ASF Rahman and others (Petitioners)
Bangladesh Bank and others (Respondent)
Mustafa Kamal CJ
Bimalendu Bikash Roy Choudhury J
Mahmudul Amin Choudhury J
July 12, 1999
The Bank Companies Act 1991 (X of 1991), Sections 17, 45 & 49
As the petitioner submitted no representation under sub-section (2) of section 17 of the Act the writ petition, against notice to repay the loan and failing which directorship of the petitioner of the concerned bank to cease, was premature and incompetent. A notice under section 17 of the Act is issued in an executive capacity under authority granted by the statute and if such a notice is issued by an unauthorized person or the allegations made therein do not attract the mischief of that section then such a notice can be challenged in the writ jurisdiction………………………(13 & 14)
Case Referred To:
Md. Saiful Alam alias Masudul Alam Choudhury vs. Bangladesh Bank and others, 19 BLD (AD) 249.
KZ Alam Advocate (Rafique-ul Huq, Senior Advocate with him) instructed by Mvi. Md. Wahidullah, Advocate-on-Record—For the Petitioners.
Amirul Islam, Senior Advocate (with Tania Amir, Advocate), instructed by Md .Aftab Hossain, Advocate-on-Record—For the Respondent Nos. 1 & 2.
Rokanuddin Mahmood, Senior Advocate, instructed by Sharifuddin Chaklader, Advocate-on-Record-For the Respondent No. 3.
Civil Petition For Leave To Appeal No. 528 of 1999.
Bimalendu Bikash Roy Choudhury J.- This petition for leave to appeal by the Writ petitioners, namely, ASF Rahman, Salman F Rahman, Iqbal Ahmed and MA Qasem is from the judgment and order dated 9 May 1999 of a Division Bench of the High Court Division in Writ Petition No. 463 of 1998 discharging the Rule Nisi and awarding a cost of Taka 5000.00 to each of the contesting respondents.
2. The salient facts over which there is little dispute are as follows. The leave petitioners, Messrs ASF Rahman, Salman F Rahman, Iqbal Ahmed & MA Qasem are all Directors of Beximco Investment Company Limited, now Beximco Holding Limited. Of them ASF Rahman and Salman F Rahman are also three Directors of IFIC Bank while Iqbal Ahmed and MA Qasem are the Directors of Arab Bangladesh Bank Limited (brief AB Bank) All of them undertook by personal guarantee in favour of AB Bank to repay the outstanding loans taken therefrom by Satkhira Fisheries Limited, Pharmatek Chemicals Limited, Khulna Fisheries Limited and Mrittika Limited. According to payment re schedule the loans were to be repaid in ten half-yearly installments starting from 30 June 1996. The Borrowers failed to pay the installment that fell due on 30 December 1997. On 31 December 1997 the borrowers requested AB Bank for granting extension of time upto 31 January 1998 for repayment of the said instalment. On 4 January 1998 AB Bank wrote to the guarantors about the default bringing to their notice that as per condition of Bangladesh Bank (respondent No. 1), entire outstanding amount became due and they were asked to arrange for adjustment of the entire outstanding amount of Taka 210.64 crore immediately. On 20 January 1998 the petitioners replied thereto stating that they had been pursuing the borrowers to ensure payment as early as possible. On 3 February 1998 AB Bank informed Bangladesh Bank of the default in repayment of the instalment which was due on 30 December 1997. Bangladesh Bank, by their letter dated 4 February, 1998 advised AB Bank that they might proceed against the guarantors, the present petitioners, in accordance with section 17 of Bank Companies Act, 1991 as amended by Act XI of 1997. Thereupon the AB Bank issued notices on 9 February 1998 under section 17(1) of the said Act to all the petitioners individually through respondent No. 2 General Manager, Bangladesh Bank who forwarded the same under a covering letter dated 12 February 1998 (Annexure ‘A’ series). One of the notices is quoted below for proper appreciation of the contents and the effect of the notice as the dispute centers round third notice which is in similar terms:
Mr. Iqbal Ahmed February 09, 1998
Director Strictly Confidential
Arab Bangladesh Bank Ltd By SPL. Messenger
C/o. Bangladesh Export
Import Co. Ltd (Beximco)
House No. 1 Road No. 2
Dhanmondi Residential area,
Sub: Issuance of notice under section 17 of Bank Company Act, 1991(As amended by Act No 11 of 1997) for repayment of outstanding dues on 4 project accounts namely (1) Satkhira Fisheries Ltd. (2) Pharmatek Chemicals Ltd; (3) Khulna Fisheries Ltd & (4) Mrittika Ltd where Directors of other Banks are liable as guarantors.
