LEGAL OPINION regarding acceptance of Lender’s Pari Passu Security Sharing Agreement among Bank

Our Ref: LJ/PJ/02/2007                                              Dated: February 10, 2007

Mr. A

Deputy General Manager

Bank 1

Motijheel Branch

Sena Kalyan Bhaban

195, Motijheel C/A

Dhaka

 Mr. B

General Manager

Bank 1

Motijheel Branch

Sena Kalyan Bhaban

195, Motijheel C/A

Dhaka

Dear Sirs,

RE: LEGAL OPINION regarding acceptance of Lender’s Pari Passu Security Sharing Agreement among Bank 2., Bank 3. And Bank 4 A/C Company 1.

We refer to your letter dated 04.02.07 and 06.02.07 on the above subject.

We have perused the contents of your letter and other papers/documents referred to us in connection with the above-mentioned account. Our opinion on the draft Lender’s Pari Passu Security Sharing Agreement is given below.

Clause of the Agreement Our Observation
Recital D. In recital D, at the end of the 2nd sentence please add the following words:

“on pari passu basis in the manner as stipulated hereunder in Section 4.”
Clause 3.2 Please delete and replace clause 3.2 with the following:

“3.2 The Chargees hereby agree that the security interests over the assets of the Borrower as mentioned in Clause 3.1 above shall be shared amongst the Chargees on pari passu and pro rata basis notwithstanding the date on which such instruments were executed.”
General All blanks should be filled in and appropriate dates should be inserted.
General Please check all the commercial terms and conditions.
Except the above, the draft agreement appears to be in order.

Regarding whether the Bank’s interest shall be protected if the Pari Passu Security Sharing Agreement is executed, our opinion is as follows:

Generally, the priority of charges is on a “first come first served basis.” Hence, a charge duly executed, stamped and registered with the RJSC will take priority over a charge duly executed, stamped and registered at a later date with the RJSC. As such, legally Bank 2. shall have first charge on the mortgage property located at Gazipur and the other lenders shall have 2nd Charge.

Notwithstanding the position in law, it is also not illegal or invalid if the lenders amongst themselves contractually agree to treat each other’s security on the same footing (pari passu) having the same priority for mutual benefit.

Hence if the lenders agree to treat each other’s security over the same asset as having the same priority notwithstanding, when each of the securities has been registered, they will share the enforcement proceeds on a pari passu pro-rata basis. Each lender is under a legal contractual obligation to abide to the terms of the security sharing agreement.

In our case the lenders are going to agree to share the securities on a pari passu pro-rata basis among themselves by executing a Pari Passu Security Sharing Agreement, which is an agreement between the lenders to share their respective securities on equal basis not withstanding the execution of the charges being on different dates. By this agreement, Bank 2. shall agree to treat the charges of Bank 4Ltd. and Bank 3. on the same footing, as theirs notwithstanding that the charges of Bank 4Ltd. and Bank 3. were to be registered later.

In our opinion, the interests of Bank 1 shall be protected because the Bank shall be sharing the securities on equal basis with the other lenders according to the terms of the Pari Passu Security Sharing Agreement.

All papers/documents referred to us are returned herewith. Should you have any query, do not hesitate to contact us.

Thanking you.

Yours faithfully,

________________

Barrister-at-Law


The Lawyers & Jurists

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