SENEVIRATNE AND ANOTHER vs. LANKA ORIX LEASING COMPANY LTD

028-SLLR-SLLR-2006-V-1-SENEVIRATNE-AND-ANOTHER-vs.-LANKA-ORIX-LEASING-COMPANY-LTD.pdf


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SENEVIRATNE AND ANOTHER VS LANKA ORIX LEASINGCOMPANY LTDCOURT OF APPEALWJMAUCHANDRA.J.
CALA 191/4
D.C. COLOMBO 36095/MSJULY 16 ANDAUGUST 24, 2004
Debt Recovery (Special Provisions) Act, No. 2 of 1990 – Amended by Act, No.9 of 1990 and Act, No. 9 of 1994 – Section 6(2) affidavit – Averment ‘'justly due”absent – Triable issue – Security – Is it imperative ? – Civil Procedure Code,section 70S – High Court of the Provinces (Special. Provisions) Act, No. 10 of1996, section 2 – Does it oust the jurisdiction of the District Court ? – Bills ofExchange Orinance, sections27,30,39(1), 45 and 88(1) provisions not followed- Existence of conditions – Presentment – Previous letters not replied – Is it anadmission ?
The plaintiff respondent instituted action in the District Court of Colombo,upon an on demand promissory note under the Debt Recovery (SpecialProvisions) Act (D.R. Act) to recover a sum of Rs. 4 million with interest. Decreenisi was entered and it was served on the defendants. The defendents filedobjections and moved for the dismissal of the action or in the alternativesought leave to appear and defend unconditionally. The trial court directed thedefendants to deposit half the sum claimed as a pre-condition to defend theaction. It was contended by the defendant petitioner that:
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the alleged cause of action falls within the Commercial High Court ofColombo – (High Court of the Provinces (Special Provisions) Act) andhence the District Court has no jurisdiction.
the affidavit is not valid;
the plaint and affidavit do not contain averments to the effect that thesum claimed is justly due;
Provisions of Section 27or Section 28 of the Bills of Exchange ordinancehave not been followed.
the plaint does not disclose a valuable consideration; and
the Promissory Note is not valid.
HELD:
An action instituted under the Debt Recovery (Special Provisions) Act,as amended, falls outside the jurisdiction of the High Court of theProvinces (Special Provisions) Act, No. 10 of 1996—section 2(1). TheDebt Recovery Act has provided for a special procedure for therecovery of debts by lending institutions.
It is not essential that the plaintiff should actually use the word “justly”in his affidavit. If the affidavit substantially complies with therequirements of section 705 and if the facts threrein set out show thatthe sum claimed was rightly and properly due it is in order.
As regards the objection that there is no averment with regard to theexistence of consideration, the defendants had not denied theirsignature on the Promissory Note. It is never necessary to averconsideration for any engagement on a Bill or Note or to provide theexistence of consideration.
The Promissory Note in question was an on demand PromissoryNote; the defendants promised to pay the plaintiff at its registeredoffice in Colombo, the plaintiff by its letter of demand of 8.1.2003,demanded the sums set out in the Promissory Note, to which thedefendants did not reply-this amounts to presentment. “In businessmatters”, if a person states in a letter to another, that certain facts exist,the person to whom the letter is written must reply if he does not agreewith or means to dispute assertions; if not the silence of the latteramounts to an admission of the truth of the allegations in the letter”.
Accordingly, the only possible conclusion, for the failure to reply to theletter of demand is that the amount stated is correct and thedefendants have not repaid the sum stated in the Promissory Note.
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The defendant pettioners, have not denied the Promissory Note. Thereis nothing to show that they repaid the sum in the Promissary Note.The defendants have not dealt with the plaintiffs claim on its merit, buthave soley depended on the regularity of the procedure and technicalobjections to the plaintiff’s action. As the defendants have notdisclosed a triable case, they are not entitled to be heard withoutobtaining leave to appear and defend.
The Debt Recovery Act, as amended, does not permit unconditionalleave to defend the claim. The minimum requirement is the furnishingof security.
It is imperative that court has to order security, but court can use itsdiscretion to determine the amount of security if the defendantsdisclose a defence.
APPLICATION for leave to appeal from an order of the District Court of
Colombo.
Cases referred to :
Paindathan vs. Nadar – 57NLR 101
Saravanamuttu vs. de Mel – 49 NLR 429
Carpen Chetty vs. Manilan – 3 Cey. LR 11
Mather Saibo vs. Crowther – 3 ey. LR 31
Sadadeen vs. Meeresa – 3 CLW 138
People's Bank vs. Lanka Queen Int'l (Pvt) Ltd., (1999) 1 Sri LR 233
National development Bank vs. Chrys Tea (Pvt) Ltd., and another(2002) 2 Sri LR. 206
S. P. Srikantha for defendant petitioner respondents.
Hiran de Alwis for plaintiff respondents respondents.
cur. adv. vult.
