013-SLLR-SLLR-2002-V-1-HAJI-OMAR-v.-WICKRAMASINGHE-AND-ANOTHER.pdf
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Haji Omar v. Wickramasinghe and Another
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HAJI OMAR
v.WICKRAMASINGHE AND ANOTHER
SUPREME COURTFERNANDO, J.
EDUSSURIYA, J., ANDJ. A. N. DE SILVA, J.
SC APPEAL (CHC) NO. 12/2001
HC CIVIL NO. 36/98/1
DC COLOMBO NO. 5033 SPL
NOVEMBER 13 AND 27, DECEMBER 04, 2001
Interim Injunction – Basis and scope of interim relief – Recovery of Loans byBanks (Special Provisions) Act, No. 4 of 1990.
In an action for invalidating a sale of property mortgaged to the Seylan Bank(2nd respondent) an interim injunction to prevent the issue of the certificate ofsale was refused by the trial court (presumably as the certificate of sale hadalready been issued); whereupon, the plaintiff (the 1st respondent) filed a petitionseeking an order on the purchaser (the appellant) and the Bank, inter alia,restraining them from demolishing or alienating the property. The High Court issuedan interim injunction to that effect. That order was set aside by Amerasinghe,J. in SC Appeal (CHC) No. 28/98 SCM of 16th February, 1999, where it washeld "the basis of injunctive relief should be the plaint and the prayers containedtherein; it is not designed to prevent other activities of the parties to an action".
At the trial Counsel for the 2nd defendant-appellant (the purchaser) raised thefollowing issue as issue No. 13 :
"In view of the judgment of the Supreme Court in SC Appeal (CHC)No. 28/98, SC (Spl.) LA (HC) No. 14/98 can the plaintiff have and maintainthis action?11
Of consent, the High Court Judge heard that issue as preliminary issue of lawand answered it in favour of the plaintiff (the 1st respondent).
Held:
(1) Although the plaintiff in his action questioned the validity of the sale ofthe property, the main relief he claimed was a permanent injunction
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restraining the issue of the certificate of sale. Since that certificate hadalready been issued, the plaintiff sought an interim injunction which wasunrelated to the cause pleaded by him. Such relief was denied by theSupreme Court on the basis that the certificate of sale had been issued.The validity of that certificate was not questioned at any stage, nor didthe plaintiff seek an order invalidating or setting aside the certificate ofsale. That certificate was in law conclusive proof that all the provisionsof the Act had been complied with (section 15 (2) of the Act).
(2) In the circumstances, issue No. 13 should have been answered in thenegative.
Cases referred to:
SC Appeal (CHC) No. 28/98 SCM of 16th February, 1999.*
National Development Bank of Sri Lanka v. Serendib Aisa (Pvt) Ltd.and Another – (1999) 2 Sri LR 56.
*Haji Omar v. Wickramasinghe and Another (1999) 1 Sri LR 82.
APPEAL from the judgment of the High Court.
Sanjeewa Jayawardena with Priyanthi Gunaratne for the 2nd defendant-appellant.
Nihal Jayamanne, PC with J. M. Wijebandara for plaintiff-respondent.
Cur. adv. vult.
February 20, 2002FERNANDO, J.
While agreeing with the conclusions and order of Edussuriya, J. I wish 1to state my reasons more fully.
When Amerasinghe, J. made his order dated 16. 02. 99 in SCAppeal (CHC) No. 28/98, he did so on the basis that a certificateof sale had been issued on 01. 12. 97. The validity of that certificatehad not been questioned either in the plaint filed on 17. 12. 97, orin any other pleading or subsmission. Accordingly, that orderproceeded on the undisputed basis that a valid certificate of sale hadbeen issued.
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Even thereafter, the plaintiff-respondent-respondent (the plaintiff) 10took no steps to question that certificate. The issues suggested byhim related to other matters : the validity of the resolution, the timelypayment of the balance purchase price, and the publication of thenotice of sale. There was no consequential issue as to the validityof the certificate and / or as to setting aside of the cerificate.
It is in that background that issue No. 13 must be considered.While it is true that that issue might have been framed with greaterparticularity, it is clear that it did raise the question whether – in viewof the issue of a valid certificate of sale – the title of the borrower(the plaintiff) had vested in the purchaser (the 2nd defendant-appellant) 20and the certificate was in law conclusive proof that all the provisionsof the Act had been complied with.
