The High Court on Wednesday delivered a verdict saying that no bank or financial institution (FI) can file cheque dishonour cases against any person for defaulted loans. A bank or financial institution can file a case in the Artha Rin Adalat only in the manner described in the Artha Rin Adalat Act, 2003 for recovery of the loans.
Moreover, proceedings of all the check dishonor cases filed by banks or financial institutions currently pending in the courts across the country will be stayed, the court also ruled in the judgment.
The HC also directed the Bangladesh Bank to issue a guideline for keeping insurance coverage against all loans granted by banks and financial institutions.
The High Court bench of Justice Md Ashraful Kamal delivered the verdict after hearing an appeal petition filed over a cheque dishonour case of the BRAC Bank.
Lawyers Abdullah Al Baki, Wahida Afroze Chowdhury and Md Asaduzzaman appeared in the court hearing on behalf of the appeal petitioner, while lawyer Syfuzzaman represented the BRAC Bank.
According to the case documents, one Mohammad Ali, a businessman from Nabinagar upazila under Brahmanbaria district, took a loan of Tk 0.4 million from BRAC Bank’s Nabinagar branch in 2011.
He paid Tk 0.319 million in 22 instalments out of 36 instalments. However, he was unable to repay the remaining loan later when his business conditions deteriorated. Then he gave the bank a cheque of Tk 0.295 million against the due, but it bounced.
In this circumstance, BRAC Bank in 2015 filed a case with a magistrate court in Brahmanbaria for recovery of the remaining loan. Following the case, the judge of the Additional District and Sessions Judge’s Court in Brahmanbaria handed down a sentence of six month’s prison to Mohammad Ali and fined him Tk 0.295 million.
Mr Mohammad Ali later filed an appeal petition against the lower court verdict. The HC admitted the appeal on October 8, 2018, and after the hearing, it delivered the verdict on Wednesday (November 23 in, 2022).
The High Court asked the concerned bodies of the government to return the money to Mohammad Ali, which he deposited while filing the appeal.
The High Court said, “The check that the bank takes against the loan is a security, not a negotiable instrument. A check dishonor case cannot be filed against the check taken as security. Taking a blank check against a loan is illegal. Banks and financial institutions have been doing this illegal activity for a long time.”
The court said that a loan from a bank or financial institution is taken through an agreement. Some corrupt and unscrupulous officers of the bank misuse checks for their interests and to implement their hidden agendas, it also observed.
The HC asked the lower court concerned across the country to summarily reject the cheque dishonour cases filed by the banks and financial institutions. It also asked the courts to send the parties directly to the Artha Rin Adalat.
BRAC Bank’s lawyer Syfuzzaman said, “Now our outstanding due is Tk 0.972 million from the loan receiver. We will appeal against the judgement.”