Banking Companies Act, 1991 | Case Reference

Banking Companies Act [XIV of 1991]

Sections 5(cc) and 27-Once the name of a person is published in the C.L.B. list he is prevented from carrying on his business since all credit facilities from all financial institutions are stopped. Furthermore the lending bank is required to file suit for recovery of the defaulted amount.

A share-holder or a director of the defaulting company cannot transfer his share or resign from his directorship after obtaining loan without the consent of the Board of Directors of the loan giving bank or institution. Md. Momin Ali Vs. Bangladesh Bank and others. (Spl. Original) 20 ALR (HCD) 1-4

Section 5GaGa-A guarantor, although a debtor, is not defaulter-borrower within the meaning of section 5GaGa of the Act, and therefore, his name cannot be included in the CIB list. Sonali Bank vs Major Monjur Quader (Rtd.) (Civil) 70 DLR (AD) 163 Section 5GaGa-Defaulter-borrower means such person who has taken loan either in his own name or in the name of company which is স্বার্থ সংশ্লিষ্ট প্রতিষ্ঠান and which is a public limited company where the alleged defaulter borrower is either a Director or has 25% share therein. Alter- natively in the case of a private limited company, the alleged defaulter borrower must have at least 20% share therein. In all the events, the loan must have been outstanding for more than 6 (six) months. Sonali Bank vs Major Monjur Quader (Retd) (Civil) 70 DLR (AD) 163

Section 5 (Ga Ga)

With the consent and concurrence of the said financial institution, SABINCO which granted loan to Meghna PET Industries Ltd. By this arrangement the petitioners ceased to be the shareholders and directors of Meghna PET Industries Ltd. and in turn Mr. Md. Zakaria, Mr. M.F. Kamal and Mr. Abu Taher ceased to be the shareholders and also directors of Meghna Vegetable Oils Industries Ltd. Since the petitioners ceased to be the shareholders and directors of Meghna PET Industries Ltd. they ceased to be liable to repay the said loan to SABINCO even as guarantors. Sonali Bank, represented by its Managing Director vs. Md. Mostafa Kamal (M.M. Ruhul Amin J) (Civil) 5ADC 493 

Bank Company (Amendment) Act, 2003 

Section 15(Ka Ka) Bank Companies Act, 1991

Section-45(1)

Directing that within 120 days from the date of drawing up of the order, the 20th Annual General Meeting (AGM) of City Bank Ltd, the respondent No. 2, is to be held excluding the agenda regarding election of directors. Bangladesh Bank vs. Sk. Abul Hossain and others (Md. Tafazzul Islam J)(Civil) 4 ADC 649

Section 17(1)(c)

That the directorship of the appellant in that Bank has been automatically vacated on the expiry of two months from 9.9.95. Moazzam Hossain VS. Bangladesh Bank and ors (Md. Tafazzul Islam J)(Civil) 4 ADC 870

Section 17(1) (c)

The appellant was merely a guarantor for the loan availed by said Md.Aman- ullah in the year 1983 and further the said loan being fully adjusted in the year 1989 there was no liability of the appel- lant against the said loan on the date of issuance of the notice dated 3.9.95; other liabilities as shown in the above notice. Moazzam Hossain VS. Bangladesh Bank (Md. Tafazzul Islam J) (Civil) 6 ADC 963

Section 27, 48

Even if it is assumed that there was unfairness by reason of not giving a per- sonal hearing was cured by the process of the appeal. Dillon, L.J. in MacMahon in the context of the arguments of Lord Wilberforce in Calvin V. Carr (1980) A.C. 574 and per Barwick, CJ. in Twist V. Randwick Munical Council (1976) 12 ALR 379, 384 stated 'If the scope of any permissible appeal is limited, so that it does not involve an examination of the circumstances of the case de novo on evidence not limited to that which was before the original tribunal, it may well be that the appellate hearing will not cure the defects of the original deci- sion.' The opinion of Lord Dillon was that 'failure was fully cured by the hearing in the Divisional Court under the statutory appeal process'. Kamal  Uddin Ahmed vs. The Governor, Bangladesh Bank (Md. Muzammel Hossain CJ) (Civil) 10 ADC  119

Section 27(ka)

The sanctioning, realizing and exempting the interest of loan money is a policy decision of the Board of Directors of the concerned bank which is not amenable in the writ of mandamus.

