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Short title.
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1. This Ordinance may be cited as the Trust Receipts Ordinance.
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Trust receipt for imported goods.
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2.
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(1) Where any person, being the consignee of any goods imported into Sri Lanka or a person at whose instance any goods are imported into Sri Lanka, is not entitled, under the terms of any contract relating to the goods or to payment therefor or otherwise, to obtain possession of the goods or of the documents of title relating thereto, except upon payment of a sum of money or upon an undertaking to hold the goods in trust, and such person or any other person –
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(a) obtains possession of such goods or documents upon the execution, in favour of any approved credit agency by which the goods or documents are actually released, of a document in respect of the goods which complies with the provisions of subsection (2) or subsection (3) (which document is hereinafter referred to as “a trust receipt for imported goods”); or
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(b) obtains a loan from any approved credit agency for the purpose of making the payment necessary to enable him to obtain possession of such goods, or documents, upon the execution in favour of such agency of a document in respect of those goods which complies with the provisions of subsection (2) or subsection (3) (which document is hereinafter referred to as “a trust receipt for imported goods”), the provisions of section 4 shall be applicable in relation to that trust receipt and the goods to which it relates.
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(2) In order to comply with the provisions of this subsection, a document which is executed by any person in the circumstances mentioned in subsection (1) must contain the following undertaking on the part of that person in respect of the goods to which it relates :-
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(i) an undertaking to hold those goods in trust for the agency in favour of which it is executed, to mark the goods or packages or cases containing them in a specified manner, and to keep the goods in specified premises until the sale thereof;
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(ii) an undertaking to pay to the agency from time to time as received, the proceeds of the sale of those goods or a specified proportion of such proceeds;
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(iii) an undertaking not to sell those goods or any of those goods except for cash;
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(iv) an undertaking to deliver such of those goods as may for the time being be unsold, to, or to the order of, the agency upon demand made in writing in that behalf;
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(v) an undertaking to permit the agency, without prior notice, from time to time to enter and inspect the premises in which those goods are kept and to take stock of such of those goods as may be in the premises ;and
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(vi) an undertaking to insure those goods against all insurable risks to their full insurable value on a reinstatement basis in the name of the agency and in the case of loss, to pay the insurance moneys to the agency in the same manner as the proceeds of sale “.
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(3) In order to comply with the provisions of this subsection, a document which is executed by any person in the circumstances mentioned in subsection (1), must contain the following undertaking on the part of that person in respect of the goods to which it relates, that is to say-an undertaking to hold the goods in trust for the agency in favour of which it is executed, and to store them in a specified warehouse in the name of the agency.
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(4) Nothing in subsection (2) or subsection (3) shall be deemed to prevent the inclusion in the document of any undertakings, conditions or stipulations in addition to the undertaking specified in either of those subsections.
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Trust receipt for goods for exportation.
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3.
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(1) Where, upon a statement made to any approved credit agency by any person, that he proposes to purchase goods for the purpose of exportation from Sri Lanka, such person, for the purpose of making payment for the goods and of meeting expenditure in connection with the exportation and preparation for exportation thereof, obtains from such agency advances by way of loan, overdraft or otherwise, upon the execution in favour of such agency, of a document which complies with the provisions of subsection (2) (which document is hereinafter referred to as “a trust receipt for goods for exportation”), the provisions of section 4 shall be applicable in relation to that trust receipt and the goods to which it relates.
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(2) In order to comply with the provisions of this subsection, a document which is executed by any person in the circumstances mentioned in subsection (1) must contain the following undertakings on the part of that person in respect of the goods to which the document relates :-
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(i) an undertaking to hold those goods in trust for the agency in favour of which it is executed, to mark the goods or the packages or cases containing them in a specified manner, and to keep the goods in specified premises until the exportation thereof;
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(ii) an undertaking, upon the exportation from Sri Lanka of those goods, to deliver to the agency the bills of landing and other shipping documents relating to such goods;
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(iii) an undertaking not to sell those goods to any other person in Sri Lanka except with the consent of the agency, and in the event of any such sale with such consent to deliver the proceeds of sale from time to time as received to the agency;
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(iv) an undertaking, in the event of those goods not being exported from Sri Lanka within a specified period, to deliver the goods to, or to the order of, the agency upon demand made in writing in that behalf;
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(v) an undertaking to permit the agency, without prior notice, from time to time to enter and inspect the premises in which those goods are kept and to take stock of such of those goods as may be in the premises; and
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(vi) an undertaking to insure those goods until the exportation thereof, against all insurable risks to their full insurable value on a reinstatement basis in the name of the agency and in the case of loss, to pay the insurance moneys to the agency in the same manner as the proceeds of sale
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(3) Nothing in subsection (2) shall be deemed to prevent the inclusion in the document of any undertakings, conditions or stipulations in addition to the undertakings specified in that subsection.
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Legal effect or trust receipts to which this Ordinance applies.
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4.
