056-SLLR-SLLR-1998-V-3-YASODHA-HOLDINGS-PRIVATE-LTD.-v.-PEOPLES-BANK.pdf
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Sri Lanka Law Reports
[1998] 3 Sri LR.
YASODHA HOLDINGS (PRIVATE) LTD.
v.PEOPLE'S BANK
SUPREME COURTAMERASINGHE. J„
PERERA, J..
BANDARANAYAKE, J.
S.C. APPEAL NO. 129/97
H.C. COLOMBO (CIVIL) NO. 92/97 (1)
SEPTEMBER 15, 1998
Civil Procedure – Action for accounting – Interim Injunction and Enjoining Order.
The appellant instituted an action in the High Court against the People's Bankfor an accounting and sought, inter alia , an interim injunction and enjoining orderrestraining the Bank from –
transferring the appellant's facility in the Bank to the non-performingcategory; and
reporting the plaintiff to the Sri Lanka Credit Information Bureau untilfinal determination of the action instituted in the High Court.
The High Court refused this relief and the appellant appealed to the SupremeCourt.
Held:
The claim that the appellant does not owe the Bank anything is not borne bythe evidence on record. A prima facie case had not been made out in the sensethat there is a bona fide contention between the parties on the question ofindebtedness. The balance of convenience lies in allowing the normal bankinglaws and procedures to operate. The equities are in favour of the Bank. Thesubmission that the Bank would not stand to lose anything is untenable having
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regard to the fact that the loan portfolio, liquidity and profitability have been andwill continue to be affected if it cannot take such measures as it is entitled inlaw to take to protect its interests. Moreover the appellant has failed to showthat irreparable harm would be sustained unless the injunction was granted.
If the Bank, acting in accordance with the law, takes certain steps that mighteventually harm the appellant's business, the harm sought to be preventeddoes not relate to acts that are unlawful or wrongful. The harm, if any, that mightbe caused would be that which the appellant has brought upon itself by failingto liquidate its debts.
Per Amerasinghe, J.
"The power which the court possesses of granting injunctions should be verycautiously exercised and only on clear and satisfactory grounds. An applicationfor an injunction is an appeal to an extraordinary power of the court and theapplicant is bound to make out a case showing a clear necessity for its exercise."
APPEAL from order of the High Court of Colombo.
L. C. Seneviratne, PC with Desmond Fernando, PC, Suren Peiris,R. Y. D. Jayasekera and H. V. Situge for appellant.
E. D. Wickremanayake with Gomin Dayasiri, Kushan de Alwis and Ms. PriyanthiGunaratne for respondent.
Cur. adv. vult.
October 22, 1998.
AMERASINGHE, J.
The apppellant instituted an action in the High Court against thePeople's Bank for an accounting relating to transactions betweenthe appellant and Bank. The appellant sought, inter alia, an InterimInjunction and an Enjoining order restraining the Bank from –
transferring the appellant's facility in the Bank to the non-performing category; and
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reporting the plaintiff to the Sri Lanka Credit Information Bureauuntil the final determination of the action instituted in the HighCourt.
The High Court in its Order dated the 3rd of July, 1997, refusedto grant the relief prayed for.
The appellant then applied for leave to appeal to the SupremeCourt from that Order of the High Court. On 18.09.97, this courtgranted leave on the question whether the learned Judge of theHigh Court was in error by refusing to grant an Order that the plaintiffwas eligible to the grant of facilities from the Bank in the normal courseof business and in refusing the grant of the Interim Injunction andEnjoining order prayed for.
The appellant was an importer of sugar, cement and other items,and between December, 1991 and April, 1996, had been advancedvery large sums of money, from time to time, by the Bank, in additionto being afforded the facility of opening Letters of Credit. At severalmeetings between the Chairman of the appellant and the Board ofthe Bank, it was agreed by the Chairman of the appellant to repaysome of debts owed to the Bank by the appellant. By his letter dated3rd January, 1997, the Assistant General Manager of the Bank pointedout that the appellant had failed to comply with the undertakingsgiven with regard to the settlement of interest accruals and thefinalization of securities. He also stated as follows:
"It is needless to mention that a sum of Rupees 3,383.5 millionlent to your group of companies by way of short-term advancesare blocked, together with the interest due thus creating animmense problem to our branch."
