Re: Legal opinion in respect of recovery of lease financing facility A/C Mr. X.
We refer to your letter dated 30.03.2004 and 06.04.2004 on the above subject.
We have perused the contents of the letter along with all other papers/documents referred to us. It appears from your letter that Mr. x (the ‘Borrower’) availed a lease finance facility of Tk. 5,00,000.00 from the Bank for procuring and use of one unit Toyota Microbus on 05.12.2001. The Borrower defaulted in repaying the lease finance facility in terms of the sanction letter and subsequent reschedule arrangement. The present outstanding liability of the Borrower is Tk. 4,36,131.12 out of which Tk. 1,26,000.00 is overdue.
It also appears that the Borrower has an MBDR for Tk. 25.00 lac with Dhanmondi Branch of the Bank and has been availing credit facility in the form of SOD against the pledge of said MBDR with a letter of lien. The present outstanding balance in the SOD account is Tk.5.00 lac.
In such situation, the Bank has sought our opinion whether the Bank can adjust the overdue instalments or the entire outstanding of lease finance facility by debiting the SOD account or by encashing the MBDR of the Borrower.
We have perused the format of Letter of Lien. The Letter of Lien does not empower the Bank to apply the proceeds under lien for adjustment of any other loan account of the Borrower with the Bank.
However, legally where money is placed in a bank as fixed deposit the ownership of the money passes to the bank and therefore the bank which is itself the owner of the money cannot exercise any lien over the said money. But the bank has right to adjust such amounts against any debt due to it from the customer. The purpose of the lien in such cases is attained by the application of the principal of set-off.
In view of the above we are of the opinion that the Bank has a right to adjust its dues from the proceeds of MBDR by the application of the principal of set-off. Bank may adjust its dues by giving the Borrower 7 (seven) days notice to the effect that in the event the Borrower fails to adjust his liability within the prescribed period, Bank shall adjust the same from the proceeds of the MBDR.
With regard to debiting the SOD account we are of the opinion that without express consent of the Borrower, the Bank cannot debit the SOD account for adjustment of another loan account.
Should you have any further query, please do not hesitate to contact the undersigned.
For: “The Lawyers & Jurists”