008-SLLR-SLLR-2009-V-1-SRI-LANKA-CO-OPERATIVE-SOCIETY-vs-SUSAI.pdf
CA
Sri Lanka Co-Operative Society Vs Susai
67
SRI LANKA CO-OPERATIVE SOCIETY
vs
SUSAI
COURT OF APPEALWIMALACHANDRA. JBASNAYAKE. JCALA 380/2001 (LG)
DC COLOMBO 35813/MSJANUARY 12, 22, 2004
Civil Procedure Code – Section 703, Section 704(2) liquid claimsdishonouring of cheques – Jurisdiction – which Court? – EngUsh Law,or Roman Dutch Law applicability? – Leave to appear and defend-unconditionally – When?
The plaintiff complained that the defendant had issued 5 cheques andthe cheques were dishonoured by the bank. The plaintiff resided inColombo, the transaction took place in Colombo, the defendant residedin Nuwara Eliya, the trial Judge granted leave unconditionally. It wascontended that the cheques were drawn on banks situated outside thejurisdiction of the District Court of Colombo and therefore the DistrictCourt of Colombo has no jurisdiction.
On leave to appeal being sought-
Held:
In the absence of express agreement as to the place where the plaintiffis to be paid, the English Law will apply, accordingly as to the place ofpayment, the debtor must seek out the creditor in the absence of anexpress agreement with regard to payment.
The cheques were issued, from the banks at Nuwara Eliya,Hanguranketa and Padiyapalalla, payments were made in Colombo,the plaintiff resides in Colombo and the cheques were dishonoured inColombo. It is the District Court of Colombo which has jurisdiction.
68
Sri Lanka Law Reports
[2009]! SRIL.R.
Judge can order such a deposit if he considers the defence is notprima facie sustainable or not bona fide. Section 704 (2) doesnot say that if the Judge accepts the defence outlined as bonafide he must necessarily give leave to appear and defendunconditionally.
The defendant’s affidavit indicates that his defence is not primafacie sustainable. A reasonable doubt exits as to the honesty ofthe defence set up by the defendant. The alleged defences are notsufficient to grant unconditional leave to appear and defend, thereare reasonable doubts about the good faith of the defendant.
APPLICATION for leave to appeal with leave being granted.
Cases referred to:- .
Ponnaih vs. Kanagasabai 35 NLR 128
Sirimanne vs. New India Assurance Company Ltd 35 NLR 413
Seneviratne vs. Thaha 65 NLR 184
Sebastian vs. Kumarajeewa 1978-80 NLR 264 at 268
Supramaniam Chetty vs. Kristnasamy Chetty 10 NLR 327
Issadeen & Company vs. Wimalasuriya 62 NLR 299
Vailiappa Chettiar vs. Viswanathan 66 NLR 481
Kuvera de Zoysa with Senaka de Saram for plaintiff-respondent-petitioner
V. Puvitharan for defendant-petitioner-respondent
Cur.adv.vult
July 25, 2008WIMALACHANDRA, J.
The plaintiff-petitioner (plaintiff) has filed application forleave to appeal against the order of the learned AdditionalDistrict Judge of Colombo granting the defendant-respondent(defendant) leave to appear and defend this actionunconditionally, under summary procedure.
The plaintiff states that the defendant had issued fivecheques marked “PI – P5”, for Rs.669,000/= and these
CA
Sri Lanka Co-Operative Society Vs Susai
(Wimalachandra, J.)
69
cheques were dishonoured by the bank on presentation. Theplaintiff claims the said sum of money from the defendantfor supplying ‘seed potatoes’ to the defendant. It is commonground that the plaintiff resides in Colombo and the saidtransaction had taken place in Colombo. Summons wereissued in terms of section 703 of the Civil Procedure Codeand defendant moved for leave to appear and defend theaction mainly on the following grounds:
The District Court of Colombo has no jurisdiction tohear and determine this action.
Only the cheque marked ‘A 1’ is given by the respondentand cheques marked ‘A2’ to ‘A5’ were.not endorsed bythe defendant in favour of the plaintiff.
