– Written by Cross Border Dispute Resolution Department –Rifat Rahman (Senior Associate); S. M. Shakil (Associate); Sabrin Shahid (Junior Associate).
Introduction:
In Bangladesh, creditors have several legal remedies to recover their dues through both civil and criminal laws. Whether the claim arises from a breach of contract, dishonored cheque, loan default, unpaid debts, or government dues, there are specific legal provisions applicable to each scenario. Each of these laws outlines a structured mechanism for recovering the creditor’s money.
Money Suit
A suit for recovery of money is termed as money suit. Money suit can be filed under Order 4 of the Code of Civil Procedure 1908 (hereinafter “CPC”). The limitation period for filing a money suit is 3 years from the date when the cause of action arises. The cause of action arises for the price of work done by the plaintiff for the defendant at his request when the work is done. In case of money payable for money lent or for money lent under an agreement that it shall be payable on demand the limitation period starts when the loan is made.
Any person having right to sue, can initiate a money suit. To be precise, any person who has right to sue and who does not qualify under any special law designed for money recovery can file a money suit.
In money suit the court fees is computed according to the amount claimed. In practice, the maximum court fees for money suit can be BDT. 50,000.
In order to initiate a money suit in Bangladesh, a mandatory requirement on part of Plaintiff is that he/she must issue a demand notice to the defendant, giving them a reasonable time (usually 15-30 days) to settle the dues amicably.
The proper forum for filing a money suit is the relevant District Court. The Plaintiff will file the case by submitting a plaint.
Unfortunately, it takes in between 5 and 10 years to dispose of a money suit which is quite certainly a lengthy process.
During trial both plaintiff and defendant present documentary and oral evidence in order to support their claims.
At the time of trial, the plaintiff will produce witnesses to give evidence in order to support his/ her claim who will be cross-examined by the lawyers of defendants. After that, the defendants will also bring witnesses to support their version of events who will also be cross-examined by the plaintiff lawyers.
Attachment Before Judgment
Attachment before judgment allows plaintiff via a court order to attach the property of the defendant even before the final judgment is passed. However, the court must be satisfied that the defendant is about to dispose of the whole or any part of his property, or is about to remove the whole or any part of his property from the local limits of the jurisdiction of the Court.
Judgment and Decree
The court after the case has been heard, shall pronounce judgment in open court, either at once or on at another date. After the judgment is pronounced, the decree shall be drawn up. A decree may be executed either by the court passing the decree or by the court to which decree has been sent for execution of decree (Section 38 of CPC).
Appeal
Once a judgment is passed, an aggrieved party has the right to file an appeal in case of decree or appealable order. If the decree was passed by Joint District Judge, appeal lies to the District Judge. However, if the decree was passed by District Judge, the proper forum for appeal will be High Court Division. The limitation period for an appeal against a decree is 90 days from the date the decree is passed. In case of an appealable order, the limitation period is 30 days from the date the order is pronounced.
The legal threshold for filling money suit is relatively lower than other money recovery procedures available in Bangladesh. However, such a suit is time consuming.
Winding Up Application in the High Court
Winding up of a company is a process where a company ceases its existence as a separate legal entity, which liquidates company assets into cash and pay off the debts and distributes any remaining surplus among its shareholders. Generally, a company may dissolve when the company can no longer operate. This is due to the financial difficulties such as inability to pay debts, insolvency or bankruptcy. In certain situations, creditors can also initiate winding up process by filing a petition before the court.
It is to be noted that, only the private limited company and partnership firms can be dissolved through the winding up mechanism, not the sole proprietorship or partnership businesses. (Bengal Waterways Ltd. Vs. Rahimuddin Ahmed (1982), 34 D.L.R. A.D.D.) 47)
Winding up in Bangladesh is mainly governed by the Companies Act of 1994. In Addition, The Companies (Court) Rules, 2009, Insolvency Act, 1920, Bankruptcy Act, 1997 may also be applicable, depending on the circumstances of the case.
Under Section 234 of the Company Act 1994, there are three ways in which a company can be winded up in Bangladesh. The winding-up of a company may be either:
- Compulsory winding up by the Court or
- Voluntarily or
- Under the supervision of the Court
After filing a petition before the court, the court appoints a liquidator. The liquidator oversees the company assets and ensures that the debts are paid and remaining’s are distributed among the shareholders. Additionally, the order of winding up has to be filed in the Registrar of the Joint Stock Companies and Firms to complete the process.
