014-SLLR-SLLR-2001-V-2-GUNEWARDANE-AND-OTHERS-v.-INDIAN-OVERSEAS-BANK.pdf
GUNAWARDANE AND OTHERS
v.INDIAN OVERSEAS BANK
COURT OF APPEALWIGNESWARAN, J.
TILAKEWARDANE, J.
A. 702/94(F)
C. COLOMBO 4210/MAUGUST 30, 1999OCTOBER 5, 1999NOVEMBER 30, 1999
Overdraft facility – No Written request – Trust Receipt – Prescription -Acknowledgement of the debt.
The Plaintiff – Respondent sought to recover moneys advanced on overdraftfacilities on the Defendant’s Current Account – A. M. K. Agency and loansadvanced on Trust Receipt facilities. Judgment was entered against 1 – 4thDefendant – Appellants. The Appellants took up the position that the debtwas prescribed, the 1st – 3rd Defendants denied signing the Trust Receipt,and that only the 4th Defendant – Appellant signed the Trust Receipt.
Held :
(i) Even though circumstances beyond their control (Ethnic riots 1983)prevented the Plaintiff Respondent Bank from furnishing written docu-ments requesting overdraft facilities, the fact of the existing contractbased on an overdraft facility had been established.
Question of prescription does not arise as there had beenacknowledgement of the debts due.
There was a tacit admission on behalf of the Defendant Firm of theexistence of the Trust Receipt, and that the Trust Receipt had beensigned only by the 4th Defendant Partner. The action was to recovermoney lent and advanced, it was not a summary action based on anydocument.
There was no evidence led that the so called third party did not act onbehalf of the Defendant Firm.
The right to sue on an overdraft facility arises as soon as the customeroverdraws his account.
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In the absence of special arrangements overdraft duprare repayableon demand and limitation will begin to run from thepromised date ofrepayment of the fixed term loan oivfrom the <Jafe of demand in anyother case.
APPEAL from the Judgment of the District-Court of Colombo.
Cases referred to :
r
Kepitlgalla Rubber Estates Ltfk, v. National Bank of India – 1909 2KB 1010
Tai Hing Cotton Mills Ltd., v. Lie Chong Hing Bank Ltd., – 1986 AC80, 1085 All ER 947
Canadian Pacific Hotels LtxL, v. Bank of Montreal- 198740NLR(4th)385
Dabare v. Marthelis Appu – 5 NLR 210
Sri Lanka Ports Authority and another v. Jugo linija Boat East -1981 1 SLLR 18
Williams and Glyn’s Bank Ltd. v. Barnes – 1981 Com.LR 20.
Shammil Ferera with Ms. Vij ula Arulanadan for 1st 2nd and 3rd Defendant
– Appellants.
Harsha Amarasekara with Kanchana Peiris for plan tiff – Respondent.
Cur. adv. vult.
February 25, 2000.
WIGNESWARAN, J.The first to third Defendant-Appellants and fourth and fifthDefendant-Respondents were constituents and customers ofthe Plaintiff-Respondent Bank as partners of a business called“A. M. K. Agency” and they maintained an account with the saidBank. (Vide paragraph 4 of the Plaint and paragraph 2 of theAnswer).
This action was filed by the Plaintiff to recover moneys ad-vanced on overdraft facilities on the Defendants’ current accountand loans advanced on Trust Receipt facilities.
Summons was never served on the fifth Defendant and anexparte order was made against the fourth Defendant. The first
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Gunawardane and Others a Indian Overseas Bank
(Wigneswaran, J.)
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to third Defendants took up the defence of prescription withregard to the overdraft facility and denied the signing of a TrustReceipt. The first to third Defendants did not lead any evidence.An officer of the Plaintiff Bank gave evidence.
Judgment was entered on 11.03.1994 by the AdditionalDistrict Judge of Colombo against first to fourth Defendants, asprayed for in the plaint less Rs. 100,000/- received by the PlaintiffBank on an insurance claim.
The learned Counsel for the first to third Defendant-Appellants submitted as follows :-
No written request from the Defendants for an overdraftfacility was furnished by the PlaintififrRespondent.
The ledger from which PI (an extract) was preparedwas not produced.
Last date of payment by Defendants regarding overdraftfacility was 24.09.1984. Action was filed on24.06.1988. The right to sue on an overdraft facilityarises as soon as the customer overdraws his account.
