Mahbub & Company | Prosecution for dishonour of loan security cheques held legal
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Prosecution for dishonour of loan security cheques held legal

Prosecution for dishonour of loan security cheques held legal

The Appellate Division announced its judgment this morning (24th October, 2017) in 7 Criminal Appeals and 29 Criminal Leave Petitions finally deciding the question of whether a commercial bank can file a criminal case for dishonour of a cheque given by a borrower despite taking sufficient collateral security from him. The appeal filed by borrowers was unanimously dismissed by a short order. The full judgment is yet to be published.

Previously in Civil Petition for Leave to Appeal Nos. 960-964, 1118 and 1106, the apex court had granted a leave to appeal with a view to deciding whether its earlier decision in the case of Majed Hossain v The State reported in 17 BLC (AD) 177 holding prosecutions arising out of security cheques to be legal requires reconsideration. The leave was granted upon an argument forwarded by borrowers that prosecution for dishonour of security cheques amounted to double recovery of the same debt when more appropriate mechanisms in law are available to banks, for instance, in the Artha Rin Adalat (Money Loan Court).

As it stands after today’s judgment, the principle laid down in Majed Hossain v The State remains valid and it remains legal for banks to prosecute borrowers for dishonour of security cheques regardless of whether sufficient collateral exists against their loan facilities.

– Saqeb Mahbub, Associate Partner