METAL PACKING LTD. AND ANOTHER v. SAMPATH BANK LTD.

033-SLLR-SLLR-2008-V-1-METAL-PACKING-LTD.-AND-ANOTHER-v.-SAMPATH-BANK-LTD..pdf


356Sri Lanka Law Reports(2C08} 1 Sri L.R
METAL PACKING LTD. AND ANOTHERv
SAMPATH BANK LTD.COURT OF APPEALWIMALACHANDRA, J.
BASNAYAKE, J.
CALA 325/2006DC COLOMBO 1143/DRMARCH 19, 2007
Debt Recovery (Special Provisions) Act – No. 2 of 1990 – Sections 6 2(a), 6 2(b)and 22 -Amended by Act No. 9 of 1994 – Should the plaintiff affirm in the affidavitthat the sum is "lawfully due"? Justly due? Failure to reply business letters?
The District Court after inquiry ordered the respondents to deposit 1/3 of theprincipal amount. The objection that in the affidavit there is no averment thatthe amount is "lawfully due", was rejected as the Court held that on the face ofthe plaint and the affidavit the amounts claimed were "lawfully due".
On leave being sought,
It was contended that the law amended – Act No. 9 of 1994 making itobligatory to annex to the plaint an affidavit affirming that the money is "lawfullydue" and that the affidavit filed does not contain the word "lawfully due".
£4Metal Packaging Ltd. and Another v357
Sampath Bank Ltd. (Eric Basnayake, J.)
–
Held:
The defendant did not disclose a defence against the claim in the plaint.The defence is mainly confined to technical objections to the regularityof the procedure. The defendants have merely denied the plaintiff'scase. Mere denial is not sufficient when they have failed to respond tothe letter of demand sent by the plaintiff demanding the said sum. Inbusiness matters in certain circumstances, the failure to reply to a letteramounts to an admission of a claim made therein.
Per Eric Basnayake, J.
"The term justly due was interpreted in Ramanayake v Sampath Bank, wherethe Court held that the failure to aver in the affidavit that the amount is 'justlydue' is not a fatal defect, if the affidavit shows that the amount is rightly dueand properly due and hence that is only a technical objection which should notbe allowed to prevail."
The Courts have to be satisfied that the contents of the affidavitdisclose a defence against the claim made by the plaintiff which isprima facie sustainable.
APPLICATION for leave to appeal from an order of the District Court ofColombo.
Cases referred to:
Ramanayake v Sampath Bank 1993 1 Sri LR 149.
Seneviratne and Others v Lanka Orix Leasing Company Ltd. 2006 1 SriLR 230.
People's Bankv Lanka Queen International Pvt. Ltd. 1 Sri LR 233.
Car Mart and another v Pan Asia Bank Ltd. 2004 3 Sri LR 56.
National Development Bankv Chrys Tea (Pvt) Ltd. and Another 20022 Sri LR 2006.
Saravanamuttu v De Mel 49 NLR 429.
M.A. Sumanthiran with Nigel Bartholomeusz for defendant-petitioner-petitioner.
P. Wickremasekera for plaintiff-respondent-respondent.
June 2, 2008
ERIC BASNAYAKE, J.The plaintiff-respondent (hereinafter referred to as the plaintiff)filed this action in the District Court of Colombo against thedefendant-petitioner-petitioner (hereinafter referred to as the 1stand the 2nd defendant as the case may be) under the Debt
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Recovery (Special Provisions) Act as amended to recover inter aliaa sum of Rs. 12,851,301.30 together with interest amounting toRs. 10,911,751.93.
The 1st defendant opened an account with the plaintiff’s bank toobtain a loan and subsequently obtained one. The 2nd defendantstood as surety. The 1st defendant settled part of the loan anddefaulted. The plaintiff informed the 1st defendant of the amountoutstanding with a breakdown (P12 and 13). Thereafter this amountwas demanded. However, the defendants did not respond (Pi0,11,12 and 14A). Order nisi was issued at the first instance to whichthe defendants filed papers and sought leave to defendunconditionally.
The defendants in the objections filed admitted to the fact of the1st defendant obtaining a loan from the plaintiff. The defendantsstated that a sum of Rs. 14,088,248.08 was paid to the plaintiff. Thedefendants do not mention the amount taken as a loan.
