no insurance claim would arise in relation to the property. Further, insurance companies may have refused to renew the insurance due to the conflict situation in certain areas, though the property would continue to be subject to mortgage. The third situation could be: while the insurance was in tact, the insurance company may attempt to escape liability through interpretation of clauses in the insurance policy stating that damage due to terrorism or riots is not covered by the policy. In all these circumstances, the owner may have to pay the loan and interest even if the property is damaged or destroyed. In the recovery of the loans, commercial banks would attempt to use the simple and effective method of parate9 execution in terms of the Recovery of Loans by Banks Act No. 4 of 1990. This would be highly prejudicial to the owner who may not have been in a position to repay the loan due to the conflict situation. Under the Recovery of Loans by Banks (Special Provisions), the right to enforce a security by parate execution was granted to Licensed Commercial Banks registered under section 3 of the Banking Act No 30 of 1988. Section 4 of The Recovery of Loans by Banks (Special Provisions) provides that “the board of the particular Bank may by resolution to be recorded in writing authorise any person specified in the resolution to sell by public auction any property mortgage to the bank as security for any loan in respect of which default has been made in order to recover the whole of the unpaid portion of such loan and the interest due thereupon up to the date of sale”. Under Debt Recovery (Special Provision) (Amendment) Act No 9 of 1994, notwithstanding anything to the contrary in any law, a sum in excess of the principal may be recovered as interest. In these circumstances the defaulter is left in the hands of the bank and he cannot seek any relief or remedy in court. The provisions of the Debt Recovery (Special Provisions) Act No 2 of 1990 can only be invoked by a “lending institution” which is defined in Section 30 of the Act to mean a Licensed Commercial Bank within the meaning of the Banking Act, the State Mortgage and Investment Bank, National Development Bank, The Development Finance Corporation of Ceylon and a company registered under the Finance Companies Act No 78 of 1988 to carry on finance business, and includes a liquidator appointed under a Companies Act, No 17 of 1982 or any authority duly appointed, to carry on, or wind up, the business of any bank, corporation or company referred to above. The above institutions may recover a debt due to it by an action instituted in terms of the Act by the procedure laid down in this Act. If the court is satisfied that the instrument, agreement or document produced appears to be properly stamped and not open to suspicion and not barred by prescription, the court would enter a decree nisi10. After the decree nisi is served on the defendant, he has to obtain the leave of court to appear and defend. Pursuant to Section 6(2) of the amending Act the court may grant leave to the defendant to appear and show cause against the decree nisi, either: (a) (b) 9 Upon the defendant paying in to court the sum mentioned in the decree nisi; or Upon the defendant furnishing such security as, to the court, may appear reasonable and sufficient for satisfying the sum mentioned in the decree nisi. The right to sell the property without recourse to court This would be made absolute if no proper cause is shown otherwise to the satisfaction of court 10 17