YAPA vs. PEOPLES BANK AND ANOTHER

010-SLLR-SLLR-2006-V-1-YAPA-vs.-PEOPLES-BANK-AND-ANOTHER.pdf


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YAPAVSPEOPLE’S BANK AND ANOTHERCOURT OF APPEAL,
WIMALACHANDRA, J.
A. 2241/2003,(REV)
C. COLOMBO 6932/SPL,
AUGUST 6,2004.
People's Bank Act, No. 29 of 1961-Amended by Act, No. 32 of 1986 – Sections29 and 29 D – Parate execution -Ouster clause-Granting of interim relief -Ingredients necessary ? – Stamp Duty Act, No. 43 of 1982, section 16 -Applicability – Could the Board resolution be challenged indirectly ?
The People’s Bank sought to parate execute the mortgaged property. Thepetitioner sought an enjoining order to restrain the Bank from selling the landby public auction. The enjoining order was refused. The petitioner moved inrevision.
It was contended by the petitioner that-
In view of section 16 of the Stamp Duty Act, the 1st respondent(Bank) cannot claim the amount in the Board Resolution, asaccording to the amount of stamp duty paid on the mortgage bondsthe Bank cannot recover more than Rs. 1,1419,770/- and anyattempt to recover over and above the said amount is illegal.
That no consideration passed at the time of the execution of themortgage bonds and hence the bonds are of no force or avail inlaw.
Held:
According to section 29D, the borrower is not competent to makean application to court to move to invalidate a resolution to sell bypublic auction any immovable property mortgaged to the Bank.The petitioner cannot challenge the resolution even indirectly bychallenging the mortgage bonds on the basis that they are notproperly stamped. The petitioner is trying to do indirectly, what hecannot do directly.
That the plaintiff cannot now complain that no consideration passedin view of the acknowledgment made by him to the receipt of thesaid banking facilities as per the receipts issued by the plaintiff.
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Yapa vs. People's Bank and another
(Wimalachandra, J.)
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APPLICATION in revision from an Order of the District Court of Colombo.Cases referred to:
Felix Dias Bandaranaike vs The State Film Corporation and another(1981) 2 Sri LR 287 at 301
People's Bank vs. Hewawasam – (2000) 2 Sri LR 29
C. A. L. A. 74/97 with CA 433/97 – D. C. Colombo 4707/Spl.
Derrick Samarasekera for plaintiff petitioner.
Rohan Gunapala with Deepa Govinna for defendant respondents
Cur.adv.vult
08.12.2004
WIMALACHANDRA J.
This is an application in revision from the order of the Additional DistrictJudge of Colombo dated 18.12.2003 in case No. 6932/Spl, refusing togrant an enjoining order in terms of paragraph (b) of the prayer to the
plaint.
Briefly, the facts relevant to this application are as follows :
The plaintiff-petitioner (plaintiff) was a customer of the Matara-Uyanwatte Branch of the 1 st defendant-respondent bank (1 st defendant).Admittedly, the plaintiff made several applications for banking facilitiesto the 1st defendant. The 1st defendant granted the banking facilitiessought by the plaintiff and as security for the said facilities he executedfour mortgage bonds, 3024 dated 22.08.1996,2668 dated 27.11.1998,490 dated 08.07.1999 and 4270 dated 27.11.1998 respectively. It is notin dispute that upon the execution of the aforesaid mortgage bonds the1 st defendant released the banking facilities sought by the plaintiff andthe plaintiff issued the receipts marked “X9”, “X10" and “X11 ” annexed tothe objections filed by the 1st defendant acknowledging receipt of thesame. The plaintiff failed to repay the loan installments to the 1stdefendant as agreed upon notwithstanding the reminders sent by the1 st defendant bank. Thereafter the 1 st defendant adopted a resolutionunder Section 29B of the People’s Bank Act, No. 29 of 1961 as amendedby Act, No. 32 of 1986 to sell the properties mortgaged to the 1st
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defendant to recover the monies due to the 1 st defendant bank. The 1 stdefendant published the aforesaid resolution in the newspapers and inthe Government Gazette in terms of provision 29 of the aforesaid People’sBank Act. The 1 st defendant thereafter instituted an action in the DistrictCourt of Colombo seeking inter alia an enjoining order and an interiminjunction against the 1 st defendant from selling or alienating the saidproperties mortgaged to the 1 st defendant bank by public auction untilthe final determination of the District Court action. The application foran enjoining order and an interim injunction was taken up for inquiryand after considering the pleadings, documents and submissions ofcounsel, the learned District Judge refused to grant an enjoining orderto stay the auction sale by his order dated 18.12.2003. It is against thisorder the petitioner has filed this application in revision.
It is settled law that in deciding whether to grant an enjoining order oran injunction the plaintiff must first establish a strong prima facie case inhis favour. In the case of Felix Dias Bandaranaike Vs. The State FilmCorporation and Another0'. 308 Soza, J said ;
“ In Sri Lanka we start off with a prima facie case. Thatis, the applicant for an interim injunction must show thatthere is a serious matter in relation to his legal rights, tobe tried at the hearing and that he has a good chance ofwinning.”