The court after inquiry required the defendants to deposit 1 /3rdof the principal amount, namely, Rs. 4,283,767.01. The defendantsare now seeking to have the order of the learned Additional DistrictJudge set aside.
Objection
The only objection taken before this court is that the plaintiff hadfailed to affirm in the affidavit that the sum claimed is 'lawfully due'.The law requires an affidavit to be annexed to the plaint to the effectthat the sum claimed is 'lawfully due' to the institution. The learnedCounsel appearing for the defendants submitted that this failure isfatal and thus the action should be dismissed.
Section 4(1) of the Debt Recovery (Special Provisions) Act asamended by Act No. 9 of 1994 is as follows:
4(1) The institution suing shall on presenting the plaint filewith the plaint an affidavit to the effect that the sumclaimed is lawfully due to the institution from the defendant(emphasis added).
The learned Counsel appearing for the plaintiff had drawn theattention of court to the several paragraphs of the plaint and the
CAMetal Packaging Ltd. and Another v359
Sampath Bank Ltd. (Eric Basnayake, J.)
corresponding affidavit showing that the 1st defendant hadobtained a loan from the plaintiff bank accepting its terms andconditions (p?) and also presenting a promissory note (P9). Thestatements of account reflected the amount recovered and theamount outstanding (P12 and 13). The amount outstanding wasdemanded (P15A and 15B) and was never disputed to have beenso by the defendants. The learned Counsel submitted that theabove mentioned facts would be sufficient to indicate that the sumclaimed was ’lawfully due'.
Prior to the amendment (by Act No. 9 of 1994) the law statedthat "the sum claimed is justly due". The term 'justly due’ wasinterpreted in the case of Ramanayake v Sampath BanM1) wherethe Court held that the failure to aver in the affidavit that the amountis 'justly due1 is not a fatal defect if the affidavit shows that theamount is 'rightly due' and 'properly due' and hence that is only atechnical objection which should not be allowed to prevail. Thelearned Additional District Judge held that on the face of the plaintand the affidavit the amounts claimed were 'lawfully due'. Hencethe learned Judge rejected this submission.
Submission of the Counsel for the defendants
The learned Counsel for the defendants submitted that the lawwas amended after the judgment in Ramanayake v Sampath Bank(supra) thus making it obligatory to annex to the plaint an affidavitaffirming that the money claimed is "lawfully due". The affidavit filedby the plaintiff does not contain the word "lawfully due" or anythingto that effect.
In Seneviratne and Another v Lanka Orix Leasing Company■LtdS2) the plaintiff instituted action upon an on demand promissorynote under the Debt Recovery (Special Provisions) Act asamended by Act No. 9 of 1994 to recover a certain sum of money.The District Court directed the defendant to deposit half the amountclaimed. In a leave to appeal application one of the objectionstaken was that the plaint and the affidavit did not contain avermentsto the effect that the sum claimed by the plaintiff was 'justly due'.Wimalachandra J. held that "the defendants have not dealt with theplaintiff’s claim on its merits and they have solely depended on theregularity of the procedure and technical objections to the plaintiff’s
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action. The defendants have not disclosed a triable issue(at 237).
Like in the present case in Seneviratne's case (supra) too thedefendants filed application against the impugned order of thelearned Judge on the basis that they were entitled to unconditionalleave to appear and defend. Wimalachandra, J. having followed thecase of People's Banks/ Lanka Queen Int'l Private Ltd.W held thatthe effect of the amended section 6(2) does not permitunconditional leave to defend the claim without furnishing security.Wimalachandra, J. quoted De Silva J's observation in the People'sBank case (supra) as follows:
"The new subsection clears any doubt that would haveprevailed earlier in respect of the procedure a defendant hasto follow in applying for leave to appear and show cause. Onan examination cf the amendment introduced in sub-section6(2) it is abundantly clear that the word "application" whichappears in the original section has been qualified with thefollowing words: "Upon the filing of an application for leave toappear and show cause supported by affidavit". This showsthat –
It is mandaton/ for the defendant to file an application forleave to appear and show cause.
Such application must be supported by an affidavitwhich deals specifically with the plaintiff's claim andstates clearly and concisely what the defence tothe claim is and what facts are relied upon tosupport it.
