Hatton National Bank Limited vs. lA.X. Fernando and Company (Pvt) Ltd – CA CASE NO:-739/99 F -1999

The case between J.A.X. Fernando and Company (Pvt) Ltd and Hatton National Bank PLC addressed the issue of whether the bank was entitled to debit the exporter’s account for an unpaid export bill under a dishonoured letter of credit, based on letters of indemnity executed by the exporter. It was held that the bank could enforce its right to recoup the sum in dispute, reaffirming the principle that an indemnity creates a direct and enforceable obligation, distinct from a guarantee. This decision relied on evidence of the indemnities provided, relevant precedent, and the terms of the export transaction, emphasizing that commercial banks are entitled to recourse when such indemnities have been triggered by non-payment from the issuing bank.

H.N.J. Perera J. — It was determined that the plain