Even now there is no dispute as to the validity of the certificate.Section 15 (1) of the Act provides that upon the issue of the certificatethe title of the borrower vests in the purchaser, and section 15 (2)makes the certificate "conclusive proof with respect to thesale . . . that all the provisions of [the] Act relating to thesale . . . have been complied with". That includes the passing of theresolution, the notice of sale, the payment of the price, and the sale.Accordingly, none of the reliefs prayed for in the plaint can be granted. 30
The decision of Amerasinghe, J. in NDB v. Serendib Asia (Pvt)
Ltd. [1990] 2 Sri LR 56, has been cited. That is distinguishable forseveral reasons. There the Bank had fixed the upset price of property,mortgaged for Rs. 9.4 million, at Rs. 1,000, and the Bank itself hadbought the property at that price. Here, the property had been boughtby a third party and at a substantial price. There allegations of fraud,abuse of power, unlawful conduct, etc., had been made against thepurchaser-Bank; here the purchaser was a bona fide purchaser forvalue against whom no impropriety was alleged. In that case, the
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certificate of sale was challenged on the ground stated, but In this 40case the certificate of sale is not challenged in any way; and althoughcertain antecedent steps have been questioned no grounds have beenspecified. Further, Amerasinghe, J. did not decide the seriousquestions of law and fact which arose, but left them for determinationby the trial Judge, granting interim relief in order to preserve the statusquo. Here the interim injunction stage had been passed, and the trialJudge had to determine the questions of law and fact which arose: the fact that a valid certificate had been issued was admitted, andhe had, therefore, to determine only its legal effect : that title hadpassed and that the Act had been complied with. Having regard to sothe state of the pleadings, he had no option but to answer issueNo. 13 in the affirmative.
February 20, 2002EDUSSURIYA, J.
The plaintiff-respondent had mortgaged the immovable propertydescribed in the schedule to the plaint by three mortgage bondsreferred to in paragraph 4 of the plaint, to the 1st defendant-respondentBank in order to secure the repayment of a loan taken from the 1stdefendant-respondent Bank.
Admittedly, on the plaintiff-respondent defaulting in the payment goof the said loan the 1st defendant-respondent had by letter dated 8thAugust, 1996, informed the plaintiff-respondent that steps would betaken to sell the said property and recover the money due.
It was further admitted (paragraph 6 of the plaint) by the plaintiff-respondent that the Board of Directors of the 1st defendant-respondentBank had passed a resolution to recover the money due with interest
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at 30% by selling the said property by public auction and publishedthe said resolution in the Daily News, Dinamina and a Tamil newspaperand the Government Gazette of 25th April, 1997. It was also admittedby paragraph 7 of the plaint that it was published in the Island and 70Divaina newspapers of 24th October, 1997, that the said propertywould be sold by public auction on 07th November, 1997.
In paragraph 8 of the plaint the plaintiff-respondent has stated thaton a date prior to 07th November, 1997, on the plaintiff having adiscussion with the legal officer of the 1st defendant-respondentBank, that although the legal officer agreed to have the mortagedproperty conveyed in the name of the 1st defendant-respondent andgrant a period of two months to the plaintiff-respondent to pay theoutstanding sums of money, the 1st defendant-respondent soldthe said property by public auction on 7th November, 1997 and that «>the 2nd defendant-appellant had purchased the said propertyfor a sum of Rs. 12,025,000 and paid 10% of the purchaseprice and that the 2nd defendant-respondent is bound to pay thebalance within thirty days of that date.
