LANKAORIX LEASING COMPANY LTD

LANKA ORIX LEASING COMPANY LTD

Vs.

WEERATUNGE

SUPREME COURT
PERERA, C.J.
PRIYANTHA JAYAWARDENA, J.
PRASANNA JAYAWARDENA,J.
SC/APPEAL/113/2014
SC/APPEAL/SC/HC/LA/67/2013
HC/ARB/1263/02
NOVEMBER 12, 2018

Arbitration Act, No.11 of 1995, sections31(1), 31(6), 32(1)-Application for enforcement of arbitral award-Recovery of interest in excess of principal amount-Public policy of Sri Lanka-No application to set aside the award

The appellant, a finance leasing company, leased a motor vehicle to the respondent for a period of 30 months. The respondent defaulted in paying the monthly lease rentals and the appellant terminated the lease agreement and referred the matter to arbitration pursuant to the arbitration clause contained in the lease agreement. The parties reached a settlement before the arbitrator, which was incorporated in the form of an award. The respondent failed to comply with the award and the appellant applied to the High Court to enforce the award under section 31 of the Arbitration Act, No. 11 of 1995. The respondent filed a statement of objections wherein he pleaded inter alia that the award was not a valid award, the award had not been served on him, and that he had been tricked into signing the settlement. The respondent had not made an application to set aside the award under section 32 of the Arbitration Act.

After inquiry, the High Court made order rejecting all of the objections pleaded by the respondent. However, the High Court went on to consider whether the award was contrary to the public policy of Sri Lanka. The court found that the award had granted the appellant an amount of interest in excess of the principal amount due, contrary to section 5 of the Civil Law Ordinance. Therefore, the court held that the award was contrary to public policy and dismissed the appellant's application for enforcement of the award. The appellant appealed against the said order to the Supreme Court.

Held:

1. When an application to enforce an arbitral award is made to the court in conformity with sections 31(1) to 31(5) of the Arbitration Act, section 31 (6) requires the court to file the award and give judgment and enter decree according to the award unless there is an application pending determination made by another party to the arbitration to set aside the award under section 32, or the court sees cause to refuse the recognition and enforcement of the award under sections 33 and 34.

2. A party who wishes to set aside an arbitral award made in Sri Lanka must file an application under section 32(1) within sixty days of that party receiving the award. The court acting ex mero motu may set aside an award on the ground that it is in conflict with the public policy of Sri Lanka under section 32(1)(b)(ii), but based strictly upon the material placed before the court and only in the course of an application made under section 32(1).

3. A party who claims that he did not receive a copy of the arbitral award until he was served with notice of the other party's application under section 31 (1) to enforce the award, will be entitled to make an application under section 32(1) to set aside the award within sixty days of being served with notice of the application to enforce the award.

4. The respondent had not made an application to set aside the award under section 32(1), either before or after receiving notice of the appellant's application for enforcement of the award. Consequently, the High Court had no jurisdiction to set aside the award on the ground that it was contrary to public policy in the course of determining the appellant's application to enforce the award under section 31 (1).

Cases referred to:

1. Southern Group Civil Construction (Pvt) Ltd v. Ocean Lanka (Pvt) Ltd [2002] 1 Sri LR 190

APPEAL from the Judgment of the High Court Colombo.

Shanaka De Livera for the Petitioner-Appellant.

Priyantha Alagiyawanna with Gevindu Senevirathne for

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