HARJANI AND ANOTHER vs. INDIAN OVERSEAS BANK AND OTHERS

020-SLLR-SLLR-2005-V-1-HARJANI-AND-ANOTHER-vs.-INDIAN-OVERSEAS-BANK-AND-OTHERS.pdf



scHarjani and Another Vs
Indian Overseas Bank and Others
167
HARJANI AND ANOTHER
VS
INDIAN OVERSEAS BANK AND OTHERS
COURT OF APPEAL
SALEEM MARSOOF, P. C. (P/CA) AND
SRIPAVAN, J
C. A. NO. 1854/2003,
MAY 20,2004,
JUNE 29, 2004 ANDJULY 8 AND 12, 2004
Writ of certiorari – Recovery of Loans by Banks (Special Provisions) Act, No. 4of 1990 – Sale by public auction – Private Bank- is writ jurisdiction available?- Banking Act, No. 30 of 1988.
The petitioners sought to quash the Resolution of the 1st respondent – IndianOverseas Bank – adopted under section 4 of Act, No. 4 of 1990, whereby it hadbeen resolved to sell by public auction, the property which was mortgaged tothe 1st respondent Bank on the. basis that it is ultra virus the provisions of theAct.
The 1st respondent Bank contended that the 1st respondent is a private Bankincorporated abroad which is engaged in the business of banking and is alicensed commercial bank and that it is not a public entity carrying out publicfunctions and since it is a company which is not incorporated under any statute
168Sri Lanka Law Reports(2005) 1 Sri L. R.
enacted in Sri Lanka, and discharging functions which are not administrativein nature is not amenable to prerogative remedies.
Held:
Thelst respondent bank has sought to take advantage of the provisions ofthe Recovery of Loans by Banks (Special Provisions) Act relating to parateexecution; these powers have been conferred by statute on any bank as de-fined in section 22 of the Act.
The Act lays down a special procedure for the exercise of the powers comferred on such banks.
Per Saleem Marsoof, P. C. (P/CA),
" I am of the opinion that this Court is bound to exercise supervisory jurisdic-tion over the exercise of such powers despite the fact that some at least ofthese Banks are local or foreign Banking Companies.1’
APPLICATION for a writ of certiorari – preliminary objection.
Cases referred to :
Trade Exchange (Ceylon) Ltd., vs Asian Hotels Corporation – (1981)
1 Sri LR 67
Mend is vs Seema Sahitha Panadura Janatha Santhaka PravahanaSevaya and others – (1995) 2 Sri LR 284.
Office Equipment Ltd., vs Urban Development Authority – CA 1062/2000 – CAM 5.9.2003)
Regina vs National Joint Council for the Craft of Dental Technicians -(1953) 2 WLR 342.
R vs Electricity Commissioner Ex parte – London Electricity JointCommittee Company Ltd., – (1924) 1 KB 171 at 205.
O’ Reilly vs Mackman – (1983) 2 AC 237 at 279.
R vs Criminal Injuries Compensation Board Ex parte Schofield 19711 WLR 926.
8.
9.
10.
Ex parte Tong – (1976) 1 WLR 1239.
Ex parte Clowes – (1975) 1 WLR 1353.
Ex parte Cummins – (1992) 4 Admin. LR 747.
CAHarjani and Another Vs169 '
Indian Overseas Bank and Others ■
R vs Criminal Injuries Compensation Board ex parte P – (1995) – 1WLR 845.
R vs Criminal Injuries Compensation Board Ex parte Lain – (1967) 2All ER 770 at 778.
R vs Panel on Takeover and Mergers Ex parte Datain – (1987) 1 QB815.
R vs International Stock Exchange of the United Kingdom and theRepublic of Ireland Ltd.. (1993 1 All ER 422.
The Governor and Company of the Bank of Scotland. Petitioners -(1989) BCLC 700.
R vs Fimbra Ex parte Cochrane – (1991) BCLC 106.
S. I. B. Anor vs Fimbra & Anor (1992) – Chancery 268.
R vs.' Lautro Ex parte Ross – (1992) 1 All ER 422.
Saheer and others vs Board of Governors, Zahira College and others(2002) 3 Sri LR 405.
