Financial Times

Onus on defendant to begin case under Debt Recovery laws

The District Court of Colombo recently issued an order that the onus is on the defendant to begin the case under the Debt Recovery (Special Provisions) Act No.2 of 1990.

The order, made by Additional District Judge M.R.C. Fernando, is of great significance with regard to actions instituted by Banks and other lending institutions under the Debt Recovery Act, lawyers say.
The case had been filed by the Union Bank of Colombo Ltd. against Vajira Kalinga Wijewardena and Captain Virasinghe (Case No. Debt Recovery 969) under the Debt Recovery Act of 1990 as amended by Act No.9 of 1994 for the recovery of a sum of Rs. 50,763,293.66 with interest.

The main question before the Court was which party should commence the case in a context where the defendants had filed answer. The related issue whether the filing of answers by the defendants converted an action filed under the special procedure laid down in the Debt Recovery Act, to a procedure followed in a regular action was also a matter to be decided.

In the present action the defendants had filed answers pursuant to a direction by the Supreme Court in a consent order. The Plaintiff Bank thereafter challenged the defendants right to file Answer in the District Court and in the Court of Appeal. However, the Court of Appeal dismissed these applications. The Supreme Court refused Leave to Appeal there from.

When the case came up for trial Nigel Hatch P.C. for the Plaintiff Bank submitted that under this law the defendant should begin the case. He also objected to the defendants tendering issues as it was premature.

The defendants submitted that since they have filed answers, this action had been converted into regular action and as such the Plaintiff should begin the case. Their contention was that the mere filing of answers automatically converts the procedure to a regular action.

The District Court held that the Debt Recovery Act was introduced in 1990 with the sole purpose of assuring speedy recovery of the amounts due to lending institutions in the large interest of the economy of the country.

The Act lays down a special jurisdiction and procedure relating to debt recovery by lending institution. Accordingly the lending institutions are allowed to follow a summary procedure which is distinct from the normal regular action in recovering their debts.

The District Court upheld the Plaintiff Bank’s submission that under the scheme of the Debt Recovery Act once leave is granted to a defendant section 384 of the CPC applies and the defendant should begin the case.

Nigel Hatch P.C. appeared for the Plaintiff Bank with Mrs. K. Geekiyanage and Ms. P. Abeywickrema. Nihal Fernando P.C. with R. Jayasinghe appeared for the first Defendant and A.R. Surendran P.C. with S. Ganesharajan appeared for the second Defendant.

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