Proceedings of Cr Case under the NI Act, 1881 and Artha Rin Mamla under the Artha Rin Ain, 2003 of Bangladesh

Dr.Ahamuduzzaman, Advocate supreme Court of Bangladesh (Mobile-01793-471478, This email address is being protected from spambots. You need JavaScript enabled to view it.)

NPL/NPI & recovery mechanisms

Defaulter, classified status, negotiation failed & Legal steps by the bank

1. Reporting to the CIB;
2. Permission for taking necessary legal action by AMD, HO, AIBL;
3. Filing up Form-87 of LAD, proposal for engagement of Lawyer by the branch to LAD and checking & verification of all documents/deeds by Investment Officer including up-to-date payment of revenue for mortgaged land, deal wise charge documents, reminder letters etc;
4. Engagement of lawyer by LAD, HO and instructions for filing suits/ cases etc, as per decision of the Management, signing on woklatnama and vetting of petitions/plaint/auction notice by LAD;
5. Cheque dishonor, collection of dishonor slip, issue of 30 days legal notice with registered post(A/D) and filing of CR Case under the NI Act, 1881 before the Court of Magistrate which shall be tried by the Sessions Judge;
6. Issue of 15 days Legal Notice (not mandatory), auction u/s-12, preparation of plaint, summon, payment of court fees, firisti etc, for filing Artha Rin Mamla under the Artha Rin Adalat Ain,2003;
7. Fraud-forgery case for defective security/ collateral security;
8. Recovery strategy (waiver, selling out of mortgaged land and adjustment of liabilities, tripartite agreement, Provisioning against default loan/NPI, re-scheduling, further investment with new security i.e. enhancement of facilities, renewal with down payment and/ or permission of BB);

Suit/ case by the client

1. Miscellaneous case/ Civil suit challenging cheques, securities and collateral securities;
2. Writ against CIB, Auction of Artha Rin and CR case under N I Act,1881;
3. Objection to the ACC/ DUDOK; Bangladesh Bank; NBR; Customs Intelligence; PBI;

What is NPL or NPI?

According to International Monetary Fund, "A loan is nonperforming when payments of interest and principal are past due by 90 days or more, or at least 90 days of interest payments have been capitalized, refinanced or delayed by agreement, or payments are less than 90 days overdue, but there are other good reasons to doubt that payments will be made in full". In case of Shariah banking NPL is known as NPI (Non-performing Investments) i.e. loan is replaced by the word investment and interest is replaced by the word profit and penalty interest is replaced by the word compensation.

In case of various deals bank can call back its investment/ loan facilities for taking legal action.

(SMA, SS, DF, BL)/ Classified and listed in CIB

If any borrower fails to repay the loan or defaults any installment he shall be treated as follows:

 BRPD Circular No. 14 (Banking Regulation and Policy Department) of September 23 of 2012 stated as follows: (Loan Classification and Provisioning)

 SMA: Special mention Account i.e. when a borrower fails to repay loan and defaults for consecutive installments commonly of 3 months;

 SS : Sub-standard i.e. if it is past due/ overdue for 3 months or beyond but less than 6 months;

 DF : Doubtful i.e. if it is past due/ overdue for 6 months or beyond but less than 9 months;

 BL: Bad/Loss i.e. if it is past due / overdue for 9 months or beyond;

However, the time period may vary in case of agricultural or short term loan or Micro-credit loan etc,.

 The above SS/ DF/BL is commonly known as CL or classified. When the borrower or defaulter paid the loan or any part of it and reschedule his liabilities, the Account converts to regularize.

 Banks shall be bound to maintain provision (General and Special) for classified continuous, demand and fixed term loans.