February 02,2005WIMALACHANDRA, J.
This is an application for leave to appeal from the order dated 19.05.2004of the Additional District Judge of Colombo.
Briefly, the facts relevant to this application are as follows :
The plaintiff-respondent-respondent (plaintiff) instituted actionbearing No. 36095/MS in the District Court of Colombo upon an on demand
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promissory note marked “CA3" against the defendant – petitioners -pertitioners (defendants) under the Debt Recovery (Special Provisions)Act, No. 2 of 1990, as amended by Act, No. 9 of 1994, to recover a sum ofRs. 4,000,000 together with interest thereon at 21 % and other charges.
The Additional District Judge of Colombo entered decree nisi in favourof the plaintiff and it was served on the defendants. The defendants filedobjections by way of petition and affidavit, and moved for the dismissal ofthe plaintiffs action or in the alternative sought leave to appear and defendunconditionally. The learned Additional District Judge by her order dated19.5.2004 directed the defendants to deposit half the sum claimed by theplaintiff as a precondition to defend the action. The present application tothis Court is against the said order of the Additional District Judge.
In this application, the counsel for the defendants in his writtensubmissions took the position that the said order of the learned Judge iserroneous for the following reasons:
the plaintiff cannot have and maintain this action as the allegedcause of action falls within the jurisdiction of the Commercial HighCourt of Colombo in terms of the provisions of the High Court ofProvisions (Special Provisions) Act, No. 10 of 1996 and hence theDistrict Court has no jurisdiction to hear and determine the plaintiffsaction.
the affidavit of the plaintiff is not valid.
the plaint and the affidavit do not contain averments to the effectthat the sum claimed by plaintiff is “justly due”.
the plaintiff has not followed the provisions in sections 27 and 88 ofthe Bills of Exchange Ordinance. '
the plaint does not disclose a valuable consideration.
the promissory note which is the subject matter of this action isnot valid.
The'first objection of the defendants is based on the question ofjurisdiction. The learned counsel for the defendant submitted that the nature
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of the transaction between the plaintiff and the defendants falls within theambit of a commercial transaction and is for a sum exceeding Rs. 3 millionas set out in the schedule to section 2 of the High Court of the Provinces(Special Provinsions) Act No. 10 of 1996.
It is to be noticed that when the learned counsel for the defendantsmade the aforesaid submission he conveniently disregarded the firstschedule to this Act. Section 2(1) of the Act states that every such ProvincialHigh Court, with effect from the date that the Minister may appoint byorder published in the Gazette, shall have;
Exclusive jurisdiction and shall have cognizance of and full power tohear and determine, in the manner provided for by written law, all actions,applications and proceedings specified in the first schedule to this Act.
The first schedule reads thus:
(1) all actions where the cause of action arisen out of commercialtransactions(including causes of actions relating to banking, the export orimport merchandise, services affreightment, insurance, mercantile agency,mercantile usage and the Construction of any mercantile document) inwhich the debt, damage or demand is for a sum exceeding one millionrupees or such other amount as may be fixed by the Minister by notificationin the Gazette excluding actions instituted under the Debt Recovery(Special Provisions) Act, No. 2 of 1990 (emphasis added)
One million Rupees referred to in the first schedule has beenincreased to Three Milion Rupees by the Minister, by order in the Gazette.
Therefore it is very clear that actions instituted under the Debt Recovery(Special Provisions) Act, No. 2 of 1990 as amended by Act, No. 9 of 1994falls out side the jurisdiction of the High Court of the Provinces Act, No. 10of 1996. The Debt Recovery (Special Provisions) Act has provided for aspecial procedure for the recovery of debts by lending institutions.
In the circumstances the learned judge who made the aforesaidorder and the District Court of Colombo in which the learned Judge presided,has jurisdiction to hear and determine the plaintiffs action.
The next objection raised by the counsel for the defendants is that theaffidavit is not valid. The learned Counsel submitted, as required by section
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705 of the Civil Procedure Code, that there is no averment stating tfoat thesum which the plaintiff claims is justly due to him from the defendants.It had been held in earlier decisions, it is not enough that the affidavit insupport of the plaint merely states that an amount is due on the instrumentsued upon, but it must be stated that the sum claimed is “justly due”.However in the case of Paindathan vs. Nadar<1) it was held by a DivisionalBench that it is not essential that the plaintiff should actually use the word“Justly” in his affidavit. Upon a persual of the affidavit filed by the plaintiff itappears that the sum claimed by the plaintiff is rightly due. It was alsoheld in the case of Paindathan Vs. Nadar (supra) that the affidavit willsubstantially comply with the requirements of the section 705 of the Cocjeif the facts therein set out show that the sum claimed was rightly andproperly due. Accordingly, in my opinion there is no merit in this objectionraised by the defendant.