When the matter was taken up for inquiry both partiesagreed to dispose of the defendant’s application forleave to appear and defend the action by way of writtensubmissions. Accordingly, the parties filed written submissionand invited the Court to decide the matter on the writtensubmission filed by them. Thereafter, the learned Judgemade order on 11.10.2001 allowing the defendant to appearand defend the action unconditionally. It is against this orderthe plaintiff has filed this application. The Court of Appealgranted leave to appeal on 25.07.2003.
It is not in dispute that the aforesaid cheques were issuedby the defendant as payments for goods sold and delivered tohim by the plaintiff. It is also not in dispute that the aforesaidcheques were dishonoured when presented for payment.
It is obvious that the defendant had issued the aforesaidcheques for the seed potatoes bought from the plaintiff andpayments were to be made in Colombo upon the aforesaid
70
Sri Lanka Law Reports
12009]! SRI LR.
cheques being deposited in the plaintiff's bank in Colombo.The defendant in his petition dated 17.02.2001 filed in theDistrict Court specifically admits in paragraph four that thisaction is based on the aforesaid dishonoured five cheques.The plaintiff in his petition filed in the District Court haspleaded that the parties had agreed that payment is notdenied by the defendant. The main defence of the defendantis that the said cheques were drawn on banks situatedoutside the jurisdiction of the District Court of Colombo andtherefore the District Court has no jurisdiction to entertainthe plaintiff’s action. However, the defendant does not denythat these cheques were not given by him to the plaintiff.It was the main contention of the defendant that the saidcheques were drawn from banks situated outside thejurisdiction of the District Court of Colombo.
There is no dispute that the transaction took placein Colombo within the jurisdiction of the District Court ofColombo.
In an action to recover money on a negotiable instrument,the English law applies and hence the debtor must seek outthe creditor. In such cases the cause of action, the failure topay arises where the claimant resides.
In the case of Ponnaih vs. Kanagasabai1],where apromissorynote made by the defendant in favour of the plaintiff wassilent as to the place of payment, the Supreme Court heldthat an action may be brought on the note in the Court withinwhose jurisdiction the plaintiff resides as the debtor must seekout the creditor at his place of residence or place of business.Similarly, in the case of Sirimanne Vs New India AssuranceCompany Limited21 the Supreme Court held that in anaction to recover money due under a policy of fire insurance theprinciple of English law applies and that the debtor must seekout the creditor. In such a case the cause of action, that is thefailure to pay, arises where the claimant resides.
CA
Sri Lanka Co-Operative Society Vs Susai
(Wimalachandra, J.)
71
The defendant relied on the case of Seneviratne Vs.Thahai3) In this case the defendant, who was residing atPanadura, drew a cheque in favour of the plaintiff payableat the Panadura Office of the Bank of Ceylon, the cheque wasdishonoured at Panadura, the plaintiff instituted proceedingsin the District Court of Colombo for the recovery of the amountof the cheque. It was held that the cause of action arose inPanadura and the District Court of Colombo had therefore nojurisdiction to hear the case.
However, the facts of the present case is different fromthe above mentioned case of Seneiriratne Vs. Thaha(supra).In the present case, the transaction took place in Colombo,where the plaintiff resides and payments were made inColombo by the said cheques marked “PI to P5’ and theywere dishonoured when presented to the plaintiffs bank inColombo. The cheques PI to P5 are “crossed, account payee”issued from the banks at Nuwara-Eliya, Hanguranketha andPadiyapalalla. Accordingly, they can only be deposited in theplaintiff’s (payee’s) account and the plaintiff has depositedthose cheques in his account at Bank of Ceylon, MetropolitanBranch, in Colombo. In the case of Seneviratne Vs. Thaha(supra) the cheque was dishonoured in Panadura and theaction was filed in Colombo. Hence the facts of SeneviratneVis. Thaha (supra) is different from the facts from the instantcase.
In the absence of express agreement as to the placewhere the plaintiff is to be paid, the English law will apply.Accordingly, as to the place of payment, the debtor must seekout the creditor in the absence of an express agreement withregard to payments.
