A black hole for default loans

Abdul Khaleq Khan took a Tk6 crore loan from Brac Bank's Gulshan branch for his Maghbazar-based enterprise Atun Telecom in 2008. He only repaid one instalment and the bank later declared him a defaulter. 

In 2016, the accumulated loan, with principal and interest, stood at Tk10 crore and the bank filed a case with the Artha Rin Adalat (money loan court) 2 in Dhaka. 

Khaleq served prison time for a while after the case was filed but later secured bail from the High Court in 2017. In the same year, Khaleq obtained a High Court stay order on the case. The court initially stayed the case for six months but later extended it several times. 

"The case has not been disposed of yet," Brac Bank's lawyer Md Sharif Al Mamun told The Business Standard. 

Khaleq was also sued by Sonali Bank for being a defaulter. He borrowed Tk4 crore from the bank's Motijheel branch in 2003 and 2004 for an enterprise named Riyana Fabrics.

When the bank declared him a defaulter in 2011, his total loan amounted to Tk9.35 crore.

The bank filed a case against him with the Artha Rin Adalat 1 in Dhaka in 2014.

Shahidur Rahman, lawyer of the bank, told The Business Standard the High Court stayed the case in 2015 which is still in effect.

Khaleq's case is not unique but only one among many such defaulters who manage to obtain High Court stay orders on their loan default cases and the orders are later extended, prolonging case disposals for indefinite periods. 

As a result, the banks fail to collect default loans amounting to thousands of crores of taka. 

Until October last year, there were 62,204 cases lodged with money loan courts involving defaulted amounts of Tk1,17,614 crore. Of those, 21,734 cases were stayed by the High Court.

Former governor of the Bangladesh Bank Dr Atiur Rahman said the High Court stay order is the key reason why such cases are not disposed of. 

He said big defaulters go to the High Court when they are sued and hire high-profile lawyers for the legal battle.

"The High Court also usually accepts petitions seeking stay orders on such cases," Atiur said.    

There is a shortage of money loan court judges but there are even cases that have not been disposed of in 30-40 years, he said.

Law experts agreed with Atiur, saying the dearth of judges as well as money loan courts and the High Court stay orders are slowing down case disposals. 

They also said disposal of such cases includes the provision of following alternative dispute resolution methods, such as arbitration and mediation, if necessary but that is not followed. 

Supreme Court documents show 2,894 cases were filed with money loan courts last year and 1,500 of those were disposed of.

Commenting on the Money Loan Court Act 2003, Law Commission Chairman ABM Khairul Haque said this is an outdated law and is not suitable to be applied at present.     

He said the commission recommended amending the act in 2015.

"A draft amendment was also submitted with the recommendation. However, the law has not been amended yet," added Khairul, also a former chief justice.   

Dr M Shah Alam was a member of the commission when he headed the preparation of the draft amendment. He said cases filed with money loan courts cannot be disposed of quickly because the number of courts and judges is inadequate.   

The former professor of law at the University of Chattogram echoed Khairul, saying the money loan court act has some drawbacks when it comes to initiating and conducting trials.  

"For example, issuing a summons in such cases is a lengthy process, and there has been no initiative to digitalise the process. On the other hand, the accused also try to find ways not to accept the summons. 

"The official tasked with delivering the summons often resort to unlawful means to delay the process. These are the initial setbacks the court faces before starting a trial," explained Alam.  

He also said only a few cases are disposed of with the alternative dispute resolution methods though the provision is there.  

Only four cases were disposed of through alternative dispute resolution methods last year. In 2018, the number was 11. 

The Supreme Court said only small cases had been disposed of through such methods in the last five years.   

Spokesperson for the Bangladesh Bank Md Serajul Islam said even the central bank is concerned about the delay in disposal of loan default cases filed with money loan courts. 

He said a number of measures had been taken – such as discussing the issues with the law ministry and sending it letters – for quick disposal of these cases but there has not been any progress. 

Law, Justice and Parliamentary Affairs Minister Anisul Huq said his ministry had held several discussions with the Supreme Court with a view to expediting case disposals.

He said the apex court had also issued a circular in this regard. 

"In fact, the rate of case disposals has increased," the minister claimed.      

Financial and corporate law expert Barrister Tanjib-ul Alam told The Business Standard the High Court stay orders on the loan default cases have to be annulled first, and the central bank has to take initiatives in this regard.    

A list of such cases has to be submitted to the Chief Justice through the law ministry, he said. 

"The law ministry, after discussing with the Chief Justice, can take necessary measures against the stay orders. Moreover, there should be competent judges to handle these cases," added Tanjib-ul.    

Former district and sessions judge Iktedar Ahmed said money loan courts nowadays also hold civil case trials which is slackening the trials of loan default cases.      

Attorney General Mahbubey Alam told The Business Standard he had discussed the matter with different banks as well as the central bank several times. 

"I told the law minister and the Chief Justice that disposals of such cases would have to be expedited. The Supreme Court should issue a circular and ask the money loan courts to only hold default case trials. 

"Also, the money loan courts should be held accountable every month for case disposals," he said.       

The government's chief legal adviser said the banks concerned and the central bank have to take initiatives for resuming trials of the loan default cases stayed by the High Court.