The defendants have taken the objection that there is no avermnet withregard to the existence of consideration. However they have not deniedtheir signature on the promissory note. Section 30(1) of the Bills of ExchangeOrdinance states as follows:
“ Every party whose signature appears on a bill is prima facie deemedto have become a party thereto for value”.
Byles on Bills of Exchange, 21st edition at page 132 states thus:
“If a man seeks to enforce a simple contract, he must, inpleadings, aver that it was made on good consideration, andmust substantiate that allegation of proof. But to this rule billsand notes are an exception. It is never necessary to averconsideration for any engagement on a bill or note or to provethe existence of consideration”
The learned counsel for the defendants also submitted that the plaintiffhas failed to present the promissory note for payment to the defendantsas required by section 45 and section 88(1) of the Bills of ExchangeOrdiance.
In the promissory note which is the subject matter of this action itstates that, on demand the defendants promise to pay the plaintiff at its
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registered office in Colombo. Accordingly, the plaintiff by its letter of demanddated 8.1.2003 demanded the sums set out in the promissory note, towhich the defendants did not reply. This alone amounts to presentment.
Byles on Bills of Exchange 21st edition at page 220 states that if a billis accepted payable at a banker’s, which banker happens to become theholder at its maturity, that fact alone amounts to presentment, and noother proof is necessary.
The plaintiff duly and properly presented the promissory note for paymentalong with a demand for payment to the defendants through registeredpost by letter dated 8.1.2003. There was no reply to the said letter ofdemand. Further there was no challenge as to the correctness of thepromissory note. In this regard I refer to the Supreme Court case ofSaravanamuttu Vs. De Mel(2) where Dias, J. held that in business matters,if a person states in a letter to another that certain state of facts exists,the person to whom the letter is written must reply if he does not agreewith or means to dispute the assertions. If not, the silence of the latteramounts to an admission of the truth of the allegations contained in theletter. Accordingly, the only possible conclusion for the faliure to reply tothe letter of demand is that the amount stated in that letter is correct andthat the defendants have not re-paid the sum stated in the promissorynote.
It is to be observed that in the petition and the affidavit filed by thedefendants in the district Court, the promissory note has not been deniedand there is nothing to show that they repaid the sum stipulated in thepromissory note. In their petition the defendants have taken several technicalobjections mainly with regard to the regularity of the procedure.
K.D.P. Wickremasinghe in his book “Civil Procedure in Ceylon” 1971edition at page 318, citing the cases, Carpen Chetty Vs. ManilarP MatherSaibo vs. Crowther^ and Sadadeen Vs. Meerasa(5> states as follows :
“In an action under the summary procedure on a liquid claim thedefendant cannot be heard or allowed to take any objection, as tothe regularity of the procedure, without having first obtained the leaveof the Court to appear and defend. A judge cannot dismiss asummary action on a liquid claim on the merits of the case beforegranting the defendant leave to defend.”
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In the circumstances, I am of the view that the defendants cannot takeobjections at this stage as to the regularity of the procedure without firstobtaining the leave of Court to appear and defend the action.
It is to be noted that the defendants have not dealt with the plaintiff’sclaim on its merit and they have solely depended on the regularity of theprocedure and technical objections to the plaintiff’s action. The defendantshave not disclosed a triable issue. Accordingly, the defendants are notentitled to be heard without first obtaining leave to appear and defend.
Section 6(2) of the Debt Recovery (Special Provisions) Act, No. 2 of1990 was amended by Act, No. 9 of 1994, and section 6(2) of the originalAct was repealed and a new subsection was introduced. It reads thus:
6(2) The court shall upon the filing by the defendant of anapplication for leave to appear and show cause supportedby affidavit which shall deal specifically with the plaintiff’sclaim and state clearly and concisely what the defenceto the claim is and what facts are relied upon to supportit, and after giving the defendant an opportunity of beingheard, grant leave to appear and show cause againstthe decree nisi, either –
Upon the defendant paying into court the summentioned in the decree Nisi: or
upon the defendant furnishing such security as tothe court may appear reasonable and sufficientfor satisfying the sum mentioned in the decreenisi in the event of it being made absolute;or
Upon the court being satisfied on the contents ofthe affidavit filed, that they disclose a defencewhich is prima facie sustainable and on such termsas to security, framing and recording of issues, orotherwise as the court thinks fit”.
The defendants have filed this application against the impugned orderof the learned Judge on the basis that they are entitled to unconditional
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leave to appear and defend the action. In the case of People’s Bank V.Lanka Queen INTL Private Ltdie) it was held that the amended section6(2) (amended by Act, No. 4 of 1994) does not permit unconditional leaveto defend the claim. The minimum requirement according to section 6(2)
is the furnishing of security.
