IN THE SUPREME COURT OF THE DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA In the ma(cid:425)er of an appeal in terms of Sec(cid:415)on 5 of the High Court of the Provinces (Special Provisions)

Act, No. 10 of 1996 SC/CHC/APPEAL NO: 26/2020 High Court No: HC (Civil) 84/15/MR Lanka Orix Finance PLC, Formerly known as Lanka Orix Finance Company PLC

100/1, Sri Jayawardenapura Mawatha, Rajagiriya.

PLAINTIFF - Vs -

1) Randunu Dewage Kingsley Ananda Wickremasinghe, 66/7, Aluthwa(cid:425)e Road, Chilaw.

2) Omali Nissanka, 66/7, Aluthwa(cid:425)e Road, Chilaw.

DEFENDANTS And now between Randunu Dewage Kingsley Ananda Wickremasinghe, 66/7, Aluthwa(cid:425)e Road, Chilaw. 1^ST DEFENDANT – APPELLANT LOLC Finance PLC, Formerly known as Lanka Orix Finance Company PLC and Lanka Orix Finance PLC, 100/1, Sri Jayawardenapura Mawatha, Rajagiriya.

PLAINTIFF – RESPONDENT Omali Nissanka, 66/7, Aluthwa(cid:425)e Road, Chilaw.

2^ND DEFENDANT – RESPONDENT Before: S. Thurairaja, PC, J Achala Wengappuli, J Arjuna Obeyesekere, J Counsel: Nilum Devapura with Anjali Ratnayake for the 1^st Defendant – Appellant Shanaka De Livera with Vihanga Dissanayake and Ruwani Chandrasiri for the Plain(cid:415)ff – Respondents Argued on: 4^th December 2024 Wri(cid:425)en Tendered on behalf of the 1st Defendant – Appellant on 26th June 2024 Submissions:

Tendered on behalf of the Plain(cid:415)ff – Respondent on 4th November 2024 Decided on: 18^th July 2025 Obeyesekere, J The Plain(cid:415)ff – Respondent [the Plain(cid:415)ff] filed ac(cid:415)on against the 1st Defendant – Appellant [the 1^st Defendant] and the 2^nd Defendant – Respondent [the 2^nd Defendant] in the High Court of the Western Province holden in Colombo [the Commercial High Court/High Court] on 20^th February 2015, claiming a sum of Rs. 8,417,358 together with interest thereon at the rate of 4% per month from 21^st January 2015. Only the 1^st Defendant answer and trial was fixed ex parte against the 2nd Defendant. Admissions and Issues having been raised, the Plain(cid:415)ff led the evidence of two witnesses while the 1st Defendant gave evidence on his behalf. By judgment delivered on 6^th August 2018, the High Court delivered judgment in favour of the Plain(cid:415)ff, as prayed for.

Aggrieved, the 1st Defendant filed this appeal on 1st October 2018.

Case for the Plain(cid:415)ff The 1^st and 2^nd Defendants, who were carrying on a shoe manufacturing business in partnership under the name, style and firm of “Ran Shoe”, had entered into a “Cheque Discoun(cid:415)ng Facility Agreement” bearing No. CD 11-10-01 B with LOLC Factors Limited on 20th October 2011 [P12]. A cheque discoun(cid:415)ng facility, commonly referred to as factoring, is essen(cid:415)ally a commercial arrangement where one party, known as the factor, provides cash or finance to businesses by purchasing their receivables. In this appeal, postdated cheques that the 1^st Defendant received from his customers were purchased by LOLC Factors Limited in advance at a discounted price. Factoring is thus a source of obtaining funds in advance from the factor and provides the much needed liquidity required by small and medium scale businesses.

According to P12, the upper limit of the facility granted to the Defendants was Rs. 4,500,000. It is clear from the statement of account rela(cid:415)ng to the above agreement [P10] that the Defendants had deposited cheques to the said account as well as drawn cheques issued by them, and that there was a debit balance in excess of Rs. 5 million by March 2016. According to the Plain(cid:415)ff, which is an associate company of LOLC Factors Limited, the 1st Defendant had made a request to the Plain(cid:415)ff on 19th March 2014 that the Plain(cid:415)ff grant a loan to the 1^st Defendant that would enable the 1^st Defendant to se outstanding under P12 to LOLC Factors Limited.

The Plain(cid:415)ff states that having considered the request of the 1st Defendant, it made an offer to the 1st Defendant on 24th March 2014