(Weeramahthry in “The Law of Contracts” Vol. II Sec.873 page 833 referred to). The claim therefore wasprescribed under Sec. 7 of the Prescription Ordinance.
Defendants’ failure to challenge the accuracy of Bankstatements, P4 and P5, could not have led to theinference that the statements were in fact correct.Decisions in Kepitlgalla Rubber Estates Ltd. Vs.National Bank of India111 Tai Hing Cotton Mills Ltd. Vs.Lie Chong Hing Bank Ltd.(2> and Canadian PacificHotels Ltd. Vs. Bank of Montreal131 referred to.
Neither the original nor any copy of the Trust Receiptwas marked in evidence. Secondary evidence of thecontents of the Trust Receipt could not have been led.
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Alleged acknowledgment letter P2 pertaining to receiptof loan on Trust Receipt unsatisfactoiy.
P8 was neither written by any^f the Defendants norsigned by any of them. Therefore acknowledgment by athird pariy cannot interrupt die prescriptive period.
“Vigilantibus non dormientibus jura subvenient” Lawsassist those who are vigilant and not those who sleepover their rights. Dictum of Bonser C. J tn Dabare Vs.Marthelis Appu(4> referred to.
In ^ny event a sum of Rs. 98657.49 paid, was notdeducted^
Failure touring to the notice of Court the insurance claimobtained initially, highlights dishonesty on the part ofthe Bank.
All these submissions will now be examined.
Firstly the claim regarding the Trust Receipt would begone into.
At page 110 of the Brief, the Bank Officer ShanmugarajahRajasekeram has stated that the original Trust Receipt signedby the partners of “A. M. K. Agency” for a sum of Rs. 250,000/=was in the custody of the Bank but that during the 1983 EthnicRiots when the Bank was set on fire, the original Trust Receiptgot burnt. In cross examination the Counsel for the first to thirdDefendants at page 116 of the Brief had asked whether it wasonly the fourth Defendant partner who had signed the TrustReceipt. The case of the first to third Defendants thereforeappeared to be that the fourth Defendant partner hadcompromised the partnership by signing the Trust Receipt. Itwas not said that none of the partners signed the Trust Receiptor that the claim on the Trust Receipt was a figment of iheimagination of the Plaintiff-Respondent. Therefore when the firstto third Defendant-Appellants denied signing the Trust Receipt
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Gunawardane and Others v. Indian Overseas Bank
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it did not mean that the Plaintiff Bank had falsely implicatedthe “A. M. K. Agency” to a transaction that never took place butthat the first to third Defendant partners were hying to wriggleout of a transaction ti which according to them the fourthDefendant partner had compromised the partnership. Advisedlythe fourth Defendant partner seems to have kept away afterfiling an answer!
Whether signed by a single partner or all the partners thequestion that needs to be answered is whether on a TrustReceipt, a loan was made available to the Defendant Firm. Thefollowing matters are to be considered in this regard :-
On an “A. M. K. Agency” letter head elated 10.08.1983(P3) two partners of the firm had written to the Plaintiff-Respondent Bank few weeks after the Ethnic Riots ofJuly 1983, that they have an overdraft facility of Rs.100,000/= and a Trust Receipt facility of Rs. 250,000/=asking for one year’s time to start repayment.
On an “A. M. K. Agency” letter head dated 04.07.1985a partner of the Firm had written to the Chief Managerof the Plaintiff-Respondent Bank under the heading “T.R. Account-Rs. 250,000/=” to transfer their dues to aloan account so that the amount will be paid by 36monthly instalments. Whether the numerals “250,000”were written in Blue Ink or Black Ink, the fact remainsthat the letter referred to Trust Receipt Account.
The comments at the bottom of the letter were internalendorsements by the Bank. P2 is not suspect in any.manner as claimed by the Counsel for the first to thirdDefendant-Appellants. P2 was an acknowledgment ofthe existing Trust Account transaction between theparties.
(Hi) The letter of demand sent by the Attomey-at-Law forthe Plaintiff-Respondent dated 14.01.1988 (P6)
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referred to an outstanding amount of Rs. 230,000/=on the Trust Receipt. This letter was replied to by“A. M. K. Agency” (P7). There was no denial of a TrustReceipt transaction in the replQ P7 only referred to afurther communication that would follow. No suchcommunication followed. If in fact there was no TrustReceipt transaction it is reasonable to infer that theperson signing for the Managing partner of thepartnership would have immediately denied such atransaction or queried what it meant. P7 therefore wasa tacit acceptance of the existence of a Trust Receipttrarcsactiqn. No denial was sent even after the monthstipulated in P7 was over.
