Re: Legal Opinion regarding stock of pledged goods, A/C. Company 1.
We have perused the contents of your letter dated 03.09.2005 along with papers and documents sent to us vide your letter dated 26.09.2005 regarding the captioned subject. It appears that Company 1 and its sister concerns (the “borrowers”) availed loan from the Bank 1. Since the borrowers failed to repay the loan, Bank filed three Artha Rin Suits and one Bankruptcy Suit against the borrowers and mortgagors for recovery of loan amount. Subsequently the Artha Rin Suits were decreed against the defaulters on the basis of the Solenama.
As per the terms of the Solenama, Bank entered in to a rescheduling arrangement with the borrowers. As security of the reschedule arrangement, the borrowers mortgaged their properties and also pledged their stocks of goods (shrimp) in favour of the Bank. On the other hand the Bank arranged inspection of the stock of pledge goods on 31.03.2003 through Company 2 (the “surveyor”). The surveyor opined that the goods were fit for human consumption up to December, 2004. The borrowers did not approach the Bank to take delivery of the pledged goods for export within the validity period and as a result the pledge goods became unfit for human consumption. In the mean time Bangladesh Bank’s inspection team while conducting last inspection from 23.07.2005 to 27.07.2005 verbally expressed their dissatisfaction for not taking any step to dispose of the goods within the validity period. Now, the matter has been referred to us and we are requested to advise as to whether the Bank can dump/destroy the stock of goods and what will be legal consequence if the Bank does not dump/destroy the rotten stock of pledge goods which are not fit for human consumption any longer.
A pledge is the delivery of the goods by the pledgor to the pledgee as security for a contract of debt on the understanding that when the debt is paid off or the promise is performed, the goods would be returned to or otherwise disposed of according to the directions of the pledgor. Pledge merely involves the surrender by the pledgor of his
property as a security to the pledgee which is liable to be forfeited if the pledgor failed to fulfil his obligations under the agreement. In this case the pledged goods were fit for human consumption up to December, 2004 and the pledgor failed to take delivery of the pledged goods for export within December, 2004 and as a result the pledge goods have become unfit for human consumption.
In such situation it may be implied that the pledgor has committed breach of contract when without lawful excuse he fails to perform what is due from him under the contract i.e. exporting the goods within its validity period for consumption. The obvious implication is that such perishable goods can only be exported when they are still fit for human consumption. It is mentionable here that every breach of a valid contract gives to the innocent party a right to recover damages in respect of the loss suffered as a result of the breach.
Bangladesh Bank’s inspection team has already expressed their dissatisfaction for not taking any step to dispose of the stock of pledge goods within the validity. In such situation, the best possible course of action for the Bank would be to write to the borrowers along with a copy of the inspection report of the Surveyor, informing them that they have failed to export the pledged goods within the expiry period as agreed in the agreement and as a result, the stock of pledged goods have become unfit for human consumption. The borrowers should be asked for instructions as to how they wish to take return of the pledged goods or otherwise the Bank will be compelled to destroy/dispose the same. At the same time, the borrowers should be informed that they must provide additional securities in substitution of the rotten pledged goods, otherwise the Bank would have the option to commence proceedings against the borrowers for breach of contract.
If you have any further query, please do not hesitate to contact the undersigned.
For: “The Lawyers & Jurists”