NIHAL SENEVIRATNE & ANOTHER

NIHAL SENEVIRATNE & ANOTHER
VS.
STATE BANK OF INDIA

SUPREME COURT
SALEEM MARSOOF, PC, J.
SRIPAVAN J.
WANASUNDARA, PC J.
SC (CHC)AP 53/2006
NOVEMBER 05, 2013

High Court of the Province (Special Provisions) Act No. 1 1996 Section 2(1) - Debt Recovery (Special Provisions) Act No. 20 of 1990 - Commercial transaction - Personal Transaction - Jurisdiction of Court - Surety - Should recourse be had against the principle debtor first? - Is a demand necessary? Beneficium ordinis sue excussionis - Beneficum Divisionis Excussionis - Guarantee Bond - Pay on demand - Trust Receipt facility

The Commercial High Court granted the relief sought by the Plaintiff - Respondent Bank in a certain sum of money against the Defendants - Appellants who were the guarantors. The Appellants had executed a Guarantee Bond, the financial and Banking facilities granted included a Trust Receipt facility.

It was contended that, the Commercial High Court lacked subject matter jurisdiction, Plaintiff did not disclose a cause of action in that the Appellant were sued on the basis of secondary liability as surety without first having recourse to the primary debtor; Failure of the Court to consider whether in the absence of a demand prior to the action, there existed any cause of action and the failure to establish the liability of the primary debtor to sustain the claim on the Guarantee Bond.

On Appeal.

Held:

(1) The expression "commercial" should be construed broadly having regard to the manifold activities which are integral to banking and commerce.

Commercial transaction is any type of business or activity which is carried for profit.

(2) Beneficium ordinis sue excussionis is the privilege whereby a surety is entitiled to claim that as his liability may be regarded to be of an accessory character it shall not be enforced against his until the creditor has unsuccessfully endeavoured to obtain satisfaction from the principal debtor.

Beneficium ordinis sue divisionis is the privilege when several persons are sureties for a debt each of them may when sued for the whole amount require the creditor to divide the claim and bring his action in so far as the other are not insolvent.

The Appellants have waived the privileges usually available to sureties under the common law. The renunciation of the privileges of sureties has been read over and explained to the Appellants.

(3) No cause of action could arise in terms of clause 1 of the Guarantee Bond with respect to any claim where no demand has been made. There is no evidence that a demand had been sent with respect to Trust receipt P5 and P6 - Demands have been sent in respect of the other Trust Receipts. The amount due on 2 such Trust Receipts have been already paid - and partial payment had been made in regard to one Trust Receipt. The principal amount due should be computed on those lines.

(4) The liability of the Principal debtor to the extent set out in this judgment has been established by evidence. The Commercial High Court has allowed a sum in excess of the amount due on principal.

APPEAL from the Judegment of the Commercial High Court of Colombo.

Cases referred to:

(1) Philip Vs. Commissioner of Inland Revenue - 1 Sri Skantha 133

(2) Brunswick Export Ltd. Vs. Hatton National Bank- 1999 - 1 Sri LR 219

(3) Cornell & Company Ltd. Vs. Mitsui & Company Ltd. - 2000 - 1 Sri LR 57

(4) R. M. Investment & Trading Co. PVT. Ltd. Vs. Boring Co. & another - 1994 - 1 SCR 837

(5) Comed Chemical Ltd. Vs. C. N. Ramchana - AIR 2009 SC 494

S. P. Sriskantha with T. Sri Pathmanathan for the Defendants - Appellants

Avindra Rodrigo with Ananda Tikiriratne and Raneesha De Alwis for the Plaintiff- Respondent.

Cur.adv.vult

December 27, 2014
SALEEM MARSOOF, P.C. J.

This is an appeal filed in terms of Section 6 of the High Court of the Provinces (Special Provisions) Act No 10 of 1996 against the judgment of the High Court of the Western Province exercising commercial jur

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