From about February, 1997, the appellant was warned by the Bank,from time to time, that the Bank would be compelled to transfer theappellant's facility out of the performing category and to inform theSri Lanka Credit Information Bureau of the situation. On the 12th ofFebruary, 1997, the General Manager of the Bank informed theChairman of the appellant that the Central Bank of Sri Lanka had
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refused to grant covering approval for the credit facilities extendedby the Bank to the appellant, since the Single Borrower ExposureLimit in terms of the Banking Regulations, had been exceeded. TheChairman of the Bank on the 20th of February, 1997, reiterated thefact that the Central Bank had refused to grant covering approval forexceeding the prescribed amount of accommodation. He drewattention to the fact that the Chairman of the appellant had agreedto pay a sum of rupees 800 million initially and that the total facilityoutstanding had not been brought down to the agreed limit of Rs.1,100million. The Chairman pointed out that the appellant's failure to complywith these undertakings had a "direct impact on the loan portfolio,liquidity and profitability of the Bank", and called upon the Chairmanof the appellant company to discharge the obligations he hadundertaken. The appellant was sent a detailed statement showing theliabilities of the appellant. On the 20th of March, 1997, the Chairmanof the Bank wrote to the Chairman of the appellant observing thatthe appellant had failed to regularize matters and stated that if it didnot do so by the 10th April, 1997, the Bank would be compelled totransfer the appellant's facilities to the non-performing category andthat it would inform the Sri Lanka Credit Information Bureau of theposition.
However, on 7th May, 1997, the Chairman of the Bank informedthe Chairman of the appellant that, having regard to what the appellanthad stated in his letter dated 2nd April, 1997, the Bank would neithertransfer facilities of the appellant to the non-performing category norreport the matter to the Credit Information Bureau. The Bank agreedto accede to the appellant's request to extend the period for thepayment of Rs. 810 million up to 30th June, 1997". However, theChairman of the Bank drew attention to the fact that the non-paymentof capital as well as interest amounting to Rs. 500 million "had badlyaffected the profitability and liquidity of the Bank. As such we will becompelled to take action to recover dues to the Bank by realizingthe securities offered by the group of companies, and initiating legalaction under the Debt Recovery Laws and report outstanding duesto the Credit Information Bureau, if you will fail to adhere to theproposals made in para 3 of this letter on or before 30th June, 1997".
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The appellant maintains that if the Bank had granted credit facilitiesin excess of permitted limits, the appellant should not be penalizedin any way. The appellant maintains that “on a balance of convenience"the relief prayed for should be granted for the defendant Bank wouldsuffer no hardship either financially or in any form of restriction toits banking activity if the interim relief prayed for was granted; whereasthe appellant would suffer grave and irreparable harm if the Injunctionand Enjoining order were not granted.
The learned Judge of the High Court considered the question of"balance of convenience". He stated that permitting the appellant toutilize several billions of rupees which it admits it owes the defendantBank without any security, thereby adversely affecting the loan port-folio, the liquidity arid profitability of the Bank, placed the Bank in asuperior position as far as "balance of convenience" was concerned.
I am of the view that the balance of convenience in this case liesin allowing the normal banking laws and procedures to operate. Theequities are in favour of the Bank. The submission that the Bank wouldnot stand to lose anything is an untenable proposition having regardto the fact that its loan portfolio, liquidity and profitability have beenand will continue to be affected if it cannot take such measures asit is entitled in law to take to protect its interests. Moreover, theappellant has failed to show that irreparable harm would be sustainedunless the injunction was granted. The letter of 26 February, 1996,from the Chairman of the (appellant to the General Manager of theBank makes it abundantly clear that the appellant had persuaded otherBanks to assist it in its business. If the Bank, acting in accordancewith the law, takes certain steps that might eventually harm theappellant's business, the appellant should not be restrained, for theharm sought to be prevented does not relate to acts that are unlawfulor wrongful, whatever the appellant's preference might be in the matter.The harm, if any, that might be caused would be that which theappellant has brought upon itself by failing to liquidate its debts.
The appellant contended that it did not owe the Bank anythingand that the accounts of the Bank were unacceptable. This is astrange position to take at this stage having regard to the fact that
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the appellant has never disputed the correctness of the accounts whichhe received on a daily basis. The letter of the Chairman of the Bankto the appellant dated 14th August, 1996, indicates the fact that theappellant owed substantial sums of money to Bank. The appellanthad accepted the fact that it was indebted at discussions at Boardmeetings referred to in the letter of the Chairman of the Bank to theChairman of the appellant dated 20th February, 1997. Its indebtednessis also accepted by the letter of the Chairman of the appellant in hisletter dated 26th February, 1996, referred to above. The basis of themain action is that the appellant does not owe the Bank any sumof money.
This is not borne out by the evidence in the record and thereforethe application for an injunction must also fail on the ground that aprima facie case had not been made out in the sense that there isa bona fide contention between the parties on the question ofindebtedness. Of course a different view might well be necessary atthe end of the trial when all the evidence has been let in. However,for the limited purpose of deciding whether an injunction should begranted, I hold that a prima facie case has not been made out andthat an injunction should not be granted.
The power which the court possesses of granting injunctionsshould be very cautiously exercised and only on clear and satisfactorygrounds. An application for an injunction is an appeal to anextraordinary ppower of the court and the applicant is bound to makeout a case showing a clear necessity for its exercise. The appellanthas failed to do so, and the appeal is therefore dismissed with costs.The decision of the learned Judge of the High Court dated 3rd July,1997, is affirmed.
PERERA, J. – I agree.BANDARANAYAKE, J. – I agree.
Appeal dismissed.