In view of the settled principle expounded for a long line of catena, the High Court Division committed serious illegality and miscarriage of justice in directing the private bank exempting the interest of Bank loan money.

The Appellate Division opined that as the writ respondents have not violated any law or any right of the writ petitioner, therefore, the impugned judgment passed by the High Court Division cannot be sustained in law. The judgment of the High Court Division is set aside. The Artha Rin Adalat is directed to proceed with the cases pending before it in accordance with law. Accordingly, this Civil Petition for Leave to Appeal is disposed of....(27 & 28) [2022] 24 ALR (AD) 9

Section 27Ka-There is a clear bar upon a director of borrower-company from transferring his share to another person without prior approval or consent of the creditor bank. Sonali Bank vs Major Monjur Quader (Retd) (Civil) 70 DLR (AD) 70 DLR (AD) 163

Section 27Ka-Since amended section 27Ka Act came into force when the respondent was neither a share-holder of the company nor a member of the Board of Directors of the borrower company. His shares have already been validly transferred prior to that date and as such he does not come within the definition of defaulter- borrower by virtue of the personal guarantee. Sonali Bank vs Major Monjur Quader (Retd) (Civil) 70 DLR (AD) 163

Section 27(Ka) The respondent transferred all his shares in favour of Reza Quadir on 25-7-1996 as is evident by exhibit-D and the statutory return to that effect was duly filed with the office of the Registrar of Joint Stock Companies on 18- 12-1996. The amended section 27Ka of Banking Companies Act came into force when the respondent was neither a share- holder of the company nor a Member of the Board of Directors of the borrower company. His shares have already been validly transferred prior to that date and as such he does not come within the definition of defaulter-borrower by virtue of the personal guarantee. In the light of the findings, we do not find substance in this appeal. Accordingly. this appeal is dismissed. ...Sonali Bank =VS= Major Monjur Quader (Rtd.), [6LM (AD) 8]

Bank Company Act (XIV of 1991) 

Section 27KaKa

It is the absolute domain of the legislature may define the role of different kinds of director, their functions and liabilities in order to do away with ambiguity and confusion among executive directors, nominee directors and other directors of the company. [73 DLR 387]

In the case of Shafiqul Islam vs Bangladesh, reported in 67 DLR 270, the High Court Division held:

"From the above quoted definitions of the term “খেলাপী ঋণ গ্রহীতা”, before and after amendment, it appears that though the term 'guarantor' was not specifically mentioned in said definition before amendment, owners of 20% shares in an establishment were always included in the said definition and, as such, their names were liable to be published in the CIB for the default of their interested establishment (স্বার্থ সংশ্লিষ্ট প্রতিষ্ঠান) in repayment as per the definition of Bangladesh Bank. However, by the amended definition of the term “খেলাপী ঋণ গ্রহীতা”, the Legislature made the definition shorter and simpler in that by providing a simple explanation to the main definition of "ca", the Legisla- ture included two categories of individuals in clear terms, namely 'director' and 'guaran- tor', in said definition..."

In the case of SM Akbar vs Bangladesh, reported in 23 BLC 126, the High Court Division held:

"Since the law, namely the definition of 'director' as provided by section 2(f) of the Companies Act, 1994 and the definition of 'defaulter borrower' as provided by section 5(GaGa) of the Bank Companies Act, 1991, do not distinguish between director or nominee-director, we are of the view that, merely because the petitioner No. 1 was the nominee-director of UBICO and representing UBICO in Benetex, that does not give him any extra benefit in so far as referring his name to CIB under section 27KaKa is concerned. However, it appears from the impugned CIB report, as annexued to this writ petition as Annexure-C series, that, only the name of the petitioner No. 1 was published therein as a 'guarantor' of the credit facilities obtained by Benetex. We are of the view that, since the admitted position is that it was the UBICO which was in fact holding the shares in Benetex and, as such, the petitioner No. 1 was the human face of the UBICO in Benetex board, the names of petitioner Nos. 1 and 2 should have been referred to for publication in the CIB disclosing their separate characters therein in that the petitioner No. 1 should have been shown as nominee-director of petitioner No. 2 UBICO. This follows that, both the petitioner Nos. 1 and 2 will face the consequences of non- obtaining consent from GSP before withdrawal of share-holding or change of management in the Benetex in view of the provisions under section 27Ka of the Bank Companies Act, 1991. Further, since the admitted position is that neither the petitioner No. 1 nor the petitioner No. 2 executed any guarantee securing the credit facilities obtained by the Benetex, none of them should be referred to in the CIB as guarantor. Rather, they should be referred to as director and nominee-director of Benetex, the same being an interested establishment of the petitioners in view of the definition of 'defaulter borrower' as provided by section 5(GaGa) of the Bank Companies Act, 1991."