In the aforesaid case De Silva J. has made a comprehensive analysisof section 6(2) as amended by Act, No. 9 of 1994. De Silva, J. observed at237 and 238 thus :
“The new subsection clears any doubt that would haveprevailed earlier in respect of the procedure a defendant hasto follow in applying for leave to appear and show cause. Onan examination of the amendment introduced in subsection6(2) it is abundantly clear that the word “application” whichappeared in the original section has been qualified with thefollowing words : “Upon the filing of an application for leaveto appear and show cause supported by affidavit”. This showsthat-
It is mandatory for the defendant to file anapplication for leave to appear and show cause.
such application must be supported by an affidavitwhich deals specifically with the plaintiff’s claimand state clearly and concisely what the defenceto the claim is and what facts are relied upon tosupport it.
This section does not permit unconditional leaveto defend the case as the defendant respondenthas requested from the district Court. The minimumrequirement according to subsection (c) is for thefurnishing of security.
If the defendant satisfies (a) and (b) above thenthe defendant should be given an opportunity ofbeing heard. The court will have to decide on oneof the three matters specified in the above section.They are:
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The Court may order the defendant to pay into courtthe sum mentioned in the decree Nisi. Thus, evenwhere the requirements as stated above arecomplied with, the court has the power and theauthority to order the defendant to pay the full summentioned in the decree Nisi before permitting thedefendant to appear and defend.
Alternative to (a) above, the court can order thedefendant to furnish security which, in the opinionof the court is reasonable and sufficient to satisfy thedecree nisi in the event it being made absolute. Thedifference between this provision and the (a) aboveis that instead of paying the full sum mentioned inthe decree nisi, it will be sufficient to the defendantto furnish security, such as banker’s draft, and thendefend the action.
the third alternative is where the court is satisfied onthe contents of the affidavit filed, that they disclosea defence which is prima facie sustainable and onsuch terms as to security; framing of issues orotherwise permit the defendant to defend the action.Thus, it is imperative that before the court acts onsection 6(2)(c) it has to be satisfied;
With the contents of the affidavit filed by thedefendant;
that the contents disclose a defence which isprima facie sustainable; And
determine the amount of security to befurnished by the defendant, and permitframing and recording of issues or otherwise asthe court thinks fit.
In the case of National Development Bank vs. Chrys Tea (Pvt.) Ltd.and another(7) this Court held that;
Under Section 6(2) (a) or 6(2)(b) the Court has no discretionto order security which is not sufficient to satisfy the sum
mentioned in the decree nisi
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Section 6(2)(c) is the only section which permits the Courtdiscretion to order security which would be a lesser sumthan the sum mentioned in the decree nisi.
It appears to me that it is imperative that even under section 6(2)(c) theCourt has to order security, but the Court can use its discretion to determinethe amount of security if the defendants disclose a defence. The Courthas to be satisfied that the contents of the affidavit filed by the defendantsdisclose a defence against the claim made by plaintiff which is prima-facie sustainable.
In the instant case, the defendants have not disclosed a defence againstthe claim made by the plaint. The defendants’ defence is mainly confinedto technical objections and objections to the regularity of the procedure.The defendants have merely denied the plaintiff’s claim. In my view meredenial is not sufficient when they have failed to respond to the letter ofdemand sent by the plaintiff demanding the said sum in the promissorynote. In support of this view, I cited above the Supreme Court case ofSaravanamuttu Vs. De Mel (supra) where it was held that in businessmatters, in certain circumstances, the failure to reply to a letter amountsto an admission of a claim made therein.
In the instant case the defendants have failed to raise a sustainabledefence in their affidavit. That is the defendants have failed to disclose adefence which requires investigation and trial and not one which issummarily disposed of on the affidavits as done by the defendants in thiscase. The defendants have failed to deal with the plaintiff’s claim on itsmerits. It is my considered view that the defendants have failed to disclosea plausible defence which ought to be tried by Court. It is my further viewthat the defendants are not entitled to unconditional leave on defencesbased on mere technical objections and evasive denials which have nostrength to stand on their own. In any event, as pointed out by De Silva, J.in the case of People's Bank vs. Lanka Queen International (Pvt) Ltd.,(supra) section 6(2) (as amended by Act, No. 4 of 1994) does not permitunconditional leave to defend the claim; the minimum requirement accordingto section 6(2) (c) is for the furnishing of security determined by Court andthe Court can exercise its discretion in determining the amount of securityto be furnished by the defendant if he discloses a sustainable defence.
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I would therefore affirm the order of the learned Additional District Judgedated 19.5.2004 and dismiss the defendants’ application for leave to appealwith costs.
Application dismissed.