IN THE SUPREME COURT OF THE DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA DFCC Bank PLC, No. 73/5, Galle Road, Colombo 03.

1st Defendant-Appellant SC APPEAL NO: SC/APPEAL/144/2022 SC LA NO: SC/HC/LA/45/2020 Vs.

CHC CASE NO: HC/484/2018/MR Laththuwa Handi Harindu Dharshana, No. 35, Kandy Road, Kiribathgoda, Kelaniya.

Plaintiff-Respondent Schokman &

Samerawickreme, No. 290, Havelock Road, Colombo 05.

2nd Defendant-Respondent Before: Hon. Justice Vijith K. Malalgoda, P.C.

Hon. Justice Janak De Silva Hon. Justice Mahinda Samayawardhena Counsel: N.R. Sivendran with Upendra Kalehewatta for the 1st Defendant-Appellant.

Mokshini Jayamanne for the Plaintiff-Respondent.

Argued on: 08.06.2023 Written Submissions:

By the 1st Defendant-Appellant on 13.01.2023 By the Plaintiff-Respondent on 05.06.2023 and 04.07.2023 Decided on: 27.02.2024 Samayawardhena, J.

The plaintiff filed this action in the Commercial High Court against the 1st defendant bank and the 2nd defendant auctioneer seeking a declaration that the resolution passed by the board of directors of the bank on 27.03.2018 in terms of section 4 of the Recovery of Loans by Banks (Special Provisions) Act, No. 4 of 1990, as amended, is a nullity. By this resolution the board of directors of the bank resolved that the mortgaged property of the plaintiff be sold by public auction to recover the dues to the bank.

The Commercial High Court by order dated 23.06.2020 issued an enjoining order followed by an interim injunction preventing the bank from auctioning the property on 07.08.2018 or on any subsequent date without following the proper procedure stipulated in the Act.

The Court took the view that the bank failed to give proper notice of sale in terms of section 9 of the Act, since notice of sale had been given by the auctioneer, not by the bank.

The short question to be decided by this Court is whether the notice of sale as mandated by section 9 must be given by the bank or if it can alternatively be given by the auctioneer.

In terms of section 4, the board of directors of the bank may by resolution to be recorded in writing authorize any person specified in the resolution to conduct the auction.

4. Subject to the provisions of section 7 the Board may by resolution to be recorded in writing authorize any person specified in the resolution to sell by public auction any property mortgaged to the bank as security for any loan in respect of which default has been made in order to recover the whole of the unpaid portion of such loan, and the interest due thereon up to the date of the sale, together with the money and costs recoverable under section 13.

In the resolution relevant to this case, it is expressly stated that the board resolved to authorize the 2nd defendant auctioneer to conduct the public auction.

Section 8 requires the notice of resolution to be published in the gazette and newspapers, and copies of the same to be sent to the borrower.

8. Notice of every resolution under section 4 authorizing the sale of any property shall be published in the Gazette and in at least three daily newspapers, in the Sinhala, Tamil and English languages and copies of such notice shall be dispatched to the borrower, if he is alive, and to every person who has, in respect of that property, registered his address as required by section 2 and if that property consists of the interest of a lessee under a lease from the State, to the Land Commissioner.

The requirements of section 8 have been complied with by the bank. In other words, the bank informed the plaintiff in writing that the board of directors of the bank passed a resolution authorizing the 2nd defendant to sell the mortgaged property by public auction to recover the dues to the bank.

Section 9 of the Act reads as follows:

9. Notice of the date, time and place of every sale authorized by a resolution under section 4 shall, not less than fourteen days before the date fixed for the sale be published in the Gazette and copies of such notice shall be–

(a) dispatched to the