015-SLLR-SLLR-2006-V-2-MERAGALA-vs.-PEOPLES-BANK-AND-OTHERS.pdf
CA
Meragala vs. People's Bank
101
MERAGALAVS.PEOPLE’S BANK AND OTHERSCOURT OF APPEALEKANAYAKE.J.
SRI SKANDARAJAH, J.
CA 839/2003.
NOVEMBER 10.2006.
Writ of Certiorari – People's Bank Act, No. 32 of 1986, sections 29D – Parateexecution • Challenging a Board Resolution – Interpretation Ordinance, section22 – Could the borrower challenge the legality/validity of resolution ?-Relationship – Contractual – Does writ lie ?
The petitioner sought a Writ of Certiorari to quash the resolution passed by theBank to parate execute the property in question. The property was kept assecurity for a loan obtained from the Bank.
HELD:
In this case the transaction which had taken place between the partiesis a loan transaction.
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The trend of authority would show that the supervisory jurisdiction ofthis Court does not extend to the resolution of purely contractualdisputes.
When section 29 D of the People’s Bank Act, 32 of 1986 is read withsection 22 of the Interpretation Ordinance the borrower or any personclaiming through or under the borrower will be precluded fromchallenging the legality and/or validity of any resolution passed underand in terms of section 298.
APPLICATION for a Writ of Certiorari, Prohibition and Mandamus.
Cases referred to:
Podi Nona vs Urban Council, Horana.
Jayaweera vs Wijeratne 1985 2 Sri LR 413
Asoka Fernando with L. M. Ariyadasa for petitioner.
Ronald Perera with Chandimal Mendis and Naleen Amarajeewa for
respondents.
Cur. adv. vult.
September 6, 2006.
CHANDRA EKANAYAKE, J.
The petitioner by this Writ Application has invoked the writ jurisdictionof this Court seeking inter-alia,
to grant and issue a Writ of Prohibition prohibiting the 1 st and 2ndRespondents acting in accordance with the resolution passed bythe Board of Directors of the 1 st Respondent Bank on 23.03.2002;
to grant and issue a mandate in the nature of a Writ of Certiorariquashing the resolution passed by the Board of Directors of the1 st Respondent Bank on 23.03.2002 which was communicatedvide notice of resolution published in the 07.05.2003 issue of theDaily News.(P10);
to grant and issue a mandate in the nature of a Writ of Mandamus:
CA
Meragala vs. People’s Bank (.Chandra Ekanayake, J.)
103
compelling the 1st and 2nd Respondents to permit thepetitioner to pay the said outstanding amount of the financialfacilities with interest within 7 years repayment period at therate of Rs. 10,000/- per month; and
to write off the excessive amounts of interest and surchargesunlawfully charged by the Respondent Bank from the petitioner.
The basis of the Petitioner’s application is that the Petitioner havingobtained certain financial facilities enumerated in paragraph 1 of the petitionfor the purpose of expanding his business and for the construction of hishouse every endeavour was made to settle same by way of instalmentsdespite a decline in his business activities. Vide paragraph 15 of the petitionthere had been an outstanding balance from the Petitioner to the 1 stRespondent Bank. For the reasons stated in paragraph 5 of the petitionthe 1 st respondent bank proceeded to charge a high rate of interest to wit17% without his consent and 26.5% for the overdraft facility and for thebusiness loan he had taken on interest at the rate of 24% and for the officeloans he had taken bn interest at the rate of 26.5%. While averring inparagraph 7 of the petition that he had managed to pay a sum of Rs.12,000,00/- as capital sum plus interest to date excluding the amountwritten off from his wife’s account, it was urged that though the above sumwas paid by him and despite the proposal he had made to the bank tosettle the same in instalments of Rs. 10,000 per month (as capital sumplus interest) within 7 years the Board of Directors of the Bank has publisheda notice of resolution in the 07.05.2003 issue of the Daily News paper (P10). He has further averred for the reasons stated in paragraphs 8 to 10 ofthe petition the above resolution is based on erratic figures and thereforesame is a nullity and liable to be quashed by this Court. In the aforesaidpremises the jurisdiction of this Court has been invoked as above.
The Respondents by their statement of objections dated 18th September2003 whilst only admitting the granting of the said loan of Rs. 750,000/-under Mortgage Bond No. 1777 marked P1A at the rate of 24% interest, afurther facility of Rs. 250,000 by Mortgage Bond marked P1B bearing No.
1778 at the rate of 26.5% interest, had denied the rest of the averments inthe petition inclusive of the averments in sub-paragraph (1) namely: grantinga sum of Rs. 250,000 as a loan at the rate of 26.5% interest to settle the
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outstanding balance of approximately Rs. 175,000 on a motor leaseagreement vide Mortgage Bond bearing No. 1778 and the balance moneyapproximately a sum of Rs. 75,000 deducted as interest against theaforesaid financial facility of Rs. 500,000 and Rs. 250,000 as averred insub (a) and (b) of paragraphs (Further the position taken up by) of therespondents was that since the transactions between the petitioner andthe 1 st Respondent are of a commercial nature and based on a contractthis Writ jurisdiction cannnot be invoked, and the petitioner hasunreasonably delayed the filing of this application. Therefore he is guilty oflaches and the petitioner has suppressed the document marked R 3 andthereby violated rules of uberimma tides. In the aforesaid premises theRespondents has prayed for a dismissal of the application of the petitioner.