(iv) There wa3 no need for one A. M. C. Attanayake to sendP8 dated 25.06.1992 to the Plaintiff-Respondent Bankand to refer to “his firm” and speak of a settlementwith regard to the existing debts including the TrustReceipt loan unless he had acted for and on behalf ofthe “A. M. K. Agency”. There had been no evidencegiven by the Defendant-Appellants or the otherpartners refuting the fact that “A. M. C. Attanayake”acted for and on behalf of the Firm. In any event P8was not marked subject to proof. It was producedduring cross examination and not during theexamination-in-chief or re-examination. It referred tomany intimate details of the transaction known onlyto the parties to the transaction, such as Bank’s letterdated 04.05.1992, the balance outstanding aftercrediting cheques (Rs. 78442.29) and Trust Receiptloan balance standing at Rs. 132,000/=. The sum ofRs. 72474.80 mentioned in P8 was reflected in D1 atpage 90 of the Brief.
The contention of the Plaintiff’s witness therefore mustbe accepted. Moreover credit had been given for the sum ofRs. 98657.49 mentioned by the Counsel for the first to third
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Gunawardane and. Others v. Indian Overseas Bank
(Wigneswaran, J.)
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Defendant-Appellants in her written submissions and that washow the balance of Rs. 72474.80 was arrived at as per Dl.
The question of th£ overdraft facility too needs to be lookedinto from the stand point of the effect the Ethnic Riots of 1983had on the Plaintiff-Respondent Bank. Merely because a writtenrequest from the Defendants applying for an overdraft facilitywas not furnished, the Defendant Firm cannot resile from itsobligations and responsibilities. So too the non-furnishing ofthe ledger from which PI, an extract, was prepared. It is to benoted that when the learned Counsel for the Defendants allowedPI to be marked subject to proof, the Coun^pl foi»the Plaintiffimmediately pointed out that there was no^need to prove PIany further. This was not challenged by the Counsel for theDefendants, [vide page 110 (reverse) of the Elrief]. Therefore PImust be presumed to have been allowed to be admitted withoutfurther proof. When at the end of the trial documents weretendered nothing was mentioned about PI. (Vide Sri LankaPorts Authority & another Vs. Jugolinifa – Boal East!51
Finally we come over to the question of prescription.
An overdraft facility is afforded by a Bank by permitting acustomer to overdraw his current account upto certain limits.The current account being operative and in force the facility toowill continue to be operative until cancelled and/or unless themoney due to the Bank is demanded by it. If the customer doesnot take steps to pay off the overdrawn amount, interest willaccrue on such overdrawn amount and shall continue to be adebt due to the Bank until there is repayment of the debt orcancellation of the debt. The overdraft facility itself will come toan end, as stated above, on the cancellation of the facility orwhen the Bank demands repayment. This would be generallyso unless there are special arrangements to the contrary. It washeld in Williams and Glyn’s Bank Ltd. Vs. Bames,6> that in theabsence of special arrangements overdraft dues are repayableon demand and limitation (prescription) will begin to run from
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the promised date of repayment of a fixed term loan or from thedate of demand in anv other case. (Vide also T. G. Reeday – TheLaw Relating to Banking 5th Edition page 48).
O
In the present case demand was made on 05.05.1988 andaction was filed on 24.06.1988. In any event as between25.07.1983 and 24.06.1988 statements of monthly accounthad been sent and there was no denial of the receipt of themonthly statements. Overdraft interest and B. T. T. were addedevery month to the arrears of dues and reflected in the monthlystatements. Added to this, several acknowledgments by theDefendants {hat they would pay the amounts due, was recordedin evidence*
■»
The question^ prescription would arise only if there wereno acknowledgments or undertakings by the Defendants to paythe outstanding dues to the Plaintiff-Respondent.
It is significant to note that letter of demand P6 dated14.01.1988 referred to the amounts due to the Plaintiff Bankfrom the Defendant Firm and P7 dated 22.01.1998 signed bysomeone acting for the Managing Partner of the Firm did notdeny liability nor was a further communication sent at the endof the month, as undertaken in P7, denying liability.