Board of Trustees of Maradana Mosque vs the Minister of Educationand Another – 68 NLR 217.
S. C. B. Walgampaya, P. C. with L. K. I. Perera, and Rashani Meegama forpetitioners.
A. R. Surendran, P C„ with K. V. S. Ganesharajan for 1st respondent.
Cur. adv. vult.
November 4, 2004
SALEEM MARSOOF P/CAThe Petitioners filed this application seeking a writ of certiorari to quashthe resolution of the 1 st Respondent Bank adopted under Section 4 of theRecovery of Loans by Banks (Special Provisions) Act, No. 4 of 1990 assubsequently amended, whereby it had been resolved to sell by publicauction the property which was mortgaged to the 1st Respondent Bankby the Petitioners. The 1 st and 2nd Petitioners claim that they executedthe Mortgage Bond marked ‘A’ bearing No. 4965 dated 8th February 2001attested by D. M. Swaminathan, Notary Public, as security for the overdraft
no
Sri Lanka La iv Reports
(2005) 1 Sri L. R.
facility provided to the 3rd Respondent by the 1st Respondent Bank. Inthe said Bond, the Petitioners are described as “sureties” and the 3rdRespondent is the “principal debtor”. The Petitioners state that the LocalManagement Committee of the 1st Respondent Bank has adopted aresolution purportedly in terms of Section 4 of the Recovery of Loans byBanks (Special Provisions) Act to sell by public auction the propertymortgaged to the 1st Respondent Bank by the Petitioners in view of thedefaults made by the Petitioners and the 3rd Respondent in the repaymentof monies due on the aforesaid Mortgage Bond. They claim that the saidresolution, which has been published in the Gazette of the DemocraticSocialist Republic of Sri Lanka dated 15th August 2003 marked C1 andcertain newspapers of 16th August 2003 marked C2, is ultra vires theprovisions of the Recovery of Loans by Banks (Special Provisions) Actinsofar as in terms of the said Act, only a property mortgaged by a personto whom a loan is granted by the Bank, is liable to be sold by publicauction. The Petitioners also sought an order restraining the 1 st Respondent' Bank and the 2nd Respondent Auctioneer from selling by public auctionthe land belonging to the Petitioners in pursuance of the said resolution,and this Court has issued a stay order which has been extended fromtime to time.
The 1st Respondent Bank is a legal entity incorporated under theBanking Companies (Acquisition and Transfer Undertakings) Act of India,and is a licensed commercial Bank within the meaning of the Banking ActNo. 30 of 1988. Upon service of notice, the 1 st Respondent Bank appearedbefore Court and objected in limine to the jurisdiction of the Court to hearand determine this application, on the basis that the application has beenmade against a private bank which is not amenable to the writ jurisdictionof this Court. The 1st Respondent Bank moved to file objections to theextension of the stay order on this basis while reserving its right to file aStatement of Objections on the merits of the case after the disposal of thejurisdictional objection. Thereafter the 1 st Respondent Bank filed its limitedStatement of Objections to the extension of the interim order on 19th ofNovember, 2003 and the matter was fixed for inquiry on the preliminaryobjection raised by the 1st Respondent Bank. On 20th May, 2004 thematter was taken up for inquiry, and after hearing submissions of Counsel,the Court directed both parties of the 1 st Respondent Bank. After writtensubmissions were filed, the matter was taken up for further oral submissionson 12th July, 2004, on which date further submissions were made bylearned Counsel for the Petitioners and the 1 st Respondent.
In the oral and written submissions of the learned President’s Counselfor the 1 st Respondent, it has been stressed that the 1 st Respondent is aprivate company incorporated abroad which is engaged in the business ofbanking. Counsel has also emphasized that the 1st Respondent is not apublic entity carrying out public functions. Learned President’s Counselcontends that the 1st Respondent, being a company which has not beenincorporated under any statute enacted in Sri Lanka, and dischargingfunctions which are not administrative in nature; is not amenable toprerogative remedies. It is strenuously contended that our Courts in casessuch as Trade Exchange (Ceylon) Ltd., v. Asian Hotels Corporation P>and Mendis v. Seema Sahitha Panadura Janatha Santhaka PravahanaSevaya and Others t2> have clearly held in unambiguous terms thatprerogative remedies will not lie against companies when they are engagedin private business activities. Learned President’s Counsel for the 1 stRespondent also relied on the recent decision of this Court in OfficeEquipment Limited v. Urban Development Authority.™ where Sripavan, J.reiterated that the activities of private persons, whether natural or juristicare outside the bounds of Public law or what we call Administrative law.
