031-NLR-NLR-V-65-H.-W.-SIMON-SILVA-Petitioner-and-THE-DEPT-CONCILIATION-BOARD-and-others-Respo.pdf
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Simon 8&va v. The Data Conciliation Board
1963Present: T. S. Fernando, J.
W. SIMON SILVA, Petitioner, and THE DEBT CONCILIATIONBOARD and others, RespondentsS. C. 212 of 1963—Application for the grant and issue of Mandates in thenature of Certiorari and Prohibition in terms of Section 42 of the
Courts Ordinance
Debt Conciliation Ordinance (Gap. SI), as amended by Debt Conciliation(Amendment) Act, No. 5 of 195b—Sections 19A, 19B, 49, 62—Applicationfor settlement in respect of debt secured by conditional transfer of immovableproperty—Procedure for ” entertaining ” and giving notice of it—Incapacityof Board to delegate its functions to Secretary—Effect of invalid notice issuedby Secretary—Certiorari and Prohibition.
Where 8 debt has been secured by such a conditional transfer of immovableproperty as is a mortgage within the meaning of the Debt Conciliation Ordi-nance (as amended by Act No. 5 of 1959), the act of “ entertaining ” anapplication for settlement under section 19A of the Ordinance must be effectedby the Debt Conciliation Board itself and cannot be delegated by the Boardto the Secretary.
Accordingly, if the Secretary purports to issue to the creditor, under section19A (2) of the Ordinance, a notice of the application made by the debtor,before the application is entertained by the Board, tie prohibition on alienationor other disposition imposed by section 10B (1) would not be operative.
Where the Debt Conciliation Board in excess of its jurisdiction purports todeclare as null and void under section 18B (2) of the Ordinance a sale validlyexecuted by the creditor, Certiorari would lie.
T. S. FERNANDO, J.—Simon Silva v. The Debt Conciliation Board,
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APPLICATION for writs of certiorari and prohibition.
H. W. Jayetoardene, Q.C., with L. C. Seneviratne, for the petitioner.M.T. M. Sivardeen, for the 8th respondent.
~M~M. Kumarakulasinyham, with U. A. S. Perera, for the 7threspondent.
Cur. adv. wit.
June 11, 1963. T. S. Fernando, J.—
The following are the reasons for the order made by me at the conclusionof the argument on this application whereby I quashed the order madeon 20th February 1962 by the Debt Conciliation Board.
By deed No. 353 of 18th March 1957 the 7th respondent sold anallotment of land to the 8tb respondent for a sum of Bs. 6,000 subject tothe condition that if the said sum was repaid within a period of threeyears from the date of the sale together with interest at 15% the 8threspondent was to retransfer the land to him. The powers of the DebtConciliation Ordinance of 1941 (Cap. 81) to effect settlements of debtsowed by a person to his secured creditors were extended by the (Amend-ment) Act, No. 5 of 1959, to cover settlements of debts purporting to besecured “ by any such conditional transfer as is a mortgage within themeaning of the Ordinance ”. To give effect to this extension of theBoard’s powers certain new sections were enacted by the (Amendment)Act, and two of these—Sections 19A and 19B—require examinationupon this application.
These two Sections are reproduced below :—
19A.(1) The Board shall not entertain any application by a
debtor or creditor in respect of a debt purporting to be secured by anysuch conditional transfer as is a mortgage within the meaning of thisOrdinance unless that application is made at least thirty days beforethe expiry of the period within which that property may be redeemedby the debtor by virtue of any legally enforceable agreement betweenhim and his creditor.
(2) Where the Board entertains an application of a debtor inrespect of such a debt as is referred to in sub-section (1) the Boardshall cause notice of that fact signed by the Secretary to be sent togetherwith a copy of the application by registered post to the creditor towhom the application relates.
19B. (1) Where a creditor receives a notice under sub-section (2)of section 19A relating to an application of a debtor of his in respect ofsuch a debt as is referred to in sub-section (1) of that section, he shallnot sell, alienate, transfer, lease or mortgage the property to whichsuch notice relates unless such application is dismissed by the Board orunless the settlement effected under this Ordinance in respect of suchdebt permits him to dispose of such property.
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(2) Any sale, aMsuaiaon., transfer, lease or mortgage effected inconiaraventioa of sub-section (1) shall be null and void.
The 7th respondent made on 15th February 1960 an application to theBoard for a settlement to be effected in respect of tbe transaction whichwas the subject of deed No. 353. This application was received at theoffice of the Board on that day, i.e. more than 30 days before theexpiry of the period specified in Section 19A (1), and I am content fortbe purpose of the proceeding before me to assume that it was so receivedon behalf of the Board. The Secretary of the Board, despatched on 7thApril 1960 a notice to the 8th respondent that an application had beenmade by the 7th respondent, but did not attach to that notice a copy ofthe application itself. This notice was received by the 8th respondent on10th April 1960 who, however, sold the land to the petitioner by deedNo. 4357 executed on 16th April 1960.
The Board inquired into the application made by the 7th respondentand by its order of 20th February 1962 declared that the sale of the landby deed No. 4357 of 16th April 1960 is null and void in view of section19B (2). This is the order that was challenged in this proceeding on theground that it was vitiated by error of law on the face of the record andwas in excess of the Board’s jurisdiction.
There is no dispute now between the parties that the transactionrepresented by deed No. 353is one in respect of a debt secured by suchconditional transfer of immovable property as is a mortgage within themeaning of the Ordinance ; tbe dispute relates to the question whetherthe notice received by the Sth respondent was a valid notice under sub-section (2) of Section 19A.