In the case of Belal Hossain vs Kazi Jane Alam, reported in 13 MLR (AD) 74, our Appellate Division held:

"Section 2 of Bank Company Ain, 1991 (Act 14 of 1991) provides that provision of said Act shall not affect the provisions of any other law for the time being in force and also is not in addition to the provisions of any other existing law."

In the case of Mostafa Kamal (Md) vs Bangladesh Bank, reported in 11 MLR (HC) 377, it is held that

"Careful examination of the aforesaid sections of the Bank Companies Act and articles 42(b)(c) and 43 of the Bangladesh Bank Order, 1972 shows that the rights and liabilities of the defaulting borrowers have been specifically dealt with in the Bank Companies Act, 1991 and not in the Bangladesh Bank Order, 1972. Under section 27KaKa of the said Act, 1991, Financial Institutions and Banks are required to furnish the list of defaulting borrowers to the Bangladesh Bank and Bangladesh Bank is under obligation to prepare and maintain the list of defaulting borrowers and to furnish such list of defaulting borrowers to the Financial Institutions and Banks for their information and on receipt of such list of defaulting borrowers they would not allow such defaulting borrowers any loan or financial accommodation."

In the case of Ionic Metalliks vs Union of India, reported in 2015 GLH (2) 156, it was rightly observed:

"It is well-settled that a company, be it a private or public, being a juristic person, is different from an individual as a citizen. For To all acts of the company each and every director need not be held responsible. It would depend upon the role of each of the directors so far as the day-to-day manage- ment and affairs of the company are concerned."

Bank Company Act (XIV of 1991) 

Section 27 KaKa

Because of the contractual relationship between the plaintiffs (or their stake holder institutions) and the creditor banks (or financial institutions), the plaintiffs became defaulters as per the terms of the contracts and, accordingly, their names were sent to the Bangladesh Bank as defaulter-borrowers in performance of statutory obligations under section 27 KaKa of the Act, followed by publication of their names in the CIB report of Bangladesh Bank as per the provisions under Chapter-IV of the Bangladesh Bank Order, 1972. For such statutory functions, the creditor banks (or financial institutions) and the Bangladesh Bank did not even need to issue any notice on the plaintiff. This position has been confirmed by Appellate Division in M/s Ripon Traders vs Bangladesh Bank, VII ADC (2010) 152 and the High Court Division in Al Amin Bread vs Bangladesh Bank, 17 BLC 653.....(4:49). [73 DLR 554]

Section 27 KaKa

Section 27 ka ka of Bank Companies Act, 1991 provides for identification and preparation of a list of defaulter loanees by the bank itself and then to send it to Bangladesh Bank. The purpose of sending such list to the Bangladesh Bank having regulatory authority, is clearly stated in sub-sections (2) and (3) to the effect that Bangladesh Bank shall distribute such list to other banks and financial institutions which are prohibited from giving loan to the defaulter. Md. Abul Kashem vs. Mahmudul Hasan (Syed Mahmud Hossain J) 489

Section 27 (ka) (ka)

Challenging the classification of the li- abilities of the petitioners companies as Sub Standard in the database of the Credit Information Bureau of Bangladesh Bank and enforcement of fundamental rights guaranteed under Article 27 and 31 of the Constitution. M/S Ripon Traders vs. Bangladesh Bank represented by its Governor (B.K.Das J) (Civil) 7 ADC 152

Banking Companies Act [XIV of 1991]

Section 27 AA-In the case of public limited company a person who has to be either are director of the said company or owns more than 25% of its share to be classified as "interest concerned institution (স্বার্থ সংশ্লিষ্ট প্রতিষ্ঠান) and of course provided that the said borrower company is a defaulter.