Names of Loan recovery Courts in Bangladesh:

1. Artha Rin Adalat (Artha Rin Adalat Ain, 2003);
2. Magistrate Court & Sessions Judges Court (Code of Criminal Procedure, 1898 & the Special Criminal Laws such as the Negotiable Instruments Act, 1881);
3. Assistant Judge Court to District Judge Court (Code of Civil Procedure, 1908);
4. Deputy Commissioner’s as Collector under the Public Demands Recovery Act, 1913;
5. The High Court Division, Chamber Judge & the Appellate Division under the Constitution of the People’s Republic of Bangladesh, 1972;
6. Bankruptcy Court (the Insolvency Act, 1997);

Other related courts:

1. Money Laundering Court (the Money Laundering Act, 2012);
2. Special Court/Tribunal under Anti-Terrorism Act, 2013;
3. Cyber Tribunal and Cyber Appellate Tribunal;

Special Bodies:

1. Bangladesh Bank;
2. Anti-Corruption Commission;
3. National Board of Revenue;
4. Police Bureau of Investigation;
5. Office of the Sub-Registrar;
6. Assistant Commissioner (A/C) Land;
7. Customs Authority;
8. Office of the RJSC & Firms;

Steps/stages of a cheque dishonor cases

Defaulter of loan

(SMA, SS, Df, BL)/ Classified and listed in CIB

Final reminder ………….

Approval/ Permission from concern Division (IAD)/Management/EC/Board through AMD of HO,AIBL as required for filing cases or taking all sorts of legal action.

Submission/presentation of Cheque by concern bank Officer (Credit/investment) within six months from the date of signature and collection of cheque dishonour slip with reasons of dishonour stated thereof e.g. insufficient/inappropriate fund. Except this ground all other grounds mentioned in the dishonor slip shallnot be applicable for filing Cr Case under the NI Act,1881.

Appointment of lawyer from the panel as per discussion with Legal Affairs Division and sending documents following instructions (Form-87) to and from LAD/AMD.

(Legal notice, cheque dishonour slip, NID,power of/to concern officer, photocopies of cheque, CR petition and A/D slips are mainly essential for filing a Cheque dishonour case)

Legal notice (u/s 138 and/ or 140 of NI Act, 1938) directly or via post office with A/D or newspaper

(mandatory written notice/ legal notice within 30 days from the date of cheque dishonour for a period of 30 days from the date of receiving the notice claiming the amount stated in the cheque and after the expiry of notice period, a CR Case can be filed to CMM (Chief Metropolitan Magistrate for Metropolitan area ) or CJM (Chief Judicial Magistrate for District area) Court.

Drafting a complaint petition by the panel lawyer for filing cases to CJM/ CMM and vetting by the branch and LAD(Legal Affairs Division) (3-wtnesses, branch officer who provided dishonor slip, petitioner and Lawyer himself).For Company/Trade organization, All Directors/partners/Proprietor and the Company/Firm/Trade organization shall be made party to the case.

Taking of cognizance (u/s-141 of NI Act)

Summon/ warrant

WA/Production warrant/Proclamation of arrest/confiscation of property etc,./Bail/Cancellation of bail petition/ADR

Report/ Police report/ (after Inquiry and investigation)

Transfer to the (District/ Metropolitan) Sessions Judge Court for Trial (T.R. No.)

Refer to the Joint (District/ Metropolitan) Sessions Judge Court/ Additional (District/ Metropolitan) Sessions Judge Court for trial or by the District/ Metro Sessions Judge himself

Framing of Charge

Opening of the case

Hearing (P.H/ F.H.)

Taking of Evidences (Examination-in-Chief/ Cross-examination. Re-examination)

Arguments

Judgement (Acquittal/ conviction)

(The offence under section 138 or 140 of N I Act, 1938 is bailable and maximum punishment is 1-year imprisonment and/or fine three times of the amount stated in the cheque. However, the holder in cheque/ bearer can claim only the stated amount of cheque if recovered. The rest amount shall be deposited to the government fund. A civil suit can be filed to any civil court for recovering the amount stated in the cheque which shall not be barred by it.)

However, in case of imprisonment only, bank shall not be entitled to recover its dues.If the client dies, the case shall be barred and cheques shall be ineffective. Fine may be recovered following section 386 of the Code of Criminal Procedure, 1898 (i.e. through DC) & PDR Act,1913.

NI Act Appeal

An appeal (on deposit of 50% of the amount stated in the cheque) against any judgement or Order of a trial court shall be filed to:

If judgement passed by Joint (District/ Metro) Sessions judge to the District/Metro Sessions judge who can hear by himself or send it to trial by an Additional (District/ Metro) Sessions Judge.

