BALASOORIYA MUDIYANSELAGE SOORATHUNGA BALASOORIYA VS SAMAN PIYASIRI AND OTHERS - HON. A.H.M.D. NAWAZ, J

• Jurisdiction: Sri Lanka
• Case Number: 2019SCOA342C2012Y
• Citation: 2019SCOA342C2012Y
• Date: 29 April 2019
• Court: Court of Appeal (Sri Lanka)
• Type of Document: Unreported judgment

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Balasooriya Mudiyanselage Soorathunga Balasooriya

Vs

Saman Piyasiri and Others - Hon. A.H.M.D. Nawaz, J

C.A (Writ) Application
No.342/2012

In the matter of an application for mandates in the nature of Writ of Certiorari, Mandamus and Prohibition under and in terms of Article 140 of the Constitution of the Democratic Socialist Republic of Sri Lanka.

Balasooriya Mudiyanselage Soorathunga Balasooriya
No.460/1, Temple Road,
Bingiriya.

PETITIONER

Vs.

1. Saman Piyasiri,
Branch Manager,
People's Bank,
Bingiriya.

2. Chandrika,
Regional Manager,
People's Bank,
Regional Office,
No.03, Wathhimi Road,
Kurunegala.

3. Chief Manager,
Depart of Recoveries,
People's Bank Head Office,

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Sir Chiththappalam
A. Gardiner
Mawatha,
Colombo 02.

4. Deputy General Manager (Recoveries),
People's Bank Head Office,
Sir Chiththampalam
A.Gardiner
Mawatha,
Colombo 02.

5.Senior Manager (Recoveries),
Recoveries Department,
People's Bank Head Office,
Sir Chiththampalam A. Gardiner
Mawatha,
Colombo 02.

6. W. Karunajeewa,
Former Chairman,
People's Bank Head Office,
Sir Chiththampalam A.
Gardiner
Mawatha,
Colombo 02.

6A.Gamini Senarath,
Chairman,
People's Bank Head Office,
Sir Chiththampalam A. Gardiner
Mawatha,
Colombo 02.

7. The People' s Bank,
Sir Chiththampalam A. Gardiner
Mawatha,
Colombo 02.

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8. W.M.I. Gallella,
Public Auctioneer and Court Commissioner,
No.28, New lawyer's Complex,
Kumarathunga Mawatha, Kurunegala.

RESPONDENTS

BEFORE: A.H.M.D. Nawaz,J

COUNSEL :Asthika Devendra with Lilan Warusawithana and Sunali Jayasuriya Wasantha for the Petitioner

Kushan de Alwis PC with Kaushalya Navaratne for 1st to 7th Respondents

Decided on :29.04.2019

A.H.M .D. Nawaz, J.

This application for judicial review raises the question whether a resolution adopted by a bank, prior to the enactment of Recovery of Loans by Banks (Special Provisions) (Amendment) Act, No 1 of 2011, could be acted upon to conduct a parate execution and recover outstanding dues from a borrower, even when the principal amount borrowed is less than Rs.5 million. Does the bank act ultra vires in acting upon a pre-amendment resolution and proceeding to auction? Is the Recovery of Loans by Banks (Special Provisions) (Amendment) Act, No 1 of 2011 retrospective so as to nullify the pre-amendment resolution? These are the questions that arise in these proceedings.

The learned counsel for the Petitioner Mr Asthika Devendra has strongly contended that the Amendment Act, No 1 of 2011 is retrospective and this retrospectivity is manifest upon a perusal of the speech made by the relevant

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Minister who introduced the bill on 06th January 2011. The Hansard of Parliamentary proceedings on 06th January 2011 figured prominently in the argument for retrospectivity Mr Devendra put forward. A recourse to extrinsic aid to statutory interpretation is consequent upon this argument and the learned counsel relied on the seminal case of Pepper (Inspector of Taxes) v Hart (1993) AC 593; (1992) 3 WLR 1032 which holds that Parliamentary material is a permissible aid to statutory interpretation. Interestingly, the spirit of Pepper v Hart lives on in many a jurisdiction and in 2010, a nine-judge bench of the Supreme Court of the United Kingdom cited Pepper as an authoritative pronouncement of Parliamentary privilege-see R v Chayton (2010) UKSC 52.

Long before the advent of this case, our courts acknowledged the relevance of Hansards in judicial proceedings and Samarakoon CJ in J.B. Textiles Industries Ltd v Minister of Finance and Planning (1981) 1 Sri.L.R 156 alluded to the admissibility of statements made in Parliament as evidence in a case. Be that as it may, I shall return to this argument and echoes of Pepper v Hart in Sri Lanka later in this judgment and let me now deal with the crux of the issues.

