Court dismisses Daya Group’s writ application against People’s Bank auction

Colombo, June 20 (Daily Mirror) - The Court of Appeal yesterday dismissed a writ application filed by Daya Group Limited and Daya Apparel Export (Pvt) Ltd challenging People’s Bank’s move to auction mortgaged properties under its parate execution powers, holding that the bank was legally entitled to proceed with the recovery process.

The judgement was delivered by a bench comprising Justices R. Gurusinghe and Dr. Sumudu Premachandra, who also ordered the petitioners to pay Rs. 1 million in costs.

The companies had sought writs of Certiorari, Prohibition and Mandamus to invalidate a resolution passed by the Board of Directors of People’s Bank authorising the sale of mortgaged properties by public auction to recover outstanding credit facilities amounting to more than USD 1.42 million.

The petitioners argued that their financial difficulties stemmed from a series of unprecedented economic setbacks, including the 2019 Easter Sunday attacks, the COVID-19 pandemic, fuel shortages and political instability, which adversely affected their ability to repay the loans.

They further alleged that the bank had unlawfully invoked its parate execution powers under the People’s Bank Act and had inflated the debt by applying an excessive exchange rate. The companies also contended that mandatory statutory notices had not been properly served and that the auction process was procedurally defective.

However, the Court rejected those arguments and held that the bank was legally entitled to proceed with the recovery process.

The Court observed that the petitioners had failed to fully settle the outstanding liabilities despite a formal resolution adopted by the bank on March 26, 2021, authorising parate execution. The judges further held that People’s Bank was entitled to continue with the auction sale of the mortgaged properties to recover the unpaid debt.

People’s Bank opposed the application, submitting that the petitioners had repeatedly defaulted on their repayment obligations despite numerous opportunities for restructuring and several postponements of the auction. The bank further argued that the challenge was legally barred under Section 29D of the People’s Bank Act, which prevents borrowers and persons claiming through them from challenging resolutions authorising parate execution.

Delivering the judgement, Justice Premachandra observed that the impugned resolution had been passed in March 2021, whereas the writ application had been filed only in November 2022, a delay of more than one year and eight months. The judges held that the petitioners had failed to provide a satisfactory explanation for the delay and had effectively slept on their rights.