Section 704(2) of the Civil Procedure Code states thus:
“The defendant shall not be required, as a condition ofhis being allowed to appear and defend, to pay into Courtthe sum mentioned in the summons or to give security
72
Sri Lanka Law Reports
12009]! SR1L.R.
therefor, unless the Court thinks his defence not beprima facie sustainable ,or feels reasonable doubts as toits good faith”
Thus it will be seen that the Judge can order such adeposit if he considers the defence is not prima faciesustainable or not bona fide. In the same way section 704(2),certainly, does not say that if the Judge accepts the defenceoutlined as bona fide he must necessarily give leave to appearanddefendunconditionally. (See- Sebastian Vs. Kumarajeewawat 268, – per- Gunasekara, J.)
In the case of Supramaniam Chetty Vs. KristnasamyChetttf5), it was held that where there are reasonable groundsfor doubting the good faith of the defense, the defendantshould only be allowed to defend action if he deposit in Courtthe amount of the claim or gives security for it.
In the case of Sebastian Vs. Kumarajeewa (Supra) theSupreme Court refused to follow the decision in the case ofIssadeen & Company Vs.Wimalasuriyawhere it was heldthat even if the defence was not prima facie sustainable orthat it lacked ‘good faith’ the defendant should in law bepermitted to defend the action unconditionally.
Gunasekara, J. in Sebastian Vs. Kumarajeewa(supra) at269,said:
“I am therefore of the view that the rule enunciated inthe case of Issadeen & Company(supra) that the judge isbound to allow unconditional leave if the whole or evenpart of the defence is accepted as bona fide is incorrectand should not be followed. To some extent this wasmade manifest in the later case of VaKappa Chettiar Vs.Visuwanathan, where the claim was on three chequeseach of Rs. 8,400/- and no bona fide defence wasavailable in respect of two of them and the learned
CA
Sri Lanka Co-Operative Society Vs Susai
(Wimalachandra, J.)
73
District Judge had ordered security to be given in a sumof Rs. 16,000/-. The same Counsel who appeared forthe Appellant in the Issadeen & Company(supra) caseunderstandably argued before Weerasooriya, J.that in keeping with the earlier decision the bonafides of the defence to a part of the claim havingbeen established the Defendant should have beenpermitted to answer unconditionally. Weerasooriya, J.rejected this submission and affirmed the Orderof the learned District Judge saying that theearlier decision could be distinguished on the groundthat “there is no admission of any liability by theAppellant and what he seeks to obtain is leave toappear and defend the action in its entirety.” If thesefacts create an exception to the rule enunciatedin the Issadeen & Company (supra) case it must beobserved that in the instant case too there is noadmission of liability by the Appellant and the Appel-lant seeks to defend the action in its entirety. But bothbefore the decision in the Issadeen & Company (supra)case as is shown in Valiappa Chettiar's (supra)case Judges of our Courts have always exercisedtheir discretion in terms of section 706 in caseswhere they considered the Affidavit of the Defendant‘satisfactory’ and often ordered the Defendant to depositpart of the sum claimed in the plaint.
In the instant case, there are reasonable doubts aboutthe good faith of the defence. It is the defendant who hadgiven the said cheques for the goods supplied by the plaintiff.Now he states that he was only an agent and boughtgoods for others. But he admits that he gave the aforesaidcheques to the plaintiff. The alleged defences are notsufficient to grant unconditional leave to appear and defend.The defendant’s affidavit indicates that his defense is notprima facie sustainable. A reasonable doubt exists as to thehonesty of the defence set up by the defendant. Admittedly,
74
Sri Lanka Law Reports
[2009] 1 SRILR.
the defendant has not even made any attempt to pay theplaintiff. In the circumstances, I am of the view that thedefences raised by the defendant were not bona fide but asham.
For these reasons the impugned order of the AdditionalDistrict Judge dated 11.10.2001 is set aside. The defendantis directed to deposit the full sum claimed by the plaintiffin Court as a condition precedent, before the defendantis permitted to appear and defend. This sum shall bedeposited within three months from the date of thisJudgment, failing which the decree will be entered as prayedfor by the plaintiff.
The appeal is accordingly allowed with costs.
BASNAYAKE, J. – I agree
Appeal allowed.
Defendant directed to deposit the full sum claimed.