It has been submitted by learned President Counsel for the 1stRespondent that it is trite law that the prerogative writs of certiorari andprohibition will lie only against statutory authorities exercising administrativefunctions. Learned Counsel relies on what he describes as a classicexposition of the law by Professor Wade (H. W. R. Wade & C. F. Forsyth,Administrative Law(2000) 8th Edition at pages 600 and 601) wherein it isproclaimed that “ certiorari and prohibition have becpme general remedieswhich may be granted in respect of any decisive exercise of discretion byan authority having public functions, whether individual or collective." Healso relies heavily on the decisions of the Queens Bench Division in the
J/41
case of Regina v. National Joint Council for the Craft of Dental Techniciansholding that the prerogative writs are only issued to inferior courts, bodiesset up by statue which have been entrusted by Parliament with duties ofan administrative and judicial nature and whose jurisdiction might affectthe rights of subjects, and to statutory arbitrators to whom by statute theparties must resort.
Learned President’s Counsel for the Petitioners has relied on the oftquoted dictum of Lord Atkin in R. v. Electricity Commmissioners exparteLondon Electricity Joint Committee Company Ltd™ at 205 for his contention
CAHarjani and Another Vs171
Indian Overseas Bank and Others "
__(Marsoof. P/CA)
i 72Sri Lanka Law Reports(2005) 1 Sri L. R.
that certiorari is available “whenever any body of persons having the dutyto act judicially act in excess of their legal authority". It is worth noting inpassing that in O’ Reilly v. Mackman m at 279 Lord Diplock sought toabridge the Atkinian formula further by dropping the words “having the dutyto act judicially”, so that the decisions and determinations of every body ofpersons having legal authority to determine questions affecting the rightsof the subjects are subjected to judicial review. Learned President’s Counselfor the Petitioners emphasizes that the above dictum does not seek toconfine the persons who are amenable to certiorari to statutory bodies,and it applies to “any body of persons" whether statutory or not. He submitsthat the dynamism of law has driven the traditional remedy of certiorariaway from its “familiar moorings by the impetus of expanding judicial review”(H. W. R. Wade & C. F. Forsyth, Administrative Law, 8th Edition page627). As Professor Wade observes, Courts have through their decisionsextended the pale of judicial review “to bodies which, by the traditionaltest, would not be subject to judicial review and which, in some cases, falloutside the sphere of government altogether.” (ibid.) A variety of commercial,professional, sporting and other activities are regulated by powerful bodieswhich are devoid of statutory status, and Courts in Sri Lanka and elsewherehave demonstrated a willingness to ‘recognize the realities of executivepower’ and to review the decisions of a number of such bodies. In theirdesire to prevent the abuse of ‘executive power’ in the hands of thesepowerful non-statutory bodies, the courts have ventured to review thedecisions of these bodies. The limits of this new jurisdiction have beenexplored in a series decisions such as R v Criminal Injuries CompensationBoard, ex parte Schofield?) ex parte TongS), ex parte Cummins9', RvCriminal Injuries Compensation Board ex parte P f, As Lord Parker, C.
J.observed in R v Criminal Injuries Compensation Board ex parte Lain ('2)
“The exact limits of the ancient remedy by way of certiorari havenever been and ought not to be specifically defined. They have variedfrom time to time, being extended to meet varying conditions. At onetime the writ only went to an inferior Court. Later its ambit was extendedto statutory tribunals determining a lis inter partes. Later, again itextended to cases where there was not lis in the strict sense of theword, but where immediate or subsequent rights of citizens were affected.”