It is common ground that the 1st Respondent-Bank had granted thefacilities to the Petitioner and the Petitioner had failed and neglected torepay as agreed upon. Further it is seen from the averments in paragraph14 as agreed financial facilities from the 1st Respondent he had paidapproximately a sum of Rs. 15,000.00/- to the bank as principle plusinterest and further he had submitted even a proposal to repay theoutstanding amount in monthly installments of Rs. 10,000/- within a periodof approximately 7 years. The petitioner’s position has been that he failedto convince the Bank and thereafter the Bank proceeded to pass theresolution marked P10 which according to him is erratic and also excessivehigh rates of interest have been levied. In the aforesaid premises he hasstated in the petition that the resolution is arbitrary, capricious, unlawful,and unjustifiable.
In this regard it would be pertinent to consider provisions of section29(D) of the People’s Bank Act (as amended by Act, No. 32 of 1986). Theabove section reads as follows:
“29D. Subject to the provisions of section 29E, the Board may byresolution to be recorded in writing authorize any person specified in theresolution to sell by public auction any immovable or movable propertymortgaged to the Bank as security for any loan in respect of which defaulthas been made in order to recover the whole of the unpaid portion of such
CA
Meragala vs. People's Bank (Chandra Ekanayake, J.)
105
loan, and the interest due thereon up to the date of the sale, together withmoneys and costs recoverable under section 29L, and thereafter it shallnot be competent for the borrower or any person claiming through, by orunder any disposition whatsoever of the right, title or interest of the borrowerto and in the property made or registered subsequent to the date of themortgage to the Bank, in any court to move to invalidate the said resolutionfor any cause whatsoever, and no court shall entertain any such application.”
According to the petitioner’s own contention there had been moniesoutstanding on account of the financial facilities extended to him by the1st Respondent-Bank. Further in this case the Petitioner had agreed toobtain facilities subject to the agreements marked R1A, R1B, and R1C.When the Petitioner had defaulted in repayment that means the termsand conditions of the above agreements have been already violated.
In this case the transaction which had admittedly taken place betweenthe parties is a loan transaction. The trend of authority in Sri Lanka wouldshow that the supervisory jurisdiction of this Court does not extend to theresolution of purely contractual disputes. In this regard it would be pertinentto consider the decision of this Court in Podi Nona vs Urban Council,Horand'i where it was held by Ratwatte, J. (Seneviratne, J.) agreeing-
“In as much as the relationship of the parties was contractual thepetitioner was not entitled to the remedy by way of certiorari”
The decision of this Court in Jayaweera vs WijeratneP would also be ofassistance in this regard. It was held in the above case by G. P. S. deSilva, J. (Jameel J.) agreeing as follows
“Where the relationship between the parties is a purely contractual oneof a commercial nature neither certiorari nor mandamus will lie to remedygrievances arising from an alleged breach of contract or failure to observethe principles of natural justice even if one of the parties is a public authority”.
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However the cardinal question that has to be determined by this Courtis whether the validity and/or the legality of the resolution passed by theBoard of Directors of the 1 st Respondent Bank could be challenged by thePetitioner.
A plain reading of the provisions of the above section 29D of the People’sBank Act (as amended) would reveal that it shall not be competent for theborrower or any person claiming through or under the borrower to move inany Court to invalidate the said resolution for any cause whatsoever andno Court shall entertain such application. However the above provisionshave to be read with section 22 of the Interpretation Ordinance. When theabove provisions are read with section 22, of the Interpretation Ordinance.The borrower will be precluded from challenging the legality and/or validityof any resolution passed under and in terms section 29D of the People’sBank Act. The relief sought by sub paragraph (c) of the prayer to thepetition is to issue a mandate in the nature of a writ of prohibition, prohibitingthe 1st respondent and the 2nd Respondent from acting in accordancewith the passed resolution and the relief sought by sub paragraph (d) ofthe prayer to the petiition is for a writ of certiorari quashing the said resolutionpassed by the Board. In the aforesaid circumstances the relief sought bysub-paragraph (d) of prayer to the present petition cannot be granted. Ifthe above relief cannot be granted the relief sought by sub-paragraph (e) ofthe prayer to the present petition also cannot be granted for the simplereason that if the validity and/or legality of the above resolution cannot bequestioned then there is no reason to compel the 1 st and 2nd Respondentsto permit the Petitioner to pay the outstanding amounts and/or to write offthe excessive amounts of interest or any surcharges. Therefore the reliefssought by sub-paragraph (e) of the prayer to the present petition too cannotbe granted.
What is left for consideration now is whether the Writ of Prohibition videsub-paragraph (c) of the prayer to the petition could be granted. This relieftoo has been based on the resolution of the Board of Directors. When ithas been already concluded that the legality and/or validity of the samecannot be questioned this Court cannot prevent the 1st and 2nd Respondentsacting in accordance with the same. Therefore this relief also has to fail.
CA
Ameen and Others vs Mohideen and Others
107
In the light of the above I conclude that the Petitioner's present applicationcannot be sustained. Hence the necessity does not arise to consider themerits of the other 2 objections raised by the Respondents. Accordinglythe application is hereby dismissed. However there will be no order forcosts.
SRISKANDARAJAH, J. -1 agree.
Application dismissed.