In paragraph 11 of the plaint the plaintiff-respondent has averredthat the 2nd defendant-respondent had failed to pay the balance ofthe purchase price within thirty days and / or "does not know whetherthe said balance sum has not been paid thereafter," and thereforethe said sale is invalid, and as such in terms of the provisions ofsection 15 of Act No. 4 of 1990 the 1st defendant-respondent cannot soissue a certificate of sale. The plaintiff-respondent has, however,averred that the resolution passed by the 1st defendant-respondentBank is not in conformity with section 4 of the said Act but does notgive the reason for so stating. The plaintiff-respondent though pleadingthat the publication of the sale was not in accordance with section9 of the said Act has failed to give any reason for stating so. Theplaintiff-respondent then sought (a) a declaration that the saidresolution is invalid and (b) that therefore the said sale is also invalid,
that the 2nd defendant-respondent did not become the owner of
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the property described in the schedule to the plaint on his purchasing 100the said property, (d) a permanent injunction restraining the 1stdefendant-respondent from issuing a certificate of sale to the 2nddefendant-respondent and (e) an interim injunction to the said effectand till then an enjoining order on the same lines. So, that it is clearfrom the plaint (1) that the plaintiff does not state why the resolutionpassed by the Board of Directors of the 1st defendant Bank isinconsistent with section 4 of the Act nor does he state why the auctionsale was not in conformity with section 9 of the said Act and (2) thatalthough in paragraph 11 of the plaint the plaintiff-respondent hasaverred that the 2nd defendant-respondent has not paid the balance 110sum within thirty days of the auction, in subparagraph (c) of the prayerto the plaint the plaintiff prays for a declaration that the 2nd defendant-respondent has not become the lawful owner of the said property byvirtue of the said purchase, since a sale or purchase is completedonly on the entire purchase price being paid. The Sinhala words usedin the plaint are "@@q0which imply that the entire purchase
price has been paid by the purchaser.
What is more important in this connection is that according tosection 15 (1) of the said Act the title of the borrower vests in thepurchaser only on the issue of the certificate of sale.120
It is common ground now that the certificate of sale had beenissued on 12th December, 1997, five days prior to the date ofthe plaint, and registered on 19th December, 1997. The plaintiff-respondent thereafter on 18th March, 1998, sought revised injunctiverelief by petition and affidavit P7 and P7A to restrain the 1st defendant-respondent and/or the 2nd defendant-appellant from demolishing thebuildings standing on the property which forms the subject-matter ofthis action, causing damage to the same and / or selling the saidproperty or encumbering the said property by mortgaging orleasing it.130
The Commercial High Court decided the question of the issue ofthe interim injunction on written submissions being tendered by both
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parties, in favour of the plaintiff-respondent and issued an interiminjunction as prayed for as set out above.
The 2nd defendant-appellant then applied for leave to appeal fromthe said order issuing the interim injunction, and on leave beinggranted argued the said appeal (SC Appeal (CHC) No. 28/98). Aftera hearing, this Court made order on 16th February, 1999, setting asidethe order of the High Court on the ground that the basis of injunctiverelief sought was not, as it should have been, the plaint dated 17th 140December, 1997, and the prayers contained therein. Amerasinghe, J.went on to state that interim relief is designed to prevent the frustrationof the Court's order if the reliefs prayed for in the plaint are eventuallygranted: it is not designed to prevent other activities of the partiesto an action.
Thereafter, when the case came up for trial several issues wereraised by parties. Then, on 30th June, 2000, the 2nddefendant-appellant's Counsel raised the following issue as issuenumber 13. :
"In view of the judgment of the Supreme Court in SC Appeal 150(CHC) No. 28/98, SC (Spl) LA (HC) No. 14/98 can the plaintiffhave and maintain this action?"
On parties then agreeing that if the said issue which is an issueof law is answered in favour of the 2nd defendant-appellant the actionwill have to be dismissed, the Court took up the said issue for decisionas a preliminary issue and accordingly both parties tendered writtensubmissions, and thereafter on 9th October, 2000, the said issue wasanswered by Court in favour of the plaintiff-respondent, on the basisthat this Court had not in its order of 16th February, 1999, made adetermination on the substantive relief claimed by the plaintiff in the 160plaint.
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Counsel for the 2nd defendant-appellant contended that the findingby this Court that the certificate of sale had been issued prior to theinstitution of the action read with section 15 (2) of Act No. 4 of 1990must result in a dismissal of the action and therefore the issuein question should have been answered in favour of the 2nddefendant-appellant.
Counsel went on to contend that the certificate of sale is final andconclusive of the title of the purchaser and cannot be challenged andthat the plaintiff-respondent being aware of this sought the issue of 170permanent injunction to restrain the issue of the certificate of saleand since the certificate of sale had been issued prior to the institutionof the action the Supreme Court held that the application for the interiminjunction restraining the issue of the certificate of sale wasmisconceived. Counsel further submitted that consequently the actionis also misconceived and must be dismissed.
The question is what is the substantive relief claimed by theplaintiff in the plaint?
