031-SLLR-SLLR-2007-V-2-HATTON-NATIONAL-BANK-LTD-v.-DEPOSITORS-ASSOCIATION-OF-K.A.-MARTIN-PERERA.pdf
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HATTON NATIONAL BANK LTD.vDEPOSITORS ASSOCIATION OFK.A. MARTIN PERERA AND SONS AND ANOTHERCOURT OF APPEAL.
WIMALACHANDRA, J.
CA 1853/2005 (REV)
DC MT. LAVINIA 413/99/SPLOCTOBER 4. 2006
Recovery of Loans by Banks (Special Provisions) Act No. 4 of 1990 -Auction – Settlement in District Court – Bank agreeing to limit its claim -Undertaking – Sale of property by Bank – Incurring heavy expenditure -Excess – Setting off same – Is it permissible?
The defendant-respondent defaulted the loans obtained from thepetitioner Bank. The Bank sought to parate execute the property. Theplaintiff-respondent instituted action in the District Court against the Bank,and the two parties entered into a settlement in Court. One of theconditions was that, if the properties are sold for an amount in excess ofR$. 33.25 million in the public auction, the petitioner Bank should depositthe balance amount in the District Court to the credit of the case.
The Bank had to incur heavy expenses to place security at bothproperties. Subsequently the Bank sold the properties for 37.5 million anddeposited a sum of Rs. 3 million to the credit of the case. The plaintiff-respondent moved Court for an order directing the petitioner Bank todeposit a further sum of Rs. 1.25 million.
The District Court made order that the parties must strictly comply with theconditions of the settlement.
The petitioner Bank moved in Revision.
Held:
(1) The petitioner Bank in terms of Clause 4 of the settlement can retainonly Rs. 33.25 million and any sum in excess of Rs. 33.25 has to bedeposited in Court.
CA
Hatton National Bank Ltd. v Depositors Association of
K.A. Martin Patera and Sons and Another (Wimalachandra. J.)
401
The sums spent by the Bank to provide security – Rs. 1.35 millioncannot be retained.
(2) Once the terms of settlement as agreed upon are presented to Court,notified thereto and recorded by Court, a party cannot vary the termsof settlement to his benefit nor can he resile from the settlement.
The Bank has no legal right to retain a further sum of Rs. 1.25 millionfor expenses incurred, the said settlement neither provided for suchexpenses nor for delay on the part of the Bank in selling theproperties.
APPLICATION in Revision from an order of the District Court of
Mt. Lavinia.
Cases referred to:
Sinrte Veloo v Messrs Upton Ltd. 66 NLR 214.
Lameerv Senaratne 1995 2 Sri LR 13
Palitha Kumarasinghe PC for petitioner.
Colin Amarasinghe for plaintiff-respondent.
May 4, 2007
WIMALACHANDRA, J.
This is an application in revision filed by the petitioner fromthe order of the learned District Judge dated 21.9.2005. Thepetitioner has also filed an application for leave to appealbearing No. 399/2005 from the same order made by thelearned District Judge. By consent of the parties leave toappeal was granted in the application for leave to appeal.Counsel appearing for both parties agreed that the order thatwill be made in the revision application shall apply to the leaveto appeal application.
Briefly, the facts relevant to this application as stated in thepetition are as follows:
The petitioner-bank granted banking facilities to thedefendant-respondent and as security for the re-payment of thesame he mortgaged certain properties to the petitioner. Thedefendant-respondent defaulted the repayment of the loansobtained from the petitioner. The petitioner adopted a
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resolution in terms of the provisions of the Recovery of Loansby Banks (Special Provisions) Act No. 4 of 1990 to sell the twoproperties mortgaged to the petitioner, namely,
the house and property situated, at No. 22/11Vidyalankara Mawatha, Maharagama; and
the building situated at" No. 576 High Level Road,Maharagama.
When the notice of the auction appeared in the newspapers,upon an application filed by the plaintiff-respondent, thepetitioner-bank was noticed to appear before the District CourtOf Mount Lavinia on 11.08.1999 in case No. 413/99/SPL. On
the petitioner-bank and the plaintiff-respondententered into an agreement. The subject matter of the saidagreement was with regard to the manner of sale of theaforesaid two properties mortgaged to the petitioner-bank.
The said settlement contained, inter alia, the followingconditions:
The sale of the house and property situated at No.22/11, Vidyalankara Mawatha, Maharagama identifiedin schedule one of the Resolution adopted by theHatton National Bank dated 29.4.1999 shall betemporarily suspended.
The building situated at No. 576, High level Road,Maharagama identified in the 2nd schedule of theResolution adopted by the Hatton National Bank dated
would be sold by public auction on
as scheduled.
The petitioner-bank will make every endeavour to sellthe aforesaid two properties for not less than Rs. 33.25million, and if the petitioner-bank is successful inselling the properties for not less than Rs. 33.25million, the petitioner-bank agrees to release theproperty identified in schedule one of the resolutionadopted by the petitioner-bank dated 25.4.1999.
CA
Hatton National Bank Ltd. v Depositors Association of
K.A. Martin Perera and Sons and Another (Wimalachandra. J.)
403
If the aforesaid two properties are sold for an amountin excess of Rs- 33.25 million in the public auction, thepetitioner-bank agrees to deposit the balance amountin the District Court to the credit of this case.
