IN THE SUPREME COURT OF THE DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA In the matter of an application for Leave to Appeal to the Supreme Court of the Democratic Socialist Republic of Sri Lanka under and in terms of Article 128(2) of the Constitution read with the Supreme Court Rules of 1990 and Section 5(2) of the High Court of the Provinces (Special Provisions)

Act, No. 10 of 1996.

Jaqa Lanka International (Pvt) Ltd No. 46/1, Fife Road, Colombo 05.

Petitioner SC. APPEAL 50/A/2013 SC/(CHC) Appeal/50/2013 -Vs HC (Civil) 4/2008/CO Bank of Ceylon No. 04, Bank of Ceylon Mawatha, Colombo 01.

Respondent AND NOW BETWEEN Bank of Ceylon Formerly at No. 04, Bank of Ceylon Mawatha, Colombo 01 And presently at, ‘BOC Square’

No. 01, Bank of Ceylon Mawatha, Colombo 01 Respondent-Petitioner-Appellant -Vs-

Jaqa Lanka International (Pvt) Ltd No. 46/1, Fife Road, Colombo 05.

Petitioner-Respondent BEFORE: Hon. Buwaneka Aluwihare, PC, J.

Hon. Murdu N.B. Fernando, PC, J.

Hon. Yasantha Kodagoda, PC, J.

COUNSEL: Milinda Gunetilleke, ASG, PC with Ms. N. N. P. Sandeepani for the Respondent-

Appellant.

Avindra Rodrigo, PC with Ms. Nishika Fonseka instructed by M.J.S. Fonseka for the Petitioner-Respondent.

ARGUED ON: 07.02.2023.

WRITTEN SUBMISSIONS: Respondent-Petitioner-Appellant on 19.11.2013 and

24.08.2018 Petitioner-Respondent on14.06.2018 and

27.02.2023 DECIDED ON: 31.10.2023.

Judgement Aluwihare, PC, J., 1) This is an appeal against an Order of the Commercial High Court of the Western Province holden in Colombo, relating to the winding up and liquidation of a company, and payment of its Creditors according to their character. Before examining the questions of law, I find it prudent to note the factual matrix of this case.

The Facts

2) The Petitioner-Respondent (hereinafter referred to as the Respondent) had obtained five banking facilities from the Respondent-Petitioner-Appellant Bank (hereinafter referred to as the Appellant) including an overdraft facility, a term loan, a hypothecation loan and a trust receipt. The overdraft facility for USD 40,000 had been secured by way of mortgage over leasehold property of a Factory Building and a Corporate Guarantee. For that purpose, a Mortgage Bond bearing No. 443/219 dated 06.12.1990 and a Corporate Guarantee was entered into between the parties. The present dispute relates to this facility.

3) The Respondent subsequently made an application before the Commercial High Court to be wound up by court under Section 270(a) and 270(e) of the Companies Act. The Winding Up order was issued on 29^th April 2008 and a liquidator was appointed by the Court. Subsequently, the Appellant bank made a statement of claim to the liquidator and was recognised in the liquidator’s report (marked ‘A’ in the Petition of Appeal) as a ‘secured creditor’ in respect of the factory building, among other things. Thereafter, the liquidator by letter dated 04.12.2009 (marked ‘D’ in the Petition) informed the Appellant Bank that the entire machinery and equipment of the Company situated in the Factory Building have been disposed of and the only remaining asset is the building itself. He further informed the bank that as the building is mortgaged to the bank, proceeds of the disposal of the factory building are payable to the bank subject to the deduction of expenses and fees. The letter also noted the direct expenses incurred by the Liquidator in respect of insurance amounting to Rs. 30,647 (for three months) and security charges amounting to Rs. 102,583 (per month) for safeguarding the building and requested the Appellant Bank to reimburse the costs borne for those expenses with effect from

01.01.2010.

4) On or around 8^th October 2009, the Appellant Bank filed a Statement of Objections to a Report filed by the Liquidator on 31^st August 2009 objecting to the Liquidator deducting a sum of Rs. 806,268.15 as fees and expenses incurred by the Liquidator in relation to the sale of machinery mortgaged by the Respondent to the Appellant Bank. The sale proceeds amo