People’s Bank vs Zaid Tea – SC CHC APPEAL NO. 32/09-2018

In the case between People’s Bank and the partners of “Zaid Tea” (Miran Naushad Jamaldeen and Siththi Ayesha Naushad), the court addressed the issue of liability for repayment under foreign bills purchase agreements, specifically whether repayment should be sought from the Defendant Appellants or from SLECIC, the provider of a pre-shipment credit guarantee. It was held that the Defendant Appellants are liable to repay the money advanced by the Bank for the purchase of foreign bills, as the security cover from SLECIC pertained exclusively to the export trust receipt facility, not the foreign bills purchase facility. The principle reaffirmed is that guarantees taken for a party’s benefit do not transfer payment obligations to a guarantee provider unless specifically stipulated. The decision