BANK OF CEYLON

Vs.

FLEX PORT (PVT) LTD

SUPREME COURT
DE ABREW, J.
MALALGODA, J.
SURASENA, J.
SC/APPEAL/120/2012
SC/HCCA/LA/165/2012
WP/HCCA/MT/58/2008 (F)
DC MT. LAVINIA 4329/03/M
MARCH 3, 2020

Prescription Ordinance, section 7- Overdraft facility-When does prescription begin to run?

An overdraft, which is a loan granted by a bank to the customer is, in the absence of a written contract, prescribed in terms of section 7 of the Prescription Ordinance within three years from the date the cause of action arose. The cause of action will arise only at the time when the demand is made.

In this case the demand to repay the overdraft was made by the bank by letter dated 26.09.2003, and the defendant by letter dated 05.12.2003 replied that the overdraft could be settled. The action was filed on 19.12.2003. The action was held not to have been prescribed.

Cases referred to:

1. Seylan Bank Ltd v. lntertrade Garments (Pvt) Ltd [2004] BLR 41
2. Hatton National Bank v. Helenluc Garments Ltd [1999] 2 Sri LR 365

APPEAL from the Judgment of the High Court of Civil Appeal of Mount Lavinia.

Rajeev Goonathilake, S.S.C., with H.A.C. Caldera for the Plaintiff-Appellant-Petitioner-Appellant.

S.N. Vijithsingh with lranga Perera, Anuradha Weerakkody and Laknath Seneviratne for the Defendant-Respondent-Respondent-Respondent.

cur. adv. vult.

July 3, 2020

DEABREW J.

The Plaintiff-Appellant-Petitioner-Appellant (hereinafter referred to as the Plaintiff-Appellant Bank) granted overdraft facilities (hereinafter referred to as O/D facilities) to the Defendant-Respondent-Respondent-Respondent (hereinafter referred to as the Defendant-Respondent). The said 0/D facilities were granted by the Nugegoda Branch of the Plaintiff-Appellant Bank to the Defendant-Respondent who maintained a current account in the Nugegoda Branch of the Plaintiff-Appellant Bank. The Plaintiff-Appellant Bank instituted action No. 4329/03/M in the District Court of Mount Lavinia against the Defendant-Respondent to recover a sum of Rs.1,232,642.57 and 24% interest per annum with effect from 1.8.1999 on the basis of the said 0/D facilities granted to the Defendant-Respondent. The learned District Judge by his judgment dated 30.7.2008 dismissed the action of the Plaintiff-Appellant Bank on the basis that the action was prescribed. Being aggrieved by the said judgment of the learned District Judge, the Plaintiff-Appellant Bank appealed to the Civil Appellate High Court. The Civil Appellate High Court by its judgment dated 19.3.2012 dismissed the appeal of the Plaintiff-Appellant Bank and affirmed the judgment of the learned District Judge. Being aggrieved by the said judgment of the Civil Appellate High Court, the Plaintiff-Appellant Bank has appealed to this court. This court by its order dated 6.7.2012, granted leave to appeal on questions of law set out in paragraphs 11 (a),(b),(c),(d) and (e) of the Petition of Appeal dated 26.6.2012 which are reproduced below.

1. When money is lent by way of an overdraft, when does prescription begin to run if there is a stipulation that overdraft is repayable on demand?

2. When there is an overdraft facility which does not stipulate repayment on demand and the customer makes a deposit (repayment) in reduction of the overdraft, when does prescription begin to run for the purpose of the Prescription Ordinance, No. 22 of 1871, as amended?

3. Where there is an overdraft facility which does not stipulate repayment on demand and the bank makes a last advance to the customer by way of an overdraft and the outstanding balance after

the said last advance remains unpaid, when does prescription begin to run?

4. . Where there is an overdraft facility which does not stipulate repayment on demand and there is a written acknowledgement and/or promise of liability incurred under the overdraft facility, when does prescription begin to run for the purpose of the Prescription Ordinance?

5. Where there