Having made bald allegations in the plaint to the effect that (1)the resolution passed by the Board of Directors was not in conformity isowithsection 4 of Recoveryof Loans by Banks Act, No. 4of 1990
and(2) the notices relatingto the sale of the propertyinquestion
hadnot been published inaccordance with section 9ofthe said
Act,the plaintiff-respondentsought the following reliefs(1)that the
resolution of the Board of Directors of the 1st defendant-appellantwas invalid (2) that the auction sale conducted on 7th November, 1997,was invalid, (3) that the purchase by the 2nd defendant-appellant ofthe property described in the schedule to the plaint did not make the2nd defendant-appellant the lawful owner of the said property (4) aninterim injunction restraining the 1st defendant-appellant issuing a 190certificate of sale in terms of section 15 of the said Act to the 2nddefendant-appellant and (5) a permanent injunction on the sameterms as the interim injunction. Therefore, reliefs 1, 2 and 3 are reliefson which the plaintiff based his main relief for an order restrainingthe issue of the certificate of sale.
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It is common ground that the certificate of sale had been issuedprior to the institution of this action, and it is on this basis thatAmerasinghe, J. in his order held that the application for aninterim injunction restraining the issue of the certificate of sale wasmisconceived. Consequently, the main relief claimed by the plaintiff, 200namely a permanent injunction restraining the issue of the certificateof sale cannot be granted.
Therefore, this action must necessarily fail and cannot bemaintained, since the plaintiff has not sought an order invalidating orsetting aside the certificate of sale.
The relief claimed by the plaintiff, namely that title to the propertyin question did not pass on the 2nd defendant-appellant purchasingthe said property at the sale will not help the plaintiff, inasmuchtitle passes only on the certificate of sale being issued as in thecase of a Fiscal's sale where title passes only on the Fiscal's 210conveyance being issued.
Counsel for the plaintiff-respondent has drawn the attention of Courtto the decision in the case of National Development Bank of Sri Lankav. Serendib Asia (Pvt) Ltd., and Another 1999 – 2 SLR 56 which dealtwith the question whether it is open to a borrower under the NationalDevelopment Bank Act, No. 2 of 1979 to move to invalidate a saleconducted under the provisions of the said Act.
Amerasinghe, J. held in that case that section 50 of the said Act(which is the same as section 15 (1) of Act No. 4 of 1990) doesnot preclude the borrower from moving the Court to invalidate the 220sale, since the plaintiff-respondent had in that case alleged fraud andabuse of authority, etc.
With due respect to Amerasinghe, J. it is my view that where itis not open to a person claiming through or under any dispositionwhatsoever of the right, title or interest of the borrower to and in theproperty to move to invalidate a sale, certainly it cannot be said thatthe borrower on whose right, title and interest in the property a third
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party's claim is based, has a right to move to invalidate the sale.After all when a resolution is passed under parate execution rightsthe borrower is in the same position as a judgment debtor, and when 230the certificate of sale is issued "the judgment debtor" cannot haverights which a person claiming through "the judgment debtor" doesnot have since the third party's rights flow the judgment debtor.
Counsel for the plaintiff-respondent drew the attention of Court toissues raised by the 2nd defendant-appellant at the trial. Howeverissue No. 13 in my view overrides those issues inasmuch as bothparties agreed to the said issue being decided by Court as apreliminary issue of law, on which the outcome of the case rested.
In any event, in this case the plaintiff has not prayed for thecertificate of sale to be set aside, and further Amerasinghe, J. has 240stated in National Development Bank of Sri Lanka v. Serendib Asia(Pvt) Ltd., and Another (supra) that the plaintiff had alleged fraud andabuse of authority, and commercial unreasonableness, whereas in thecase before us now only bald allegations that the resolution was notin conformity with section 4 of Act No. 4 of 1990 and that the salewas not published in accordance with section 9 of the said Act havebeen made although at the same time producing with the plaint acopy of the said resolution as published in the newspapers as wellas the publications of the sale in the Government Gazette. IssueNo. 13 is accordingly answered in the negative.250
For the above-mentioned reasons I allow the appeal and set asidethe order of the Commercial High Court and dismiss the plaintiff-respondent's action, with costs in both Courts fixed at Rs. 25,000payable by the plaintiff-respondent to the 2nd defendant-petitioner-appellant.
J. A. N. DE SILVA, J. – I agree.
Appeal allowed.