This week Your Advocate is Barrister Tanjib-ul Alam Advocate, Supreme Court of Bangladesh. He is the head of the chamber of a renowned law firm, namely, 'Tanjib-ul Alam and Associates ',which has expertise mainly in commercial law, corporate law, admiralty, employment and labor law, land law, banking law, constitutional law, telecom law, energy law, Alternative Dispute Resolution, Intellectual Property Rights and in conducting litigations before courts of different hierarchies.
I am a director of a public limited company which has a debt of 20 crores with a reputed bank. There are 10 directors who are also the majority shareholders of the said company. I have 35% shares in the company and I have suffered loss due to several illegal and arbitrary decision and activities of the other directors. I mortgaged my property along with some other properties of the Company itself against a loan taken by the Company. I mortgaged my property as a 2nd party mortgagor. The Company became a loan defaulter and it failed to repay the entire loan. Concerned bank and the CIB of Bangladesh send the name of the directors of the company including my name in the CIB report. As my name is in the CIB my other business and financial reputation is going to be hampered acutely. Concerned bank is about to initiate proceedings under the Artha Rin Adalat Ain, 2003 and also sell the aforesaid properties of the company along with my personal property which is mortgaged at the bank. I want to come out of this problem. Please advice me accordingly.
Thank you for your query. It seems you have got a number of serious legal issues at hand and you should take immediate steps. The best and the most effective advice that I can give you at this moment is that you should consult a lawyer immediately. You should consult a lawyer who is acquainted with the banking laws. There are number of reasons why you should consult a lawyer, firstly, for every next step relating to settlement of your current situation you will have to engage a lawyer as mere advice will not solve your problem.
Given that you are a Director of a public company and holding 35% of the issued capital, your situation squarely falls within the definition of “defaulting borrower” and you and your other companies will be treated as a related company. Since you have furnished personal guarantee, you cannot avoid liability for the repayment of your company's loan. The fact that you have suffered loss due to the fault of your fellow directors would not relieve you from the liability of repayment of loan that your company has taken. In my opinion, the lending bank has rightly reported your name to the Bangladesh Bank as a classified borrower and in accordance with the provisions of the Bank Companies Act, 1991 your other companies will also be treated as defaulting borrower because you are a Director of the defaulting company and you are holding more than 25% of the issued capital.
Although you have stated about the steps that the lending bank is going to take, you have not mentioned what step you have taken to repay your loan. If you continue to be a defaulter, it is only fair that bank will take action against you. If you wish to stop the bank from taking any action against you and your company, it would be prudent for you to seek re-scheduling your loan by paying at least 10% of the outstanding amount.
If you fail to re-schedule your loan, the bank will be compelled to put your mortgaged property in to auction, regardless of the fact whether you have mortgaged your personal property or the company's property, in accordance with section 12 of the Artha Rin Adalat. This is due to the fact that as per the provisions of section 12, a bank is not allowed to file an Artha Rin Adalat suit without first attempting to sell the mortgaged property (assuming that you have executed a Power of Attorney authorising the bank to sell). If you remain defaulter and the lending bank does not take any legal action against you and your company, the bank run the risk of its claim being barred by limitation. Hence, the bank is under a legal compulsion to take legal action against you and your company and the other shareholders who have furnished personal guarantee.
Best of luck with your business.
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