It appears to the High Court Division that the petitioner was appointed director of the company on 3.5.1994 as evidenced from Annexure 3 and 3A of the Affidavitin-Opposition of the Respondent No. 4. It further appears from Form XII, Particulars of Directors' dated 02.03.2003 that the petitioner's post of directorship was declared vacant as per Banking Companies Act 108 on 2.3.2003 and on the said date one Abu Sufian was elected director in the said vacant post of the petitioner. The same is also supported by a resolution of the Board of Directors of the said company (Annexure-J). The aforesaid departure from the Board of Directors however is ineffective unless approved by the lender bank as stated in section 27 of the Banking Companies Act, 1991. Mr. A. J. Mohammad Ali, has pointed out a letter from the Respondent No. 4, Agrani Bank dated 9.5.2005 (Annexure O) where it has been stated that the Board of Directors of the Borrower Company constituted from time to time since 30.10.1994 to 20.3.2004 have been unconditionally approved. According to the said letter it appears that the name of the petitioner was not included in the Board of Directors constituted on or after 02.3.2003 thus indicating that the aforesaid changes appointments/ resignations of the Director of the Petitioner Company have been approved by the lender Bank. In such view of the matter, it is apparent that the petitioner ceased to be a director of the borrower company as on that date i.e. 2.3.2003. Mr. Nabi appearing for the Respondent No. 4 lender bank found it difficult to rebut this finding and does not deny the existence and validity of the said letter issued by his bank. In such view of the matter, the High Court Division cannot say that the petitioner was either holder of 25% shares of the borrower company or a Director of the same on 02.3.2003. In such view of the matter, he does not come within the meaning of defaulting borrower (খেলাপী ঋণ গ্রহীতা) as defined by the Banking Companies Act, 1991 and therefore the inclusion of his name in the C.I.B. list of Bangladesh Bank is hereby declared to have been done illegally and without lawful authority. The respondent no. 1 is therefore directed to delete the petitioner's name from the C.L.B. list at once. In the result, the Rule is made absolute. Md. Momin Ali Vs. Bangladesh Bank and others (Spl. Original) 20 ALR (HCD) 1-4

Section 27AA-Rule Nisi was issued by the High Court Division calling upon the respondents to show cause as to why inclusion and continuation of the name of the petitioner allegedly as a defaulter in the CIB report of Bangladesh Bank Credit Information Bureau, in purported exercise of power under section 27AA of the Bank Companies Act, 1991, should not be declared illegal, without any lawful authority and is of no legal effect and/or such other or further order or orders passed as to this court may seem fit and proper.

The High Court Division held that in the year 2015 bank sent the name of the incumbent Panna Spinning Mills and the names of all the directors of the said company to Bangladesh Bank as defaulter borrower and Bangladesh Bank in its turn enlisted the narnes in the list of CIB. But subsequently, the High Court Division decided the said inclusion as a whole illegal as we have already quoted above and the Appellate Division upheld the said decision. Consequently, we have found that it is the sender bank which sent the names of all the directors including the petitioner for inclusion of their names in the list of CIB and accordingly the names were enlisted. Even it is admitted that the petitioner resigned from the post of Directorship in the year 2012 from the respondent No. 6, Company but the bank did not spare him and sent his report with other directors for listing in the list of CIB in the year 2015. Therefore, the status of the petitioner under this position cannot be challenged before us, simply, on the score that the company itself has been declassified by this Division upheld by the Appellate Division. Therefore, the names of the petitioners in the list of CIB should be declared illegal. But in this context the High Court Division wants to refer the observations of the Appellate Division as we have already quoted that the liability of the petitioner would be decided by the Artha Rin Adalat in the case which has already been pending before the Arhta Rin Adalat. He has to face the trial as usual with all other directors. In the result, the rule is made absolute. The inclusion of the name of the petitioner in the list of CIB is hereby declared without lawful authority having no legal effect and set aside, Ahsanul Islam Vs. Bangladesh Bank and others (Spl. Original) 23 ALR (HCD) 64

Banking Companies Act [XIV of 1991] 

Section 27 Ka ka-There is no denying that it is a contractual obligation between the bank and loanee/creditors in which contract gets primacy over everything, bank stands admittedly in a fiduciary position and that makes all the more a contractual obligation as a binding one when executed and the loanee/creditors. Bank should give a positive accommodation to the petitioner to ensure a smooth exit after repayment of the outstanding liabilities which the petitioner tries to impress upon the High Court Division would be the principal amount only.

