance to produce thebooks of the Bank, where the Bank is not a party; only interms of the provisions of section 90D. It is merely forproof by litigants of banking transactions recorded therein.Compulsion to produce the original books is confined toexercising of proper authority deriving from Statute or by anOrder of Court.
Additionally, in seeking to produce the certified copiesthe Bank must prove that the book is in the custody of aBank, at the tirhe of making the entry as one of the ordinarybooks of the Bank, and that the entry was made in theordinary or usual course of business. Here the entries in thebankers books can be proved in this manner, but this wouldpreclude extraction from the entries and the formulationof a new set of documents as in the preparation of specificstatement of accounts, at the dictates and demands of alitigant. The learned High Court judge has failed to note thatthere is a provision under the Civil Procedure Code wherea party could obtain the same information by service ofinterrogatories on the litigant Bank. In this case theRespondent has in his affidavit failed to state the grounds ofthe application for the purpose of showing that it is not of a‘fishing character’ and that the entries are relevant and theinspection of the copies necessary.
sc
Selan Bank PLC vs Samaneliya Teas (Private) Limited and 3 others
(Shiranee Tilakawardena, J.)
143
Accordingly, the order given by the learned High Courtjudge is not envisaged, within the scope and ambit ofSection 90(e) and the Court sets aside the said CommercialHigh Court order dated 14th September 2007.
The Appeal is allowed. The Respondent is to pay theAppellant a sum of Rs. 30,000/- as Costs.
MARSOOF, J. – I agree
BALAPATEBENDI, J. – I agree
Appeal allowed