It was elsewhere pointed out in this judgment that P8was not marked subject to proof and that it was markedduring cross examination and that its contents werepersonal to the parties to the dispute. The authenticity ofP8 was therefore not in question. Even if the question at theend of page 117 and beginning of 118 of the Brief, happenedto be raised on the basis that the Defendants had onlyadmitted a sum of Rs. 72474/= as arrears due and nothingmore, the fact remained that there was an acknowledgment ofthe debt. Only with regard to the amount due was there anydifferences of opinion according to the question posed by thelearned Counsel for the 3rd Defendant in cross examination.There was no outright denial of any debt due.
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Gunawardane and Others u. Indian Overseas Bank
(Wigneswaran, J.)
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Thus coupled with the fact that there had beenacknowledgments of the debt and that the Defendants neverled any evidence to controvert the case of the Plaintiff-Respondent that theig£ had been demands made and furthertaken together with the fact that the Defendants never deniedthat P8 was written on their behalf, it must be concluded thatprescription could not have run in this case.
Thus the answers to the submissions of the learned Counselfor the first to third Defendant-Appellants could be summarisedas follows
Even though circumstances beyond Their control (viz.the Ethnic Riots of 1983) prevented the Plaintiff Bankfrom furnishing written documents requesting overdraftfacilities, the fact of an existing contract based onoverdraft facility admitted and abided by the DefendantFirm had been established.
PI was not objected to in evidence after the Counsel forthe Plaintiff argued that no further proof of it wasnecessaiy.
The question of prescription does not arise if there hadbeen acknowledgments of the debts due.
Whether the Bank statements were correct or not theDefendant Firm did not dispute the existence of a lawfulcontract between the Firm and the Bank. The Firm alsodid not dispute that the monies were not payable ondemand nor state that monies became due only whenadvances were taken nor that prescription had set inafter the last advance was taken.
There was a tacit admission on behalf of the DefendantFirm of the existence of a Trust Receipt, when it wasput in cross examination by the Counsel for the
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Defendants that the Trust Receipt had been signed onlyby the fourth Defendant Partner. There were otherinstances of admissions by the Defendants of the debtdue on the Trust Receipt, whicljjvere pointed out. Thiswas an action to recover money lent and advanced. Itwas not a summary action based on any document.
P2 was dealt with earlier in this judgment. It waswritten on the Defendant Firm’s letter head. It referredto a T. R. Account. (Trust Receipt Account). Whetherthe T. R. Account referred to Rs. 250,000/= or not wasimmaterial. The writing at the bottom of P2 referred tointernal endorsements. There was nothing suspiciousabout P2. in any event the Defendants gave no evidencedenying tye sending of P2 to the Chief Manager of thePlaintiff Bank.
P8 refers to intimate details of the transaction. Therewas no evidence led that the so-called third party didnot act on behalf of the Defendant Firm. More details inthis regard were referred to above.
The fact that the Plaintiff Bank had undergone immensehardship on account of the Ethnic Riots of 1983 wasrecognised and admitted by the Defendant Firm by theirletter dated 10.08.1983 (P3). The maxim referred toby Bonser C. J. would not apply in its entirety toextraordinary circumstances as the aftermath of theEthnic Riots of 1983 in this instance.
Rs. 98657.49 had been referred to in PI and accountedfor.
The insurance claim was not made by the Bank. Thepayment was made on a claim made by the DefendantFirm. If the Defendant Firm did not resort to dilatorytactics and deny their obligations unreasonably allaspects of the claims and deductions due would have
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(Wigneswaran, J.)
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been gone into in an atmosphere of cordiality and co-operation. The Defendants having acted unreasonablycannot point an accusing finger at the Plaintiff Bankwho had lost g^iumber of connected documents to firein July 1983.
The entire case of the Defence, including the fourthDefendant filing his answer and keeping away and the first tothird Defendants not coming forward to give evidence havingknown the hardships faced by the Plaintiff Bank in the aftermathof the Ethnic Riots of July 1983, savours of a desire on the partof the Defendants to brush aside their obligations andresponsibilities and delay payments lawfully due*to the Bankas long as possible.
We see no reason to interfere with the judgment dated11.03.1994 delivered by the Additional District Judge, Colombo.We dismiss the appeal of the first to third Defendant-Appellantswith incurred costs payable by them to the Plaintiff-RespondentBank.
TILAKAWARDANE, J. – I agree.
Appeal dismissed.