If a prima facie case has been made out, the Court would then considerthe balance of convenience.
The learned Counsel for the petitioner submitted that in view of section16 of the Stamp Duty Act, No. 43 of 1982, the 1 st defendant cannot claimthe amount in the Board Resolution. The learned Counsel further submittedthat according to the amount of stamp duty paid on the aforesaid mortgagebonds the 1 st defendant could not recover more than Rs. 1,419,770/= andany attempt to recover over and ^bove the said amount is illegal.
The petitioner cannot take any advantage by challenging the mortgagebonds stating that they are not properly stamped, to restrain by an interiminjunction a sale by public auction upon a resolution adopted by the bankin terms of the provisions of the People’s Bank (Amendment) Act, No. 32
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Yapa vs. People's Bank and another
(Wimalachandra, J.)
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of 1986 to sell by public auction any immovable or movable propertymortgaged to the bank as security for any loan in respect of which defaulthas been made, in order to recover the whole or unpaid portion of suchloan.
However, it is to be noted that mortgage bond No. 3024 bears the valueof Rs. 5000/=. The total amount secured is Rs. 500,000/= and interestthereon. The mortgage bond No. 2668 bears stamps to the value of Rs.5000/=. Similarly, each bond No. 490 and No. 4270 bear stamps tothe value of Rs. 8,200/= and the amount secured by each bond isRs. 500,000/= and interest thereon respectively.
According to Section 29 D of the People’s Bank Act, N o. 29 of 1961 asamended by Act, No. 32 of 1986, a borrower is not competent to make anapplication to Court to move to invalidate a resolution to sell by publicauction any immovable property mortgaged to the Bank.
Section 29 D states as follows :
“The Board may by a resolutionauthorise anyperson to sell by public auction any immovable propertymortgaged to the Bank as security for any loan in respect ofwhich default has been made in order to recover the whole ofthe unpaid portion of such loan, and the interest due
thereonand thereafter it shall not be competent for the
borrower in any Court to move to invalidate the said resolutionfor any cause whatsoever and no Court shall entertain any suchapplication.”
In the case of People's BankVs. Hewawasarrf2) Jayawickrema, J. heldthat:
“The above expression in Section 29(D) is of similar import as“shall not be called in question in any Court', contained in Section22 of the Interpretation Ordinance. Hence, we agree with thesubmissions made by the learned President’s Counsel on behalfof the Defendant Petitioner that the said resolution (marked E)passed by the Board of Directors of the People’s Bank, cannot beinvalidated or challenged in an action in the District Court.
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Therefore, in these circumstances, the sale of the mortgagedproperty by public auction upon the said resolution marked “E"cannot be restrained by an interim injunction. The plaintiff-respondent has failed to establish a prima facie case. The plaintiffrespondent has taken advantage of a mere mistake of the dateof the execution set out in the original bond to fabricate a caseto the extent of even challenging the mortgage bond itself.”
Jayawickrema, J. in the course of his judgement cited with approval thefollowing passage from the judgment of the Court of Appeal case C. A. L.A. No. 74/97 with CA Application (revision) No. 433/97(3) whereinEdussuriya, J. held that:
“Section 29(D) sets out that it shall not be competent for theborrower to move any Court to invalidate such a resolution forany cause whatsoever, and no Court shall entertain such anapplication
If this Court were to fall into the error of drawing a distinctionbetween the words invalidate and null and void in theconstruction of Section 29(D), this Court would be in my viewseeking to act in contravention of the intention of the legislatureand bring to naught the intention of the legislature in grantingparate execution rights to the Bank”
It seems to me that the petitioner is trying to do indirectly what hecannot do directly. As Edussuriya, J. pointed out in the aforesaid judgment,in terms of Section 29(D) it shall not be competent for the borrower tomove any Court to invalidate such a resolution for any cause whatsoeverand the Court cannot entertain such an application.
Accordingly, the petitioner cannot challenge the resolution even indirectlyby challenging the mortgage bonds on the basis that they are not properlystamped in terms of the Stamps Ordinance.
Another submission of the learned counsel for the plaintiff is that noconsideration had passed at the time of the execution of the mortgagebonds and hence the bonds are of no force or avail in law. In my view theplaintiff cannot now complain that no consideration had passed in view of
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the acknowledgement made by the plaintiff to the receipt of said bankingfacilities as per the receipts issued by the plaintiff marked “X9”, “X10”, and“X11 ” (annexed to the statement of objections produced by the plaintiff).
In the circumstances, I am of the view that the plaintiff has failed toestablish a prima-facie case in his favour. It is only if the plaintiff has madeout a prima facie case the Court must consider where the balance ofconvenience lies.
In my view there is no Substantial error of law or fact.in the order madeby the learned Judge that could be considered as an exceptionalcircumstance to grant relief in this application in revision.
For these reasons I refuse the plaintiff’s application in revision withcosts fixed at Rs. 2,500/=
Application dismissed