It is noteworthy that the decision in R v Panel on Takeovers and Mergersexparte Datafin extended the application of prerogative remedies to theLondon Takeover Panel, which is a non-statutory body regulating the
CAHarjahi and Another Vs173
Indian Overseas Bank and Others
IMarsoof. P/CA);
conduct of takeovers and mergers in the London Stock Exchange on avoluntary basis through a process of self regulation. In R v InternationalStock Exchange of the United Kingdom and the Republic of IrelandLimited!'4>Vne English Courts have held that the London Stock Exchange,which has been constituted as a limited liability company, is subject tojudicial review. In decisions such as the Governor and Company of theBank of Scotland, Petitioners; f?v FIMBRA, ex parte Cochrane0 ’ SIB &
■ Anor v FIMBRA & Anor"7’ and R v LAUTRO, ex parte Ross1'8’ the Courtshave held that although judicial review is not available in the context ofpurely contractual powers, the authority of a contractual nature whichvarious self-regulating organizations have over their members help theseorganizations to perform their public functions, and accordingly the failureof such an organization to perform a contractual obligation may be Subjectedto judicial review. The rationale for making such non-statutory bodiesamenable to prerogative remedies appears to be that they are dischargingfunctions of a public nature.
Learned President's Counsel for the 1st Respondent has also invitedattention to the decision of this Court in Saheer and others v. Board ofGoverners Zahira College and Others. This is a landmark decision whichhas a bearing on the issue arising in the instant case, and involves ZahiraCollege, the premier Muslim educational institution in Colombo which isthe property of the Maradana Mosque. On or about 21 st August 1961 theschool was vested in the Government in terms of the order made by theMinister of Education in terms of Section 4 (1) of the Assisted Schoolsand Training Colleges, (Supplementary Provision) Act, No. 8 of 196.1. Thesaid vesting was challenged by the Board of Trustees of the MaradanaMosque, and in a celebrated judgement reported as the Board of Trusteesof Maradana Mosque v. the Minister of Education andAnotherm the PrivyCouncil set aside the said order, and the ownership of the school revertedto the Board of Trustees of the Maradana Mosque. The school continued.to be administered by the Board of Trustees of the Maradana Mosque tillthe enactment of the Zahira College, Board of Governors (Incorporation)Act, No. 18 of 1982 by which its administration was vested in a Board ofGovernors consisting inter alia of representatives of the ExecutiveCommittee of the Maradana Mosque, the Old Boys Association, the WelfareSociety, arid the Parent-Teachers Association of the said school. In Saheerand others v. Board of Governers Zahira College and Others (supra) thePetitioners sought a writ of certiorari to challenge the decisions taken by
174 'Sri Lanka Law Repons(2005) I Sri L. R.
the said Board of Governors to run an international school in the premisesof Zahira College. The Respondents resisted the application inter alia onthe basis that the Petitioners are parents of children studying at ZahiraCollege who had a contractual relationship with the school for theenforcement of which certiorari and other prerogative remedies would notlie. Despite the private ownership of the school and the contractual nexusthat the petitioners had with the school, this Court extended the reach ofjudicial review on the basis that the Board of Governors of Zahira Collegewas exercising public functions. As Nihal Jayasinghe, J observed at page411 of the judgement
“The powers of the Board of Governors as spelt out in the Act cannotbe abused or exceeded. When it does writ would lie. Within the schemeof national education, the Board of Governors is a statutory publicauthority receiving and spending State funds, being subject to governmentregulations in the admission of students, employment of teachers, etc.As Wade says certiorari and prohibition are designed to prevent excessor abuse of power by public authorities.”