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(1) Where a trust receipt for imported goods, or a trust receipt for goods for exportation, has been executed by any person in conformity with the provisions of section 2 or section 3 and the trust receipt is registered under the Registration of Documents Ordinance as a bill of sale affecting the goods to which it relates, the following provisions shall apply during such time as any money slated in the trust receipt to be due or to become payable thereunder to the agency remain due and unpaid :-
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(i) The agency shall, in the event of the seizure of the goods by any other person in execution of any decree of any court, be entitled, upon application made to that court in the action in the course of which the seizure was effected, to an order directing that the goods shall be delivered to the agency and shall be sold, either by public auction by an auctioneer selected by the agency and approved by the court, or in such manner as the court may direct, and in accordance with such directions as may be issued by the court.
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Upon the sale of such goods the agency shall be entitled to retain out of the proceeds of sale the amount due under the trust receipt, and the balance, if any, of the proceeds of sale shall be paid into court and be deemed to be proceeds of the sale of the goods in execution of the decree under which they were seized.
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(ii) The agency shall, in the event of the insolvency of the person by whom the trust receipt is executed, be entitled to obtain from the court in which the proceedings upon such insolvency are pending, an order directing that the goods to which the trust receipt relates shall be delivered to the agency and shall be sold either by public auction by an auctioneer selected by the agency and approved by the court, or in such other manner as the court may direct, and in accordance with such directions as may be issued by the court. Upon the sale of such goods, the agency shall be entitled to retain out of the proceeds of sale the amount due under the trust receipt, and the balance, if any, of the proceeds of sale shall be paid into court to the credit of the assignee of the estate of the insolvent.
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(iii) Where any goods are delivered to the agency in compliance with any undertaking referred to in paragraph (iv) of section 2 (2) or in paragraph (iv) of section 3 (2), the agency may sell the goods so delivered, whether after removal thereof, or at the premises in which the goods are kept if the person executing the trust receipt consents to a sale at such premises. The agency shall be entitled to retain, out of the proceeds of sale of the goods, the amount due to it under the trust receipt, and the balance, if any, shall be paid to the person by whom the trust receipt was executed.
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(iv) The person by whom the trust receipt was executed shall, if he commits a breach or fails to comply with any undertaking referred to in subsection (2) or subsection (3) of section 2, or in subsection (2) of section 3, as the case may be, being an undertaking contained in the trust receipt, be guilty of an offence and shall on conviction after summary trial before a Magistrate be liable to imprisonment of either description for a term not exceeding three years or to a fine not less than the amount of the money stated in the trust receipt to be due or to become payable thereunder to the agency and not exceeding three times that amount.
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(2) The provisions of this Ordinance relating to the payment to, or the recovery by, an approved credit agency, of the amount due under a trust receipt shall be in addition to, and not in substitution or derogation of, the provisions of any written or other law under which any right or remedy is available to the agency for the purpose of the recovery of that amount, or where any part of that amount has already been paid or recovered, of the balance remaining due.
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Offences by bodies of persons.
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4A. Where an offence under this Act is committed by a body of persons, then
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(a) if that body of persons is a body corporate, every director and manager or secretary of that body corporate ;
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(b) if that body of persons is a firm, every partner of that firm ; and
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(c) if that body of persons is an unincorporate body, every individual who is a member of such body, shall be deemed to be guilty of that offence:
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Provided that a director or an officer of such body corporate or a partner of such firm shall not be deemed to be guilty of such offence if he proves that such offence was committed without his knowledge or that he exercised all due diligence to prevent the commission of such offence.”.
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Approved credit agencies.
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5.
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(1) In this Ordinance “approved credit agency” means –
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(a) a licensed commercial bank within the meaning of the Banking Act, No. 30 of 1988
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(b) the National Development Bank of Sri Lanka established by the National Development Bank of Sri Lanka Act, No. 2 of 1979;
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(c) the State Mortgage and Investment Bank established by the State Mort-gage and Investment Bank Law, No. 13 of 1975 ;
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(d) the Development Finance Corporation of Ceylon established by the Development Finance Corporation of Ceylon Act (Chapter 165) ;
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(e) any company, or any co-operative society in respect of whom an Order has been made under section 6.
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(2) Nothing in this Ordinance shall be deemed or construed to authorize any institution mentioned in paragraphs (b), (c) and (d) of subsection (1) to make loans or afford any credit facilities in consideration of the execution of trust receipts, if the power to make such loans or to afford such facilities is not conferred on such institution by the Ordinance providing for the establishment, powers and functions of such institution.
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Powers of the Director of Commerce.
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6. The Director of Commerce may, where the Director be considers it appropriate to do so in the of Commerce, interest of national economy, by Order published in the Gazette declare that the provisions of this Act shall apply to any company registered under the Companies Act. No. 17 of 1982 or any co-operative society registered under the Cooperative Societies Law, No. 5 of 1972 which in his opinion is of sufficient financial stability and standing for the purpose of this Act, and not referred to in paragraph (a) or paragraph (b) or paragraph (c) or paragraph (d) of subsection (i) of section 5.”.
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