If the petitioner-bank is unable to sell the saidproperties for a sum not less than Rs. 33.25 million thebank is entitled to purchase the properties.
If the petitioner-bank purchases the properties and acertificate of sale is issued, the petitioner-bank shalltake steps to sell the property by sealed tender within45 days from 13.8.1999.
The petitioner-bank failed to sell the properties in accordancewith the conditions stipulated in the said settlement. The petitioner-bank states that as a result it had to place security at bothproperties and thereby incurred heavy expenses. Subsequently,the petitioner-bank sold both properties for Rs. 20.5million and Rs.17 million respectively. The petitioner-bank deposited a sum of Rs.3 million in the District Court in favour of the plaintiff-respondent.Thereafter, the plaintiff-respondent by motion dated 9.6.2004moved Court for an order directing the petitioner-bank to deposit afurther sum of Rs. 1.25 million in the District Court in favour of theplaintiff-respondent. The petitioner-bank on 1.8.2004 filedobjections to the motion dated 9.6.2004 filed by the plaintiff-respondent. Thereafter the Court fixed the matter for inquiry. Bothparties agreed to file written submissions and invited the Court todecide the matter on the written submissions filed by the parties.
The learned Judge delivered the order on 21.09.2005rejecting the objections filed by the petitioner-bank and madeorder that the parties must strictly comply with the conditions ofthe settlement.
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Thus it will be seen that after the sale the petitioner-bank canretain only Rs. 33.25 million and any sum in excess of the Rs.33.25 million has to be deposited in the District Court. The Counselfor petitioner-bank submitted that the bank had to incur an amountof over Rs. 1.25 million to maintain and look after the saidproperties and the petitioner bank employed a security firm toprovide security to the said properties amounting to Rs.
1,394,191.35. The learned Counsel streneously contended that thepetitioner-bank is entitled to retain that sum paid to the securityagency, which the bank had incurred.
I am unable to agree with the submissions made by thelearned Counsel especially when the petitioner had agreed tolimit its claim to Rs. 33.25 million. Therefore in terms of thesettlement any sum over and above the said Rs. 33.25 millionwill have to be deposited in Court.
It is to be noted that the petitioner-bank by entering intothe said settlement had given a solemn undertaking toCourt to abide by the terms of the settlement. Once theterms of settlement as agreed upon are presented to Court,notified thereto and recorded by Court, a party cannot varythe terms of settlement to his benefit nor can he resile fromthe settlement.
A settlement recorded by the Court is a contractwhereby new rights are created between the parties insubstitution for, and in consideration of the abandonmentof the former claims or contentions of either or both ofthem. In terms of the settlement the Court can either givethe judgment or make order giving effect to the settlement.
It is settled law that once the terms of settlement as agreedupon are presented to Court, notified thereto and recorded byCourt, a party cannot resile from the settlement unless heestablishes that it was entered under duress, fraud or mistake.(See Sinne Vetoo v Messrs Upton Lfd.o), Lameer vSenaratnew. In the instant case the petitioner did not evenurge that the settlement was entered under any of thosegrounds referred to above.
CA
Hatton National Bank Ltd. v Depositors Association of
K. A. Martin Perera and Sons and Another (Wimalachandra. J.)
405
In the circumstances, I am inclined to agree with thesubmissions made by the learned Counsel for the plaintiff-respondent that consequent to the said order made by thelearned Judge the petitioner-bank is obliged to deposit in Courta further sum of Rs. 1.25 million appropriated by the petitionerin violation of the terms of settlement dated 11.8.1999.
Admittedly, the petitioner-bank sold the said properties for asum of Rs. 37.50 million. In terms of the settlement, thepetitioner-bank is entitled to retain only 33.25 million. It is not indispute that the bank has deposited only Rs. 3 million.Accordingly it has no legal right to retain a further sum ofRs. 1.25 million for expenses incurred. It is to be noted that thesaid settlement neither provided for such expenses nor for anydelay on the part of the petitioner-bank in selling the properties.In violation of the terms of the settlement, the petitioner-bank,unilaterally, without the permission of Court, decided andretained Rs. 1.25 million which was over and above the sum ofRs. 33.25 million due to the petitioner-bank in terms of the saidsettlement.
In the circumstances, I am of the view that the learnedDistrict Judge was correct when she held that the parties arebound by the terms of the said settlement entered on11.8.1999.
Considering the facts and circumstances of this case, thereare no exceptional circumstances disclosed as to the illegalityof the order made by the learned Judge which has deprived thepetitioner of some right, it is to be noted that revision is adiscretionary remedy and will not be available unless theapplication discloses circumstances which shock theconscience of Court. Therefore, I see no illegality whatsoeverin the matter pleaded by the Counsel for the petitioner withregard to the impugned order.
For the reasons stated above I am of the view that there isno reason to interfere with the order of the learned DistrictJudge dated 21.9.2005. Therefore, the said order is hereby,affirmed and the application in revision is dismissed with costsfixed at Rs. 7500/=.
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Both parties had agreed to abide by the decision in thisapplication, in the leave to appeal application CALA No.399/2005 as well. As such, that application too is also pro-forma dismissed.
Application dismissed.