We like to inform you that the instalments due for payment on 30th December, 1997 as per the existing repayment schedule relating to the above 4 (four) project Accounts were not paid. Subsequently, it was also assured to repay the instalments by 31st January, 1998 but the installments as per said assurance have not been paid. Please note that in case of delay in payment of such instalment, the existing repayment schedule will be treated as cancelled and the entire loans will be treated as overdue and in that case will be classified according to the classification rules and as per guideline given by Bangladesh Bank. In view of the above, the entire loan liabilities on the following 4(four) project accounts have become overdue, for which you are liable as Guarantor:
|Name of Borrowers||Name of Bank (Branch)||Outstanding overdue Loans as on 31-12-97|
|1. M/s Satkhira Fisheries Ltd.||ABBL Principal Branch||Tk. 36.19 Crore|
|2. ‘M/s Pharmatek Chemicals Ltd.||-do-||Tk. 41.79 crore|
|3. M/s Khulna Fisheries Ltd.||-do-||Tk. 35.93 crore|
|4. M/S Mrittika Ltd.||ABBL Motijheel Branch||Tk. 6.73 crore|
|Tk. 120.64 crore|
We, therefore, issue this Notice upon you under section 17 of the Bank Companies Act, 1991 (as amended by the Act No. 11 of 1997) through Bangladesh Bank, requesting you to repay the aforementioned outstanding overdue loans with interest within 2 (two) months from the date of receipt of this notice, failing which you will cease to be Director of International Finance In vestment and Commerce Bank Limited on expiry of the above period and the overdue loan amount will be recovered through adjustment of your shares held in International Finance Investment and Commerce Bank Ltd, and the shortfall, if any shall be recoverable as government dues under public Demands Recovery Act, 1913 as per the provision of section 17(5) of the Bank Company Act 1991 (as amended upto 1997).
However, you may send your explanation, if any to Bangladesh Bank with a copy to us, within 30 (thirty) days from the date of receipt of the Notice.
(A Rahim Chowdhury)
3. It is the above notices which were impugned before the High Court Division in Writ Petition No. 463 of 1998 on the grounds, inter alia, (1) that the notices were issued at the dictation of Bangladesh Bank which was the higher authority of the lender Bank; (2) that the notices were issued by the Managing Director alone without the approval or decision of the Board of Directors and (3) that the guarantors were not liable for repayment of the loan before demand was made from the principal debtors.
4. Thereupon the petitioners obtained Rule Nisi on 16 February, 1998. Pending hearing of the Rule the operation of the covering letters of Bangladesh Bank and the notices under section 17(1) of the Bank Companies Act, 1991 issued against the petitioners were stayed.
5. The Writ Petition was contested by respondent No. 2 General Manager, Banking Regulation and Policy Deptt, Bangladesh Bank, and also respondent No. 3, Managing Director, AB Bank contending that the notice under section 17(1) of the Bank Companies Act, 1991, as amended up-to-date were not required to be issued on the decision taken at the meeting of the Board of Directors and that the Managing Director had the authority to issue the same by virtue of Power of Attorney and Articles of Associations of AB Bank. Furthermore, the notices were actually issued by the Bank and not by Bangladesh Bank which had merely forwarded the same under covering letters. Again, the petitioners were liable for the default being the guarantors on behalf of the borrowers. It was denied that AB Bank issued the notices at the dictate and direction of its superior authority, namely, Bangladesh Bank.
6. In reply to the affidavit-in-opposition filed by respondent No. 2 the petitioners stated that they had submitted a representation to Bangladesh Bank on 17 February 1998 praying for rescheduling their loans with AB Bank in the same terms as were allowed to Islam Group for similar type of loans and that Bangladesh Bank, by a letter dated 26 February 1998, directed AB Bank to reschedule the liabilities in the same line as allowed to Islam Group for similar loans.
7. The High Court Division discharged the Rule Nisi Holding (1) that the Writ Petition was premature and not maintainable since the petitioners did not submit any representation to Bangladesh Batik under section 17(1) of the Bank Companies Act. The High Court Division negatived the submission of the petitioners that the prayer of the petitioners for rescheduling dated 17 February 1998 amounted to a representation under sub-section (2) of Section 17 of the Act and the direction of Bangladesh Bank dated 26 February 1998 thereupon was a decision within the meaning of sub-section (3) thereof. The High Court Division also negatived the argument of the petitioners that the Managing Director had no authority from the Board of Directors or under the Articles of Association to issue the notices to the petitioners through their Memos dated 9 February, 1998. The other ground which was set at naught by the High Court Division was that the notices under section 17(1) of the Act being issued at the dictate and direction of Bangladesh Bank, its superior authority, were ex facie illegal. Besides, the High Court Division had made certain comments about the nature of Writ and their jurisdictional authority to deal with the Writ Petition
8. The learned Counsel for the petitioners urged before us the self-same ground as before the High Court Division. We have given our anxious consideration to the submissions made for both sides.
