INDIAN BANK V ACUITY STOCK BROKERS (PVT) LIMITED

INDIAN BANK V. ACUITY STOCK BROKERS (PVT) LIMITED

SUPREME COURT
TILAKAWARDANE,J.
AMARATUNGA J. AND
SURESH CHANDRA,J.
S.C. APPEAL NO. 11/2011 (CHC)
CASE NO. 181/97(1)
AUGUST 4TH, 2010

Civil Law Ordinance No. 5 of 1865 - Laws of England to be observed in commercial matters and with regard to Banks and Banking transactions - "Justa causa" - a requirement for contracts to be valid under Roman - Dutch Law - What is a Banking transaction?

Sivasubramaniam, was a customer of the Claimant - Bank (Appellant), who maintained a current account with the Bank. He was also a customer of there respondent, who carried on business as a stock broker. The Respondent bought and sold shares on behalf of the 'said M. Sivasubramaniam. On or about 21st January 1994, the said Sivasubramaniam requested the Bank to provide him an over draft facility to buy shares. By the promise and/ or contract and/ or agreement in writing dated 21st January 1994 the Respondent had held out and assured the Appellant that (a) the Respondent held the shares listed therein and (b) that the Respondent shall credit all the sale proceeds of these shares to the current account of Sivasubramaniam held with the appellant Bank. The Bank accordingly provided an overdraft facility to the said Siva subramaniam but he had failed and neglected to repay a sum of Rs. 6,385,077/42 which was due and owing to the Appellant.

As a result of the Respondent's wrongful and unlawful breach of the agreement, it had caused the Appellant to suffer loss and damage in a sum of Rs. 5,558,841.

After trial the Commercial High Court dismissed the Appellant's action and assumed that it is the English Law that apples, stating that

'consideration' is a requisite of a contract and concluded that a perusal of the letter dated 21st January 1994 shows that there is total lack of consideration and hence the said document was not enforceable.

Held:

(1) The Civil Law Ordinance No.5 of 1865 introduced the English Law relating to Banks and Banking. But there are many transactions, where the Banks are parties, which do not come within the realm of Banking transactions and regarding which the Roman Dutch law applies.

(2) Under the Roman Dutch Law there should be justa causa for a contract to be valid.

Per R.K.S. Suresh Chandra, J.-

    "In the present case the undertaking given by the Respondent would satisfy the requirement for a valid contract as it was an undertaking given with all seriousness."

APPEAL from the judgment of the Commercial High Court.

Cases referred to:

(1) Lipton v. Buchanan - 8 NLR49

(2) Jayawickrame v. Amarasuriya - 20 NLR289

(3) Edward Silva v. De Silva - 46 NLR510

Prasanna Jayawardene with A. Siriwardane for Plaintiff - Appellant.

Kushan De Alwis with Hiran Jayasuraiy and Chamath Fernando for Defendant-Respondent.

Cur.adv. vult

February 18th 2011

SURESH CHANDRA J.

This is an appeal from the judgment of the Commercial High Court whereby the action of the Plaintiff-Appellant was dismissed.

    The Plaintiff-Appellant instituted action in the Commercial High Court against the Defendant Respondent to recover a sum of Re. 5,558,841/- with legal interest thereon.

    In it's plaint the Appellant stated inter alia that one M. Sivasubramaniam was a customer of the Bank and maintained a current account and that he was also a customer of the Respondent who carried on business as a stockbroker, that the Respondent bought and sold shares on behalf of the said M. Sivasubramaniam and the Respondent held such shares on behalf of and for the account of the said Siva subramaniam. On or about the 21st, of January 1994 the said Sivasubramaniam had requested the Appellant to lend and advance monies to him by way of an Overdraft facility granted on his current account. That by the promise and/ or contract and/or agreement in writing dated 21st January 1994 the Respondent had held out and assured the Appellant that (a) t

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