The other decisions cited by the learned President’s Counsel for the1 st Respondent do not help him very much. For instance, the recent caseof Office Equipment Limited v. Urban Development Authority, (supra) wasa case where there was at best a monthly tenancy of Store No. 137 atChalmers Granaries, and the dispute involved the question as to whethera prerogative writ was available to enforce an alleged promise to providealternative accommodation in the event the Respondent required thePetitioner to vacate the premises rented out by it. While the decision ofthis Court was governed by pragmatic considerations such as theunsuitability of prerogative remedies for the determination of disputed facts,Sripavan, J also emphasized that “the action of private individuals or bodiesthat are based on contract without any statutory underpinning are notsubject to judicial review by way of writ of certiorari.”In fact, the earlierdecision of this Court in Trade Exchange (Ceylon) Ltd., v Asian HotelsCorporation (supra) falls on the same side of the line. That was a case inwhich the Petitioner who had been given permission to run a batik shop inthe premises of the Hotel Lanka Oberoi for a period of one year, sought thewrit of certiorari to quash a decision made by the company that ownedthat hotel not to extend the premises for another year. Court refused to
CAHarjani and Another Vs-175
Indian Overseas Bank and Others
(Marsoof P/CAI:
give relief by way of certiorari despite the fact a public corporation owneda major proportion of the shares in the company. The reasoning of theCourt was that prerogative relief was totally inappropriate for a disputewhich was of a commercial nature. In fact at pages 70 to 71 of thejudgement, Sharvananda, J. observed as follows:-
“As Professor Wade in his book on Administrative Law, 4th Edition,at p. 529 stated. “Consequently the existence of statutory power maybe treated as the touchstone, tho'ugh the Court.has recently admittedone.exception in R. v. Criminal Injuries Compensation Board ex p. Lainand summed up the law as at p. 540.: “Certiorari and prohibition are ■designed to prevent the excess and abuse of power by public authorities.The powers of public aiithorities are conferred by statute in almost allcases. So that it is usually safe to assume that statutory power is inquestion.” Originally, certiorari and prohibition lay tp control the functionsof inferior courts, namely, judicial functions. But the notion of what is ‘aCourt and a ‘judicial function’ has undergone great revolution, so thattoday these remedies have grown to be comprehensive remedies forthe control of all kinds of administrative as well as judicial acts.”
The other case relied on by learned President’s Counsel for the 1 stRespondent was Mendis vSeema Sahitha Panadura Janatha SanthakaPravahana Sevaya and Others (supra). The question that arose in thatcase was whether a member of a company had acted in violation of theArticles of Association of the company in refusing to intervene by way ofwrit. S. N. Silva, J. (as he then was) observed at page 291 .-
“It is thus seen that prerogative remedies such as Certiorari andProhibition lie in situations where statutory authorities wielding powervested by Parliament exercise these powers to the detriment of amember of the public. The essential ingredient is that a member of thepublic who is affected by such a decision has to submit to the jurisdictionof the authority whose action is subject to review. In other words, thereis an unequal relationship between the authority wielding power and theindividual who has to submit to the jurisdiction of that authority. Theprinciples of administrative law that have evolved such as the doctrineof ultra vires, error on the face of the record, rules of natural justice,requirement of procedural fairness and the reasonableness of decision,
176Sri Lanka Law Reports(2005) 1 Sri L. R.
coupled with the remedies by way of prerogative writs, lie to correct anyillegality or injustice that may emanate from this unequal relationship.It is in this context that the view has been firmly held that relationshipsthat are based on contract, without any statutory underpinning andactions of companies and private individuals and bodies, are not subjectto judicial review by way of the Writs of Certiorari and Prohibition.”
In the light of these decisions it is necessary to consider whetherthe writ of certiorari is available against a private banking company suchas the 1st Respondent. The gist of the 1st Respondent’s submission isthat writ would not lie against a company which is not a statutory body.The said Respondent has sought to take advantage of the provisions ofthe Recovery of Loans by Banks (Special Provisions) Act relating to parateexecution. In fact in terms of the said Act the 1st Respondent had theoption of either adopting a resolution under Section 4 to sell by publicauction the property mortgaged to it or authorize a person by resolution interms of Section 5 of the Act to take over possession to manage the saidproperty and to utilize its produce or profits for the settlement of the loan.These powers have been conferred by the statute on any ‘Bank’ as definedin Section 22 of the Act. The Act lays down special procedures for theexercise of the powers conferred on such Banks, and I am of the opinionthat this Court is bound to exercise supervisory jurisdiction over the exerciseof such powers despite the fact that some at least of these Banks arelocal or foreign Banking companies.
For the foregoing reasons, the preliminary objection taken on behalfof the 1 st Respondent Bank is overruled and the said Respondent is directedto file its Statement of Objections on or before 1st December 2004, onwhich date the case will be mentioned in open Court. The stay orderissued by this Court on 28th October, 2003 is extended till the finaldetermination of this case.
SRIPAVAN, J. -1 agree.
Preliminary objection overruled; matter set down for argument.