If Judgement passed by Sessions / Additional Sessions (Metro/District) Judge, appeal shall be filed to the High Court Division. If appeal is disposed of or rejected deposited 50% amount may be withdrawn by the bank/ bearer of cheque. (Appeal to the Sessions Judge-30 days and Appeal to HCD-90days).

Revision

When an appeal is disposed of, a revision (criminal) may be filed by the parties for which no provision of depositing money like appeal. A revision shall always be filed before higher court against any judgement or decree passed in appeal by an appellate court e.g. If the Sessions Judge disposed of an appeal, revision shall be filed before High Court Division).

Miscellaneous

An NI case/ CR Case under NI Act is compoundable and ADR can be held through a solenama between the parties.

WRIT Petition

A writ may be filed by the opponent against the bank on various grounds and a stay may be obtained (e.g. against the validity of cheque or framing of charge or validity of signature or date or amount of cheque or concurrent jurisdictions or multiple cases or third party involvement or violation of terms or legal notice not served or proceedings not duly followed or security/advance cheque or not MICR or Directors changed but new cheque was not drawn against the investment etc,.)

A quashment on the ground of fraud / forgery case or multiplicity of suits/ cases

Caveat/ Leave to Appeal/ Appeal to the Appellate Division

To file an appeal against any judgement or order of the High Court Division, a caveat may be filed for expressing interest to file a regular appeal for which leave to appeal petition shall be filed to the Chamber Judge who may hear and pass an order for hearing by Full-Bench of the Appellate Division. If the Chamber Judge rejects, no appeal shall be allowed and the matter shall be finally disposed of.

Presidential Clemency/ prerogative of Mercy

As the president has given power under article 49 of the constitution and many other laws, He can pardon or reprieve or reduce or decreases any penalty or fine or punishment either on application or by suomotu.

CIVIL Suit

A civil suit/ money suit under NI Act can be filed under Order 37 of the CPC, 1908 within 3-years and requisite Court fees to the respective Court.

The Indemnity Bond or Promissory notes are also documents against which bank/ financial institution/ bearer/ holder of instruments can file suits.               

Case under the Penal Code: A case (CR) under the Penal Code, 1860 under section 406/420 can also be filed for fraud/ forgery including cheque dishonor. Police shall investigate as per order of the Magistrate/Cognizance Court and if necessary, Anti-Curruption Commission may also investigate or inquire into the issue.

Others

Fine including fine under the NI Act may be recovered under the PDR Act , 1913 by DC/ Collectors or following section-386 of the Cr P C,1898.

A Civil suit may be filed simultaneously in addition to a CR Case under the NI Act, 1881.

Artha Rin Mamla steps (offensive actions)

1. Defaulter of Loan (Defaulter means….. according to the circular no. of …………)
2. Permission of filing cases by Management Committee & Appointment of Lawyer (Form-87 of AIBL)
3. Checking Limitation period (u/s.46, 10%, 15%,25% in 1^st to 3^rd year or 20% in 3 years for investment of less than 3 years)
4. Legal Notice (Optional) with 15 days commonly against the defaulter, guarantor and mortgagor and stating about securities and collateral securities.
5. Auction under section 12 of the Artha rin Adalat followed by auction process under section 33.

5A. Auction Process (u/s.33) & 2^nd auction

5B. CPC,1908 shall be applicable(e.g. order 21 of CPC) for execution of decree in addition to Artha rin Adalat Ain, 2003. Artha Rin suit shall be filed by plaint u/s-8 of the Act. Note: Embezzlement related cases are not allowed in Artha Rin Adalat(sec-18). No Borrower can file any case/ mamla against the bank before Artha Rin Adalat. Set off and counter claim are not allowed before Artha Rin Adalat (sec.18(2)). Suit on the same matter may be continued simultaneously if filed by borrower to other courts and not to be treated as res-subjudice and no need for analogous hearing(sec.18(3)).

