NELKA RUPASINGHE AND ANOTHER VS. NATIONAL DEVELOPMENT BANK

NELKA RUPASINGHE AND ANOTHER VS.
NATIONAL DEVELOPMENT BANK

SUPREME COURT
TILAKAWARDENE, J.
SRIPAVAN, J.
WANASUNDERA, J.
SC 39/2010
HC [CIVIL] 274/2007/MR
COMMERCIAL HIGH COURT
SEPTEMBER 27, 2013

Parate execution - Lands of debtor and guarantor sold Purchased by Bank - Parate executing guarantor's land - Valid? Who is the owner of the lands? Hypothecary action filed.

The 1st appellant mortgaged lot 6 and the 2nd appellant mortgaged her land securing a loan obtained from the bank. As the loan was not repaid, the bank auctioned both lands and the bank bought the lands and became the owner on a certificate of sale. The Supreme Court in another case held that the bank could parate execute only the land belonging to the debtor. The bank thereafter, on the basis that it cannot auction properties of the guarantor instituted hypothecary action to recover the balance due on the outstanding sum owed after the sale of the lands.

It was contended that the bank has become the owner of the lands in view of the certificate of sale, and that in view of the 5 Bench decision of the Supreme Court, it cannot auction the guarantors land.

Held:

[1] The banks decision to auction the properties of the guarantor to recover the loan taken by the borrower is legally wrong.

[2] The auction to sell the guarantors land is not valid.

Per Eva Wanasundera, J.

"I am of the view that the said certificate of sale should be amended to include only the borrowers land and forwarded for registration, thus specifically releasing the lands of the guarantor from the ownership of the Bank the certificate of sale is valid against the First appellant only".

APPEAL from the judgment of the Commercial High Court.

Cases referred to:-

(1) Chelliah Ramachandran and another vs. Hatton National Bank and others
(2) V. Aanandasiva and 12 others vs. Hatton National Bank and 3 others SC Appeal 9/2004
(3) Ukwatte and another vs. DFCC Bank
(4) Karunawathie vs. DFCC Bank SC SlA 32/2004

Rohan Sahabandu PC for 1st and 2nd defendant-appellants.

Romesh de Silva PC with Geethaka Gunawardane for plaintiff- respondent.

Cur.adv.vult.

21st March 2014

WANASUNDERA, PC, J.

This appeal has come up to the Supreme Court as an appeal from a judgment of the Provincial High Court of the Western province holden at Colombo and exercising Civil Commercial Jurisdiction, as provided in Section 5 of the High Court of the provinces (Special provisions) Act No. 10 of 1996. The judgment of the aforementioned Commercial High Court of Colombo is dated 09.09.2010.

The plaintiff-respondent (hereinafter referred to as the respondent-bank) is the National Development bank PLC of No. 40, Navam Mawatha, Colombo 2 and the 1st and 2nd Defendant-Appellants (hereinafter referred to as the Appellants) are Nelka rupasinghe (hereinafter referred to as the 1st Appellant and Ahangame Gamage Nandawathie (hereinafter referred to as the 2nd Appellant) from Ahangama.

The facts of this case play an important role in deciding this appeal and as such I will place them here in summary form. The 1st Appellant become the owner of lot 6 in plan 1243 of an extent of 34A Or 5P and lot 8 of an extent of 15A 1R 30p by deeds of transfer No. 247 and 248. Altogether, the 1st Appellant was the owner of about 50 acres of land. The 2nd Appellant became the owner of lot 4, lot 9 and lot 10 of plan 1243 of an extent of 25A OR 27P. 1A 2R 18P and 25A OR 27P by deeds of transfer 245, 249 and 250 adding up to again about 50 acres. The 1st Appellant applied for a loan of 7 million from the Respondent Bank for the project of replanting tea on her land and she mortgaged her land to the respondent to get a loan of 7 million on 18.12.2000, by deed No 193. On the same day, i.e. 18.12.2000, the 2nd Appellant also mortgaged her property to morefully secure the same loan of the 1st Appellant to be received from the respondent bank by deed No. 184. So, the 2nd mortgage deed No.

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