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“All Citizens are Equal before Law and are Entitled to Equal Protection of Law”-Article 27 of the Constitution of the People’s Republic of Bangladesh
 



Issue No: 224
June 15, 2011

This week's issue:
Law Update
Law Interview
For Your Information
Your Advocate
Legal Education
Law Week

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Your Advocate

This week Your Advocate is Barrister Omar Khan Joy, Advocate, Supreme Court of Bangladesh. He is the head of the chambers of a renowned law firm, namely, 'Legal Counsel', which has expertise mainly in commercial law, corporate law, family law, employment and labor law, land law, banking law, constitutional law, criminal law, IPR and in conducting litigations before courts of different hierarchies. Our civil and criminal law experts from reputed law chambers will provide the legal summary advice.

Query
I and my friend went for a joint share business. I have invested 3 lacs in it. Where I was the investor and he only provided with his existing account in share market. As of the recent failure of economy and also for the obvious reason of buying and selling shares my investment went down to 2 lacs. Later my friend who is also a partner of this share business just by providing the account has sold all my shares and took the money. Now he is avoiding me and telling me that he will return the money by next Year February. But I have doubt on it. Moreover he agreed to sign in a deed of agreement but later refused. So in this situation what can I do?

Mamun
Dhanmondi

Response
I would like to thank you very much for your queries. Your queries are significant in the light of the prevailing unrest in the share market of the country. We have found that many people have become victims of fraud like you when they were investing in the share market through third persons. From the given scenario, it appears that you are unlikely to get any protection under the security laws concerning your transaction. This is because in order to transact with the shares of listed companies, it is necessary to possess a Beneficiary Owner's ('BO') account. From the fact it is intelligible that your friend had such an account. Hence, the shares were owned by him albeit the investment was on your part. Thus, your friend had every right to handle the shares and also deal with profits and proceeds emanating thereof. There is no proof that the shares were yours or you have invested for the same. Had the BO account been in your name or in the joint names of both of you; the situation could have been in your favour.

Since you have not complied with the law in dealing with shares in the stock, you are in a weaker position so far as the recovery of the money from your friend is concerned. In fact, you would not have faced such a situation if you had dealt with the shares by your own BO account. Investors can open a BO account with the Central Depository Bangladesh Limited ('CDBL') participants. There are more than 300 participants to the CDBL across the country. The participant will request the investor to sign an agreement which will set out the rights and duties of both the investor and the participant. The participant will then open an account for the investor at CDBL. Normally the account will be in the name of the investor. If the participant is going to mix one investor's securities with another in an omnibus account then this must be specifically stated on the agreement. For any future kind of share business in the future, please open a BO account.

Alternatively, as far as the issue of recovering the money is concerned, the law of contract seems to be pertinent. However, it appears that there was no written agreement between you. But you may take recourse to an oral contract although a written contract would have made it much easier for you to establish your case. To establish an oral contract, you would have to have supporting documents e.g. witnesses, documents related to payment etc. Even if you can rely on an oral contract by establishing the same, legality of such contract may be questioned. This is because by entering into such an agreement you seemed to have bypassed the requirement of possessing a BO account. In consequence, the entire purpose of such an obligation was frustrated by the existence of the oral agreement.

You should keep on pressurizing your friend for the money. Accordingly, a Legal Notice may be served in this regard. It may be useful as people often change their mind to avoid the complexities of litigation once such a notice is served and received.

I hope the aforesaid opinion will help you to ease the situation you are in. I advise everyone to take due care when entering into any such transaction. Compliance with due process reduces the risks involved in such investment by manifolds. As prevention is always better than cure, it is only the raise of awareness on our part that could ensure safety of our hard earned money.

For detailed query contact: omar@legalcounselbd.com.

 

 

 
 
 
 


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