5C. A writ may be filed by the opposite party challenging auction notice under section-12 of Artha Rin Mamla. Notwithstanding provisions of filing appeal or revision to the Higher Court with payment of deposited money as stated in section 41 and 42, If any proceedings of a suit is stayed by HCD through writ 25% interest or profit shall be imposed if writ is rejected.

6. Main Artha Rin case proceedings:

Drafting of a plaint u/s 8 of Arth Rin Ain, 2003 (flowed by CPC,1908), payment of court fees

Borrower and Guarantors, mortgagors, directors must be included as party to the suit/ mamla.

7. Issuance of summons (u/s-7)
8. Appearance of the parties (under CPC, Order 9)

Rejection of Plaint (Order 7, Rule 11 of CPC and relevant laws)/ Strike out (Order 6, Rule-16)/ Written Statement/ Written Objection/ Additional reply by Bank/ exparte.

If defendant fails to appear without any reasonable cause when summon was served. (u/s.19). The defendant may apply for reinstate of the suit by cancellation of exparte order within 30 days. The defendant shall deposit 10% money of the decreed amount within next 15 days as admission through negotiable instruments as security and if 10% deposited, the application shall be granted immediately.

No artha rin suit shall be dismissed in case of absence of the plaintiff i.e. no dismiss of default rather the Court shall dispose of the case after verification or examining records/ documents (sec.19).

9. Written statement & written objection
10. Costs for delay of submission of written statement (A hearing of an artha rin suit cannot be adjourned for more than once with the application of any party for which costs of minimum taka 1000 and maximum taka 3000 may be imposed. The fine shall be deposited to the Government revenue. The hearing can be adjouned for next working day only (sec.14(4)).
11. ADR (mediator, a Lawyer who may charge bill upto taka 20000/-)
12. Section-30 step
13. Framing of Issues (u/s.13 of Artha Rin Ain followed by Order 14 of CPC)
14. SD/ Settling date
15. Hearing (u/s.14)/ Adjournment of Hearing (or time petition)/ costs for delay.
16. Taking of Evidences
17. Argument ((After completion of taking of evidence, any party can submit written argument within 5 days after serving copies to the opposite parties but the Artha Rin Adalat is not bound of taking oral arguments but can pass order to give oral arguments in addition to written argument(sec.15).
18. Judgement and decree (33(5) & 33(7), Mutation, selling out etc.;

(The Court may prefer decree in favour of the plaintiff for 12% interest/ profit as remedies with claimed/ demanded amount i.e. suit value from the date of filing the suit if no appeal filed against the decree and if appeal or revision or any other application to the Higher Court is filed 16% simple interest/ profit and if appeal to the AD of SCB is filed against any appellate decree or order 18% interest/ profit may be imposed (sec.50). A judgement-debtor may be arrested and detain in custody for 6 months if fails to pay the dcreetal amount with the application of the decree-holder. However-warishans of the debtor or person below 18 years of age shall not be arrested (u/s.34). A debtor shall not be arrested twice if 6 month period is over.

Dispossal of Artha Rin Suit(Time Limitation 30 days for exparte and 90+30 days for both party’s appearances)

 18.A. Execution case (section-28 to 33 of the Act with CPC, maximum 6 years)

19. Appeal (The financial institution need not pay any deposit for filing appeal (u/s.41(4)). However, if a party(defendant) wants to file appeal where the decreed amount is above taka 50 lac, an appeal shall be preferred to the High Court Division. Time-60+30 days to dispose of the appeal. The Appellate Division of the SCB may in leave to appeal order to pay like payment in regular appeal (section-43).
20. Revision (Revision u/s-42, is next to appeal and no court shall accept any revision if the petitioner not pays/deposits 75%(including 50% as deposited earlier in appeal). Time-60+30 days to dispose of the revsion.
21. Writ, Article-102 of the constitution (against interim order and also by the parties/3^rd parties without filing appeal). Section-20 and section -44 discussed/ stated about no appeal or revision against interim order or proceedings of the artha rin court, so a writ may be preferred.
22. Miscellaneous ((u/s. 51 for contempt, the Artha rin Adalat may punish a person for 1000 tk. Fine and in default 10 day simple imprisonment).
23. ADR (Section-22 during pendency of suit, section-38 during execution cases and section-45 at any time even after judgement.