The contention of the petitioner is that an application must receiveconsideration by the Board for tbe Board to ascertain whether it is inrespect of a debt purporting to be secured by any such conditional transferas is a mortgage within the meaning of the Ordinance. The expression‘ mortgage ’ had not received a statutory definition in the Ordinanceuntil Section 4 of the (Amendment) Act, No. 5 of 1959, defined it asfollows :—
* “mortgage ”, with reference to any immovable property, includesany conditional transfer of such property w) ich, having regard to allthe circumstances of the case, is in reality intended to be security forthe repayment to the transferee of a sum lent by him to tbe transferor.’
It is conceded that before the notice was sent out by the Secretary theBoard did not consider the question whether the application was one inrespect of a debt purporting to be of the nature specified in Section I9A (1)either at a meeting or in some other lawful manner. The Board in thecourse of its written order of 20th February 1962 took the view that theentertaining of an application was a formal act and could be effected bythe Secretary on behalf of the Board which can regulate its own procedure.Section 62 of tbe Ordinance empowers the Minister to make regulations inrespect, inter alia, of the procedure to be followed at the hearing of
T. S. FERNANDO, J.—Simon Silva v. The Debt OonciHation Board
141
applications. No regulation empowering the Board to delegate"to theSecretary its function of entertaining applications has been brought tomy notice. Even if such a regulation had been made, having regard tothe view—indicated below—which I have taken of the nature of the dutyinvolved in the act of “ entertaining ”, such regulation would, in myopinion, have been ultra vires the powers of the Minister.
learned counsel for the 7th respondent argued that the expression' entertain ' in Section 19A (1) means receive or hold for considerationand that the entertaining of an application need not be done by the Boarditself but could be effected on its behalf by any one authorised by itto do so. He was compelled to concede that the same word in Section19 has not that meaning. I can see no good reason for saying that theword has a different meaning in the new Section 19A. The Order of theBoard contains on the face of it an admission that the Board did not meetand apply its mind and cause the Secretary to send the notice. Thedecision the Board reaches at Section 19A (1) stage will be reached exparte and is tentative; nevertheless it is a decision in the nature of ajudicial act much in the same way as the ex parte decision, of a courtentertaining or refusing to entertain a plaint in a civil suit. The powerto make such a decision cannot, in the absence of power to do so, bedelegated.
The prohibition on alienation or other disposition of property imposedby Section 19B (1) is dependent on the receipt of a notice under sub-section (2) of Section 19A. In other words, the issue of a notice in termsof that sub-section and its receipt thereafter by the creditor is a conditionprecedent to the coming into force of such a prohibition. The layingdown of a minimum period of 30 days before the expiry of the redeemabledate for applications to be made and the prohibiting of alienationsafter receipt of notice make it reasonably plain that the purpose wasto ensure that the notice will reach the creditor before the expiry of theredeemable date. In the present case the application not havingbeen entertained by the Board but action taken thereon only by theSecretary, the notice received by the 8th respondent was not a validnotice in terms of the Statute. That being so, the prohibition onalienation does not attach to the property.
A further objection was taken to the validity of the notice. SectionI9A (2) requires that the notice signed by the Secretary shall be sentto the creditor together with a copy of the application. In the instantcase no copy of the application was attached to the notice. As I haveheld that the notice is invalid because it was issued without the Boardentertaining the application it is unnecessary for me to decide herewhether the requirement that a copy of the application be sent togetherwith the notice is imperative or merely directory.
Reference has been made in the challenged order of the Board thatSection 49 of the Ordinance enacts that it shall be the duty of theBoard to do substantial justice in all matters coming before it withoutregard to matters of form. The Board was inclined to take the view that
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the first or ex parte entertaining of the application under Section 19A (1)was merely a matter of form. As already indicated by me above, theact of entertaining is not mere form; but, even on a contrary assumption,Section 49 only protects acts done by the Board without regard to mattersof form wad not aote done by others, e.g. its Secretary.
It has been pointed out to me that the Board cannot by the verynature of its composition meet frequently. This difficulty is irrelevantas an answer to the ground of challenge made in this proceeding. Ther eis a requirement that the application must be presented at least 30 daysbefore expiry of the redeemable period, and this time was deemed by thelegislature to be ordinarily sufficient for the Board to meet without undueinconvenience. It appears to me that there is a duty on the Board tomeet in time sufficient to enable the notice to reach the creditor beforethe expiry of the redeemable period. The facts of this case disclosethat the Secretary has delayed nearly two months after the receipt of theapplication before sending out a notice. Not only was the Board notconvened to consider the entertaining of the application, but, eventhough the Board has without authority left it to the Secretary to sendout to the creditor a notice in respect of every application received intime, there was negligence in that the Secretary failed to attach to thenotice a copy of the application.
Counsel for the 7th respondent sought to avoid the issue of a writ inthis case on the ground of an alleged lack of bona fides on the part ofthe creditor in regard to the sale of 16th April 1960. It is only right tosay that on the material placed before me it was not possible to sustainthis allegation. Moreover, this court’s discretion was invoked not bythe creditor but by the petitioner who was the purchaser.
In the special circumstances of this case where the 7th respondent has,without any fault on his own part, lost an opportunity of obtaining reliefunder the Ordinance, I have refrained from making any award in respect
of C03tS.
Application allowed.