The High Court Division held that it would be expected that bank should give a positive accommodation to the petitioner to ensure a smooth exit after repayment of the outstanding liabilities which the petitioner tries to impress upon the High Court Division would be the principal amount only. What can be done by the bank under the law remains within the domain of bank- ing terms and conditions where the High Court Division does not want to tread on but certainly the High Court Division can suggest and direct the bank to give accommodations in terms of the undertaking given by the petitioner as it transpires in the supplementary affidavit dated 26.02.2019. Mr. Rahman always candid enough to submit that within the permissible limit bank will certainly do the needful to come at a solution in the light of the observations as made above. In many a decisions as the High Court Division has found that the bank extended and showed its magnanimity and in the instant case since the petitioner had already paid Taka 66.92 crore, certainly he deserves an effective accommodation from the bank to have smooth exit once for all. Nassa Tipei Spinners Limited and others -Vs- Bangladesh Bank and others (Spl. Original) 15 ALR (HCD) 281-285

Bank Company Act (XIV of 1991) 

Section 103

If there is a nominee in accordance with the laws, rules and regulations of nomination, after the death of the depositor, Bond-Holder, Share-holder, Pension-Holder etc. the nominee shall be entitled to receive the money/benefits of the deceased. The nominee will have an exclusive right to receive the deposits/benefits on the death of the depositor and every other person shall be deprived of those rights. [73 DLR 227]

 

Bank Companies Act, 1991

Section 31 Bank Companies Ordinance 1962

Section 27

Sundarban Bank International Ltd. (Proposed) challenging legality of the wherein it was observed that the Sundarban Bank International Ltd. (Proposed) failed to reach the stage of eligibility for filing application for issuance of licence to start banking business.

Filed an application to the Ministry of Finance praying for issuing permission to start the banking business of the pro- posed Sundarban Bank International Ltd. The Governor, Bangladesh Bank, Head Office, Dhaka vs. M. Habibullah Bahar & another (M. M. Ruhul Amin J)(Civil) 4 ADC 51

Section 45- The provisions of the Bank Companies Act 1991 which gave it the regulatory power. Under section 45 of the Bank Companies Act 1991 the Bangladesh Bank is empowered to give any direction upon any bank or financial institutions for public interest for the development of banking practice and for proper management of a bank. ...Sonali Bank Limited=VS=Roseburg Industries Limited, [9 LM (AD) 173]

Banking Companies Ordinance, 1962, 

Section 61, 72, 73

Decreeing the suit upon declaring that the property described in the schedule of the plaint belonged to Mahaluxmi Bank Ltd. (in liquidation), the bank, and that the defendants have no right title or interest in the land in suit. Ruhul Amin Khan vs. Official Liquidator Mahaluxmi Bank Ltd (Md. Tafazzul Islam J) (Civil) 5 ADC 923

Bank Companies Act, 1991 

Section 77

High Court Division has committed an error of law in not considering the facts of the case and without applying its judicial mind wrongly discharged the Rule because of the fact that the learned Subordinate Judge, Commercial Court No.2, Dhaka, was required to decide as to whether it was necessary to add the parties to whether it was necessary to add the parties to adjudicate all the issue effectively and completely and the matter in controversy between the parties. And as such, the findings and decisions as arrived at by the High Court Division are erroneous and so cannot be sustained in law. Eastern Bank Limited vs Saudi Bangladesh Industries (Syed J. R Mudassir Husain CJ) (Civil) IADC 566

 

The Bank Companies Act, 1991

Section 103

The question of nomination comes as per sub-section (1) of Section 103 of the Act in the event of death of depositor or depositors. The nominee shall be titled to the payment to the exclusion of any other person. It therefore appears that the Bank shall be discharged of his obligation by making payment to such nominee. Ziauddin Ahmed and others -vs- Arab Bangladesh Bank and others (Latifur Rahman CJ)(Civil) 3ADC 885