Exercise.   Put tick marks to the appropriate answer. Time-05 Minutes.

Exercise.   Put tick marks to the appropriate answer. Time-05 Minute.

1. A legal notice under N I Act shall be served for a period of-

(a) 30 days                 (b) 15 days                         (c) 7 days                  (d) not fixed

 2.What is the elaboration of MICR?

(a) Millennium Ink creditor recognition            (b) Magnetic identification Creditor receipt              (c) Magnetic Ink Character Recognition;               (d) Multilateral Investment credit receipt

 3. Which of the following section states about taking of cognizance under the N I Act, 1881?-

(a) section 138      (b) Section-138A       (c) Section-141     (d)  Section-141A

 4. An appeal under the NI Act is allowed with the payment of -…..% deposit of cheque mentioned amount

(a) 20%                 (b) 25%                   (c) 50%                          (d)  75%

 5. The maximum punishment for a N I Act Case is -

(a) 6 months imprisonment   (b) 1 year imprisonment       (c) Imprisonment or fine    (d) 1 year imprisonment and/or fine of maximum 3 times of the mentioned cheque amount

 6. A legal notice under N I Act may be served by--

(a) Directly;  (b) by Post with A/D              (c) By Newspaper;                    (d) All or any

7. Time limitation for filing appeal before the Sessions Judge and High Court Division

(a) 30 days;  (b) 30 days and 60 days.;                          (c) 90 days                (d) 30 days and 90 days

8. What is Cr Misc. case?

(a) Miscellaneous Case against the order of a criminal Court;  (b) Criminal Miscellaneous Case before the HCD;

(c) Criminal Miscellaneous case against bail or framing of charge or for quashment;       (d) None of a,b,c;

 9. What is the distinction between CR case and GR case?

(a) Case filed Before Court & Thana; (b) case lodged in High Court and sub-ordinate Court;

(c) Criminal case and civil case; (d) Criminal case and civil suit;

 10. What is the qualification of the Judge of Artha Rin adalat?

(a) Asst. Judge                 (b) Sr. Asst. Judge;            (c) Joint District Judge;     (d) Addlt. District Judge;

11. What is the elaboration of CIB?

(a) Credit Information Bureau           (b) Customers Intelligence Board              (c) Credit for Information Bureau               (d) Central Intelligence Bureau

 12. Who shall be made party in a Artha rin mamla?

(a) Borrower      (b) Mortgagor       (c) Guarrantor     (d)  All of A, B, C; (e) None

 13. Which of the following suit/ case shall be filed earlier among the followings?

(a) Cr Case under N I Act;      (b) Fraud-Forgery case;     (c) Certificate case ;     (d)  Artha rin mamla;

 14. The maximum punishment under Artha Rin Adalat Ain is -

(a) 6 months imprisonment   (b) 1 year imprisonment       (c) Imprisonment or life;    (d) Death penalty;

15. An auction before filing an Artha Rin Adalat is essential under section-

(a) 7; (b) 12              (c) 22;                    (d) 33

16. Drafting of a plaint under Artha Rin Adalat shall be filed following section-….. of the Ain, 2003

(a) Section-6; (b) Section-7.;                          (c) Section-8                (d) Section-9

17. What is allowed against interim order of Artha Rin Adalat?

(a) Appeal;                        (b) Revision;                (c) Review;                  (d) writ;

18. An appeal against the judgement of Artha Rin Adalat is allowed to District Judge, if the decreetal amount-

(a)Upto Tk. 5 lac           (b) If aboveTk.20 lac           (c) Not more than Tk.50 lac                (d) Tk. 50 lac and above

 19. The maximum costs for delay petition hearing under Artha rin Ain is -

(a) Tk.1000     (b) Tk.3000         (c) Tk.5000               (d) Tk.20000

20. What is the maximum Court fees for artha rin mamla?

(a) Tk.40,000/-      (b) Tk.40,500/-     (c) Tk. 50,500/-       (d) Tk.57,500/-

Answer sheet:

Prepared /Compiled by: Dr.Ahamuduzzaman; Advocate supreme Court of Bangladesh./ 26.02.2019;