No Right of Appeal Even from Preliminary Orders Under Sec 16 of the Recovery of Loans by Banks Act
SC Denies Right to Appeal in Bank Recovery Proceedings
In a recent decision, the Supreme Court clarified that no appeal can be filed, even against preliminary objections, under the special legal procedure laid down in the Recovery of Loans by Banks (Special Provisions) Act No. 4 of 1990. This Act sets out a streamlined process for banks to take possession of mortgaged property after a parate execution sale, without having to go through a lengthy trial.
Under Section 16 of the Act, a bank that has conducted a parate sale can apply to the District Court to obtain possession of the property by producing the certificate of sale. The law specifically provides that this process should be summary, avoiding delays, and does not grant a right of appeal against orders made under it.
In the case under review, a bank had applied to the District Court for possession of property following a parate sale. The borrower, instead of contesting the sale itself, raised a preliminary objection.
The District Court rejected the preliminary objection and allowed the application to proceed. The aggrieved party then filed an appeal in the Civil Appellate High Court, claiming that while final orders under Section 16 may not be appealable, a preliminary order such as this one should be. Civil Appellate Court Allowed the Appeal. This prompted the bank to file an appeal before the Supreme Court.
Purpose Must Prevail
The Supreme Court overturned the Appellate Court’s ruling, holding that no appeal lies even from preliminary orders made during proceedings under Section 16. The Court emphasized the importance of giving a purposive interpretation to the Act, that is, understanding and applying it in line with the objective of the legislature.
The Court also examined Parliamentary debates (Hansard) from when the law was passed in 1990. Those records clearly showed that the law was introduced to address delays faced by banks in recovering property and to ensure a speedy, efficient process for loan recovery.
The Court rejected the argument that the preliminary order could be treated separately. It stated that all steps in a Section 16 case including preliminary rulings are part of the special jurisdiction created by the Act. Therefore, unless the law expressly provides a right of appeal, none can be assumed, even for interim or incidental matters.
“…A decision on a preliminary objection delivered in the course of a proceeding under a special statute cannot be considered in isolation or considered to be independent of the jurisdiction exercised under that statute. When a Plaintiff institutes an action in a Court, under a particular statute which provides for its procedure, the jurisdiction exercised by the District Court at all stages of the proceeding will be derived from the jurisdiction conferred by the Act. Therefore, the nature of the Order, whether preliminary or final, does not change the nature of the proceedings or confer a right of appeal when the statute does not provide for such a right…” – Justice A.L. Shiran Gooneratne
Case No: SC Appeal No: 121/2019 [Decided on 30.05.2025]
Before: Justice P. Padman Surasena, Justice A.L. Shiran Gooneratne and Justice K. Priyantha Fernando