The Petitioner seeks in the main to quash the resolution of 17th June 2003 that finally led to the sale of the mortgaged properties in 2012. The resolution relied upon by the bank is evidently a pre-amendment step taken under Sections 3 and 4 of the principal amendment namely Recovery of Loans by Banks (Special Provisions) Act, No 4 of 1990. By the Amendment Act, No 1 of 2011 which was certified on 28th January, 2011, Section 5A was brought in to give relief to borrowers who had obtained a loan of less than Rs 5 million. The Amendment Act, No 1 of 2011 was further amended by Amendment Act, No 19 of 2011 on 31st March 2011 to clarify that the Amendment would operate only in respect of borrowings where the principal amount borrowed is less than Rs 5 million.

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Section 5A as amended by Act No 19 of 2011, which comes up for interpretation on the question whether it is retrospective in its effect, goes as follows: 5A (1)

"No action shall be initiated in terms of section 3 of the principal enactment for the recovery of any loan in respect of which default is made, nor shall any steps be taken in terms of section 4 or section 5 of the aforesaid Act, where the principal amount borrowed of such loan is less than rupees five million ......... "

So as of 28.01.2011 when the Recovery of Loans by Banks (Special Provisions) (Amendment) Act, No. 1 of 2011 was certified, 3 types of action or steps are prohibited on the part of banks in respect of a loan when the principal amount borrowed is less than Rs.5 million

1. Section 3 action
2. Section 4 step
3. Section 5 step

All these three actions or steps that are authorized by the principal enactment namely Recovery of Loans by Banks (Special Provisions) Act, No.4 of 1990 are embargoed by the Amending Act No. 1 of 2011 as amended.

So what was prohibited by the Amendment Acts in 2011, when the principal amount borrowed is less than Rs. 5 million, have to be reemphasized.

1. Section 3 of the principal enactment Act No.4 of 1990 enables the board of a bank to treat a borrower as if in default of the entirety of the unpaid portion of the loan in the event he has defaulted in the payment of any sum, whether on account of the principal or interest.

2. This deeming provision to treat the borrower as a defaulter enables the bank to initiate, in its discretion, action either in terms of section 4 or section 5.

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3. Section 4 of the principal enactment empowers the board of a bank to adopt a resolution to authorize any person to sell by auction any property mortgaged to the bank, which is the security for the loan.

4. The board may, in terms of Section 5 of Act No. 4 of 1990, authorize any person by resolution to enter upon the mortgaged property, take possession and manage it.

From the effective date of the Amendment Act No 1 of 2011 namely 28th January 2011, none of the above steps could be taken by any bank in respect of the specific class of borrowers i.e those who have borrowed less than Rs 5 million.

The intendment of the legislature is quite clear and unambiguous upon a scrutiny of the above provisions and the pith and substance of the Amendment read with the principal enactment is that no resolution to sell by parate execution a mortgaged property can be adopted by a bank, after 28th January, 2011, in respect of a borrower whose principal amount borrowed is less than Rs 5 million. So the Recovery of Loans by Banks (Special Provisions) (Amendment) Act, No 1 of 2011, as amended by Act No 19 of 2011, confers an advantage on these class of borrowers in that there will be no more board room resolutions to effect parate executions of their mortgaged properties but it will be open to the creditor bank to institute hypothecary action in respect of these loans less than Rs. 5 million.

The watershed date is 28th January, 2011, after which there must be, in esse, a borrower whose borrowing must be less than Rs. 5 million. The date of the loan is immaterial. It can be before or after 28th January 2011. The consequence is that the bank is incompetent to adopt a resolution in terms of section 3, 4 or 5 of the principal enactment.

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The gravamen of the argument of the learned Counsel for the Petitioner was that since the Petitioner's loan was Rs. 2 million, he falls within section 5A (1) and no resolution can be passed against him.

But the nub of the problem in this case is distinctive. The resolution to sell by auction the mortgaged property had long been adopted by the People's Bank as far back as 17th June 2003- almost 8 years before the Amendment Act No 1 of 2011 carne into effect. The Amendment Act prohibits the passage or adoption of a resolution only after 28th January 2011. The Amendment is only offensive of a prospective resolution. It cannot possibly claw back at a resolution adopted as far back as 17th June 2003.

Bearing this in mind, Mr.Asthika Devendra quite ingeniously argued that the Amendment Act bears a retrospective effect because it was enacted in order to help the small time borrowers. Section 5A is broad enough to nullify the prior resolution and as such the resolution dated 17th June 2003 must be quashed by certiorari. This was the argument of the learned Counsel for the Petitioner.

Before I answer this question presently, I find upon the chronology of events surrounding the loan transaction that the resolution dated 17th June 2003 was frustrated a number of times by acts undertaken by the Petitioner. I will not go into detail as regards the factual background of the case but suffice it to say that the Petitioner was granted two loans by the People's Bank and the mortgaged properties operated both as primary and secondary mortgages for the se two loans. Two lands which constitute the security were offered by the Petitioner to the bank as a security for an initial loan of Rs. 2 million and later the Petitioner executed a secondary mortgage of these two lands for an overdraft facility of Rs. 1 million on 30.06.1999. There was also a primary mortgage of another land which the Petitioner offered as a security for the...