In a Compulsory Winding Up by the court, the petition is filed before the High Court Division under Section 242 of the Companies Act, 1994. The court may order the winding up, on several grounds, one of them includes:
- Unable to pay off debts
If the company is unable to pay its debt or if the Court is of opinion that it is just and equitable that the company should be wound up. As per Section 241(1)(e), a company is deemed unable to pay its debts if:
- It fails to pay a debt of BDT 1,000 or more within 21 days of receiving a demand notice.
- Execution of a court decree remains unsatisfied.
- It is proved to the Court that the company is commercially insolvent.
Before filing a winding up petition, a creditor usually serves a statutory notice demanding payment. If the company fails to respond, the creditor may apply to the High Court. Upon confirming the company’s insolvency, the court can order winding up and appoint an official liquidator to manage its assets.
In winding-up proceedings, when a creditor seeks to wind up a company for failure to pay its debts, courts must distinguish between bona fide disputes and admitted debts. A bona fide dispute arises when there is a genuine, substantial, and honest disagreement between the parties whether the debt exists, how much is owed, or whether the debt is legally enforceable. an admitted debt refers to an undisputed debt, which is supported by evidence and must payable. If a company fails to pay an admitted debt upon service of a statutory notice, the creditor may file a petition the High Court Division for winding up on the ground that the company is unable to pay its debts.
The Negotiable Instruments Act, 1881
Another way of recovering money is filing a case under the Negotiable Instruments Act, 1881 (hereinafter “NI Act’). Any individual in case of dishonour of negotiable instruments which includes cheques, promissory notes, bills of exchange can file a case under the NI Act.
A cheque must be presented before the bank within 6 months from the date it is drawn. The payee is also required to send a legal notice demanding payment to the drawer within 30 days from the date of dishonour. If the drawer fails to pay the payee with thirty days of the receiveof notice, the payee as complainant must file a case against the drawer within one month.
In order to initiate a case under Section 138 of the NI Act, the complainant will appear before the relevant judicial magistrate court with a petition of complaint, the dishonoured cheque, and with his NID. The court will examine the complainant and will usually issue summons or send the case for investigation before a law enforcing agency.
After receiving the police report, the cognizance court will send the case for trial before a Joint Sessions Judge. During the trial stage the complainant and his supporting witnesses will give oral evidence who will be cross-examined by the defense lawyer. The accused also have the chance to give evidence as defense witnesses who will also be cross-examined by the prosecution lawyer.
Following the conclusion of trial, a date will be fixed for argument. After argument, the court will announce judgment. The accused has an option to make an appeal against the judgment but the accused is required to deposit fifty percent amount of the dishonoured cheque before the court.
It is a quick procedure to recover money, as cases under NI Act is less time consuming. Such a case puts high pressure on the debtor, as the debtor is required to appear before the court on every fixed date while the case is going on. If found guilty, the debtor may even face imprisonment. However, in order to initiate a case under the NI Act, the aggrieved person must have a cheque.
Artha Rin Adalat Ain, 2003
One of the most common procedures in order to recover money is filling a suit before the Artha Rin Court under the Artha Rin Adalat Ain, 2003 (hereinafter “Artha Rin Ain”) which is civil in nature. This specialized court is established under Section 4 of the Artha Rin Ain.
Artha Rin Ain permits service of summons via newspaper which is undoubtedly a new dimension for Bangladeshi legal system.
The court can even pronounce judgment based on documentary evidence, and without examining oral evidence if the defendant fails to appear. Moreover, Section 12 of Artha Rin Ain allows banks to sell mortgaged property even before filing a suit.
On the other hand, no individual is permitted to file a case before the Artha Rin Court. Only financial institutions such as banks can initiate proceedings under the Artha Rin Ain.
The Public Demands Recovery Act, 1913
The Public Demands Recovery Act, 1913 (hereinafter “PDRA”) was originally designed to streamline the process of recovering public dues, such as taxes, fines, loans, and other financial obligations owed to the government. The term “public demand” refers to any money owed to the government or public institutions.
According to PDRA, a certificate officer is generally given authority to issue certificates for the recovery of public demands.
This process for recovering public demand begins when a certificate officer reviews the document, after he/she signs and files a certificate case declaring a specific amount which is recoverable from the debtor.
By this method the government can easily recover money via different modes of execution of certificate pursuant to Section 14 of PDRA. However, this Act only allows government to recover money, and not any individuals or private institutions.
Conclusion:
The legal process of money recovery, execution in Bangladesh requires a comprehensive understanding of the applicable laws. Proper compliance with legal procedures and if necessary, seeking remedies through revision and writ before the higher court ensures fair and equitable remedies in money recovery process. A clear understanding of these frameworks and professional legal guidance are essential for effective debt recovery.