Bank of Ceylon vs Flex Port (Pvt) Ltd – sllr 2020 volume 3 page 068

The case between Bank of Ceylon and Flex Port (Pvt) Ltd addressed whether an action to recover an overdraft amounts to the recovery of a loan and when the prescription period under section 7 of the Prescription Ordinance commences. It was held that an overdraft facility is to be treated as a loan and, in the absence of an explicit written contract, the cause of action arises upon demand for payment. The principle established is that the prescription period begins on the date of demand rather than any alleged earlier default. This decision relied on established case law such as Seylan Bank Ltd v. Intertrade Garments and Hatton National Bank v. Helenluc Garments, as well as standard banking legal texts, clarifying that an action filed within three years of the date of demand is not prescribe