This section does not permit unconditional leave todefend the case as the defendant respondent hasrequested from the District Court. The minimumrequirement according to sub-section(c) is for thefurnishing of security.
If the defendant satisfies (a) and (b) above then thedefendant should be given an opportunity of beingheard. The court will have to decide on one of the threematters specified in the above section.
CAMeta/ Packaging Ltd. and Another v361
Sampath Bank Ltd. (Eric Basnayake, J.)
They are:
The court may order the defendant to pay in tocourt the sum mentioned in the decree nisi. Thuseven where the requirements as stated above arecomplied with, the court has the power and theauthority to order the defendant to pay the full summentioned in the decree nisi before permitting thedefendant to appear and defend.
Alternative to (a) above, the court may order thedefendant to furnish security which, in the opinion ofthe court is reasonable and sufficient to satisfy thedecree nisi in the event of it being made absolute.The difference between this provision and (a)above is that instead of paying the full summentioned in the decree nisi, it will be sufficient forthe defendant to furnish security, such as banker’sdraft, and then defend the action.
The third alternative is where the court is satisfiedon the contents of the affidavit filed, that theydisclose a defence which is prima facie sustainableand on such terms as to security and framing ofissues or otherwise permit the defendant to defendthe action. Thus it is imperative that before courtacts on section 6(2)(c) it has to be satisfied;
with the contents of the affidavit filed by thedefendant;
that the contents disclose a defence which isprima facie sustainable; and
determine the amount of security to befurnished by the defendant, and permit framing andrecording of issues or otherwise as the court thinksfit.”
In Car Mart and Another v Pan Asia Bank Ltd4) in a similar actionwhere the defendant was ordered to pay 1/3rd of the amount claimed,the learned Counsel for the defendant submitted that the decree nisiwas bad in law. He submitted that the action was not properlyconstituted according to the provisions of the Debt Recovery Act. He
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submitted that the plaint was prepared in contravention of theprovisions of section 22 of the Act. He further submitted that after thecourt has entered decree nisi for the total amount claimed by the Bank,at the end of the action the court has to either make the decree nisiabsolute or discharge it whereby the court has no power to vary theamount.
The Court held that the proviso to section 6(3) empowers thecourt to vary the decree nisi at the end of the action. If the defendantat the end of the case satisfies court that a sum of money is notlegally due from him or a sum not legally recoverable from him thecourt has power to make adjustments to the decree nisi beforemaking it absolute. The court held that the District Court has grantedleave for the defendants to appear and defend after depositing thesum ordered. Amaratunga, J. held (at 59) that "after depositing thissum it is open to the defendants to show that penal interest isincluded in the sum claimed."
Under section 6(2)(a) or 6(2)(b) the court has no discretion toorder security which is not sufficient to satisfy the sum mentionedin the decree nisi. Section 6(2)(c) is the only section which permitsthe court discretion to order security which would be a lesser sumthan the sum mentioned in the decree nisi (National DevelopmentBankv Chrys Tea (Pvt) Ltd. and Another.^) followed in Seneviratneand Another v Lanka Orix Leasing Company Ltd. (supra)). Evenunder Section 6(2)(c) the court has to order security, but the courtcan use its discretion to determine the amount of security if thedefendant discloses a defence. The courts have to be satisfied thatthe contents of the affidavit filed by the defendants disclose adefence against the claim made by the plaintiff which is prima faciesustainable (Wimalachandra J. in Seneviratne's case (supra) at240).
The defendants did not disclose a defence against the claimmade in the plaint. Like in Seneviratne's case in the instant case toothe defendants defence is mainly confined to technical objections tothe regularity of the procedure. The defendants have merely deniedthe plaintiff's case. "Mere denial is not sufficient when they havefailed to respond to the letter of demand sent by the plaintiffdemanding the said sum. In business matters, in certaincircumstances, the failure to reply to a letter amounts to an admission
CATea Tan9 Ud v363
Kolonnawa Urban Council
of a claim made therein." (Saravanamuttu v De Meffl followed inSeneviratne's case (supra)).
Therefore this case is without any merit. Hence this application isdismissed with costs.
WIMALACHANDRA, J.I agree.
Application dismissed.