9. We agree with the findings of the High Court Division except finding a little fault with their comments on jurisdiction and other merits of the case.
10. First, about the competency of the authority issuing the notices. Sub-section (1) (Ga) of section 17 of the Bank Companies Act, 1991 as amended by Act XI of 1997 authorises a Bank to issue notices for realisation of advance, loan, instalment, interest and other dues realisable by the company, the consequence for non-compliance with such notices being that the post of a defaulting Director would fall vacant as envisaged under the said sub-section. The Managing Director of a Bank is authorised to act on behalf of the Bank for such and other purposes. Therefore, we are unable to find any fault with the Managing Director issuing the notices in his usual course of business.
11. Secondly, whether the notices were unduly dictated by Bangladesh Bank. Section 45 (1) (Ga) (Gha) and section 49 (kha) of the Basil Companies Act clearly invest Bangladesh Bank with a strong regulatory power over the functioning an business of banking companies. Therefore when Al Bank had intimated Bangladesh Bank about the default in repayment of instalment by the petitioners, the guarantors of the loans, Bangladesh Bank, in the discharge of their regulatory duties, to enforce economic discipline and to eradicate default culture, advised AB Bank that it might proceed under section 17 of the Act. It cannot be said that Bangladesh Bank had unduly dictated AB Bank to proceed against the petitioners under section 17. On the other hand, Annexure-A series show that the notices in questions have actually been issued by the Managing Director of AB Bank and Bangladesh Bank had only forwarded the same to the petitioners. So on this count also we fail to find any illegality in the notices.
12. Thirdly, a guarantor’s liability is co-extensive with that of the principal debtor. So the petitioners cannot escape the liability of the borrowers and no demand from the borrowers is necessary.
13. Finally, we have hardly anything to find fault with the finding of the High Court Division that the Writ Petition was premature and incompetent, as the petitioners submitted no representation under sub-section(2) of section 17 of the Act. The petitioners straight away came before the High Court Division with the Writ Petition and obtained a stay order on 16 February 1998. It was only on 17 February 1998 that the petitioners had approached Bangladesh Bank with a prayer for rescheduling which can hardly be considered as a representation under sub-section (3) of section 17. It transpires that the petitioners did not give any reference to the notice under section 17 or the Writ Petition made by them. In such circumstances, the prayer for rescheduling cannot be construed as a representation within the meaning of sub-section (2) of section 17 which debars the Writ Petition before the High Court Division.
14. Thus having disposed of the salient questions we proceed to make some comments on the nature of the Writ Petition and the jurisdictional point as made by the High Court Division. About this, we have recently made some elaborate discussions in Md. Saiful Alam alias Masudul Alam Chowdhury vs. Bangladesh Bank and others, CP 529 of 1999 (unreported) which is a cognate of this case. Suffice it here to say that the instant Writ Petition is not exactly in the nature of certiorari and the High Court Division is competent to deal with such Writ Petition under the special circumstances. We may usefully quote our observation made in that case:
“The High Court Division is not exactly right when it says that the Rule Nisi is in the nature of certiorari. In issuing the notices under section 17 the lender Bank acted neither as a subordinate authority nor as a Court nor as a tribunal. It acted purely in an executive capacity under an authority granted by a statute. If the show cause notice is issued by an unauthorised authority or if the allegations in the show cause notice on the face of it do not attract the mischief of section 17, a notice under section 17 can certainly be challenged in the writ jurisdiction and declared to have been issued without lawful authority and to be of no legal effect. That is the only scope of intervention with a notice under section 17 by the High Court Division in its Writ jurisdiction”.
15. The factual matter which was agitated before the High Court Division respecting quantum of liabilities or otherwise remains a matter to be thrashed out between the petitioners and AB Bank as well as Bangladesh Bank. We have been informed that since the disposal of the Writ Petition by the High Court Division the petitioners have obtained rescheduling of their liabilities and also made payment of one instalment towards the said rescheduled instalments. But this cannot be our concern now. The episode of rescheduling and repayment is a post-judgment episode. We take no notice.
16. In the circumstances we do not see any ground for grant of leave in this case or to interfere with the ultimate decision of the High Court Division.
The petition is dismissed.
Source : 52 DLR (AD) (2000) 61