Legal Opinion for settlement of ACU$ 3,52,250.00 debitted by Bank 1, Kolkata in compliance with the order of Kolkata High Court, A/C Company 1.

Mr. Z

Address….

Dear Sir,

RE: Legal Opinion for settlement of ACU$ 3,52,250.00 debitted by Bank 1, Kolkata in compliance with the order of Kolkata High Court, A/C Company 1.

We refer to your letter dated December 26, 2007 and February 11, 2008 and our letter dated January 08, 2008 on the above subject.

From perusal of your letter and the provided documents it appears that, Company 1, through Bank 2 (“BANK 2”) opened a Letter of Credit (“L/C”) in favour of M/S COMPANY 1 (L/C Beneficiary). Bank of India was the bank of the L/C Beneficiary and Bank 1 (“Bank 1”) was the advising Bank. Dispute arose regarding payment under the L/C and the L/C Beneficiary took the matter to the court in India. On 6 November 2006, the High Court at Calcutta in G.A. No. 2921 of 2006, Apot No. 472 of 2006. C.S. No. 678 of 1999 passed a decree for US$ 3,52,250.00 against BANK 2 in favour of Bank of India to be credited by Bank of India to the account of the L/C Beneficiary and also directed that the decree shall be satisfied from the funds lying with Bank 1.

In accordance with the said decree of the High Court at Calcutta, Bank 1 remitted US$ 3,52,250.00 to Bank of India by debiting the ACU$ A/C of BANK 2 maintained with Bank 1. The amount was blocked since 22 December 1999 at BANK 2’s Nostro A/C with Bank 1 vide an order of injunction passed by the High Court at Calcutta. But vide the said decree dated 6 November 2006 of the High Court at Calcutta, upon such payment, the injunction order was vacated.

Company 1 has Tk. 69,80,888.68 in 4 (four) un-encumbered A/Cs (“Un-encumbered A/Cs”) and Tk. 45,88,047.00 in 1 (one) encumbered A/C (“Encumbered A/C”) lying with the Khatungonj Branch, Chittagong of BANK 2.

In the circumstances stated above, you require our legal opinion on the following issues:

Query 1. Whether the Khatungonj Branch of BANK 2 should respond to the remitted amount of US$ 3,52,250.00 by Bank 1 from A/C of BANK 2 maintained with Bank 1 by debiting the amount from the accounts of Company 1 maintained with the Khatungonj Branch?

Response: A bank has a right under law to set off a debt owing to a customer against a debt due from the Bank. Therefore, BANK 2 may debit amounts from the accounts of Company 1 maintained with the Khatungonj Branch in order to set off the US$ 3,52,250.00 remitted by Bank 1 from A/C of BANK 2 maintained with Bank 1.

Query 2. If so then which head of account should be debited?

Response: BANK 2 may set off the said amount from the 4 (four) Un-encumbered A/Cs of of Company 1 maintained with the Khatungonj Branch. And provided that, the Encumbered Account is encumbered against the L/C in question, then BANK 2 may also set off from this Encumbered Account. However, if the Encumbered Account is encumbered against a separate L/C then BANK 2 should refrain from setting off from the Encumbered Account as it will compromise the security taken for the said separate L/C.

Query 3. After adjusting part of the amount from the accounts of Company 1 maintained with the Khatungonj Branch, whether BANK 2 may create forced loan account for the remaining amount?

Response: After setting off, we are of the opinion that, BANK 2 may create forced loan account for the remaining amount against the name of Company 1 to protect the interest of BANK 2.

If you have any further query, please do not hesitate to contact the undersigned.

Thanking you.

Yours faithfully,

………………….

For: “The Lawyers & Jurists”

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