A BANK’S prime source of earning is lending of its depositors’ money in the form of loans or advances, which are expected to come back with stipulated interest within the validity of the loan as per sanction terms and conditions. With this aim of earning, bankers build good relationship with potential borrowers. The degree of rapport evolves as the repayment of bank’s loan continues. Such borrowers are treated as the ‘valued customers’ of the bank. And, the value of these borrowers is so high that a top ranking depositor might be missed out from the yearly closing feast invitation of a bank, but a top borrower never.
But when the borrower turns his back to the bank and stops payment of bank loan, this good relation slowly turns sour and bitter and the happily knotted banker-customer tie began to disintegrate. At the final stage, when all efforts of banks in recovering loan proved fruitless, he resorts to the court of law to realise its borrowed money.
Banker files case and the defaulted loan is recovered — the process in reality is not that smooth and quick. Recovery is the toughest job of all played by a banker. A loan’s life cycle comes to an end with its recovery. But in this thorny path of recovery, a banker has to go through a lot of trouble. This is because, in practice, the current legal system becomes a lengthy process and it becomes an impediment to loan recovery through legal means. Procedural delay in disposal of cases is the major challenge and hurdle to recovery of non-performing loans. Many loan defaulters are spared due to the flaws in the system and protracted legal bureaucracy in disposal of related cases. According to a recent statement of the law minister in the parliament, till September 2019, the total number of related cases pending with the country’s higher and lower courts was 3,640,639. The common cases are loan default cases, CR cases, certificate cases, bankruptcy cases and cases referred to the alternative dispute resolution system. According to the Bangladesh Bank statistics, a total of 62,204 cases were pending with the Money Loan Courts until June 2019 involving funds worth Tk1176.14 billion. Though the Money Loan Court Act, 2003 relating to recovery of defaulted bank loans seems to be very commanding, in practice, however, the system is very ineffective. The byways and loopholes in the system leave money loan cases of banks pending in the lower courts year after year.
The section 17 of the Money Loan Court Act, 2003 mandates disposal of the cases within a maximum of 120 days, in reality, courts can’t dispose cases within this timeframe. In fact, courts take a much longer time in hearing and disposing petitions of the defendants. The defendants file writ petition in the High Court Division against any interim order of the lower court. The High Court Division, in many cases, by issuing a stay order put off the proceedings of the lower court until disposal of the writ petition.
But disposal of a writ petition is a lengthy process. If the order of the writ petition goes against the defendant, s/he then appeals against the order of the writ petition. The case thus keeps travelling from one bench to another, one court to another. The main intention of the defendants is to keep the case pending at the stage of hearing in the lower court and they take undue advantage of the legal bureaucracy. If they file an appeal against the decree of the lower court, they shall have to deposit 50 per cent of the decreed value to the lower court. That’s why defendants are usually not willing to file an appeal against the decree of a lower court. For that reason they create many legal hurdles at the hearing stages in the case. In what follows, many cases under the Money Loan Court Act, 2003 take even 8 to 10 years to settle.
Besides, many bank loan defaulters, using their political influence manage to delay the legal procedure of the cases filed against them for an indefinite period of time. Though there is a provision under section 4(1) of the Money Loan Court Act, 2003 to establish one or more money loan courts in every district, it has not been implemented. As a result, the number of money loan courts is insufficient in comparison with the number of cases. The cases filed under this act are often tried in the Joint District Judge Court which is already burdened with regular cases.
In the instances of a CR Case (for cheque bouncing), since it is a criminal case, it is is lodged with Chief Judicial Magistrate Court (for areas out of Metropolitan) and Chief Metropolitan Magistrate Court (for areas within Metropolitan) and after several hearings up to cognizance, the case is transferred to Sessions Court. As the cases mostly don’t get resolved within the stipulated time-frame, it gets re-launched and normally, a CR case takes about two or more years to settle.
A legal adviser’s negligence and dishonesty can also contribute to slow disposal. A lawyer may have several cases under trial in different courts. On many occasions, lawyers are found neglecting bank’s cases and prioritise other cases since bank clears lawyers’ professional bills at a later date after several hearings or after the settlement of the case. This happens mostly when a case is transferred to the Sessions Court from Magistrate Court. Lawyer leaves the responsibility of conducting the case to the public prosecutor of the court concerned. During argument hearing, he doesn’t appear before the court or doesn’t argue strongly and fails to manage arrest warrant or shorten the time gap for the next hearing. There are also allegations that many legal advisers of banks take bribes from the defendants and in return don’t argue strongly while hearing and thus facilitate bail and delay the date of next hearing favouring the defendants.
There are instances when accused loan defaulters filed counter-case against the plaintiff banker with the ill intention of deliberately demoralising and harassing the banker. Besides, the existing provision of punishment for many financial scams and irregularities in banking sector, the punishments, in my view, is not proportionate to the depth of crime. If the punishment for looting of thousand crores of taka is imprisonment of a few months, borrowers will be encouraged to default. Therefore, punishment for financial crimes must be much more stern and exemplary so that defaulters and associated culprits of banking sector think twice before committing such crimes.
If we truly want to get benefits from the laws pertaining to recovery, legal bureaucracy must be handled. To get rid of procedural delay and backlogs of the banks’ cases, it appears crucial to form a separate bench in the High Court Division of the Supreme Court for speedy disposal of the writ petitions filed by the defendants. This bench will only hear and dispose of the writ petitions and appeals filed by or against the banks. A bar limiting the defaulters to file writ petition and appeal up to a certain amount of loan can also be put to tackle the procedural delay. Provision of deposit of at least half or one-third of the decreed/disputed amount before filing any appeal can also add velocity to disposal of cases. In this way, writ petitions and appeals will be disposed of in an accelerated way and the number of disposed cases will be increased. On the other hand, section 4 of the Money Loan Court Act, 2003 should be made functional by establishing one or more Money Loan Courts with sufficient number of dedicated judges in each district for the trial of cases constituted by banks and financial institutions. Necessary amendments to law may be done so that bank’s CR cases for bounce of cheques or any kind of money recovery cases can be lodged and tried with this dedicated court.
The loan recovery process must be made functional and the banker, the legal system and the administrative bodies should play their due roles to make it happen. The related law and the legal system has significant role in this process. Making of law doesn’t make any sense, if it’s not applied. In fact, any law in force is toothless if it’s not effectively implemented. The application of law against the defaulters would create examples and thereafter wilful defaulters would think twice.
At the same time, corrupt bankers should not be spared by termination or dismissal from the job only. They should be penalised and punished as per the law. If the other parties connected with vetting, valuation and rating are found guilty; they must be brought to book. Similarly the government officials associated with non-encumbrance certificate, registration and mutation of mortgaged properties should be brought to justice for any irregularities and forgery. But, for all the above strategies to work, the government must show stern political commitment and goodwill against wilful defaulters.
Mosharaf Hossain is a principal officer and head of branch at National Bank Limited, Pakundia Branch, Pakundia, Kishoreganj.
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