Why is money loan court case delayed in disposition?

Sometimes we have to face the question, why the cases filed with the money loan court are not settled quickly! Money Loan Court is a special 'law'. The Finance Act was originally enacted to strengthen and speed up the recovery of defaulted loans by banks. In other words, money lending laws were created to achieve a specific purpose. The question arises: to what extent has this specific goal been achieved? Or is it being achieved at all?

At a time when the presence of non-performing loans or non-performing loans in the banking sector increased, the Finance Act was enacted. At the same time, the money loan court was formed. But it appears that despite the formation of special courts for the implementation of the Finance Act and the implementation of this Act, there has been no improvement in the situation of defaulted loans in the banking sector. Rather, the amount of defaulted loans is increasing day by day. The Money Loan Act was enacted in a very concise manner with the addition of a few clauses. The purpose of this act was to bring down the amount of bad loans in the banking sector to a tolerable level by expeditious disposal of cases related to defaulted loans. But there is scope to raise questions about the extent to which that objective has been achieved. Because the number of cases in the debt court is increasing and the speed of settling the filed cases is also very slow.

The Money Loan Court Act has given several powers to the bank manager which if properly exercised is bound to improve the situation of recovery of defaulted loans. The manager of the bank can recover the money due to the bank by selling the mortgaged property without a court order if necessary. Even if the mortgaged property is sold, if the bank's dues are not recovered, then a case can be filed with the court to recover the remaining dues. But bank managers often don't want to exercise this power. This is because the mortgaged assets are not properly valued before the bank approves and disburses the loan in favor of the applicant. While taking a loan from a bank, 1.15 percent or 1.50 percent of the property has to be mortgaged to the bank on the basis of registry. In other words, if someone wants to take a loan of Tk 100, he has to mortgage a property worth Tk 125 or Tk 150 in favour of the bank. Most of the time bank officials are shown to 'manage' overvalued mortgaged assets in various ways. As a result, the property does not fetch a fair price when it goes up for sale. It is not possible for a borrower to overvalue the mortgaged assets without the assistance of the bank manager. It has also been seen many times that the court has ordered the sale of mortgaged assets but no suitable buyers are found in the market.

Failure to collect defaulted loans: Whose responsibility?
Another thing is very important in the banking sector of our country. The loans of those who take relatively small amount of loans are truly genuine. When I say a small loan, I mean a loan of up to 2/3 crore taka. Those who take loans up to Rs 2/3 crore taka usually repay the loan installments regularly. At the time of loan approval, they take the loan by following all the formalities. It can be seen that they took a loan of Tk 2 crore and mortgaged property worth about Tk 4 crore to the bank as security. Bank officials are also very strict on asset valuation for such loans. They tend to underestimate resources in these areas. In other words, the assets worth may be Tk 5 crore are shown as Tk 4 crore. They usually pay the loan installments regularly.

Borrowers often become overwhelmed when banks go to sell collateral pledged against such loans. Borrower would not want to lose assets of Tk 4 crore for a loan of Tk 2 crore. But those who take large amount of loan most of the time have problem with mortgaged property. When an influential individual approaches a bank branch for a loan, the bank manager often provides them with guidance or makes efforts to recommend them through influential political leaders or other individuals. Alternatively, bank managers actively work to facilitate the approval of loans for influential person. In such cases, the collateral assets provided for the loan are assessed at an inflated value. For example, a property worth 5 crore taka may be evaluated at 25 crore taka. Here, the division of the loan amount is often manipulated in a manner that is not transparent. If someone spends Tk 5 crore illegally to take a loan of Tk 20 crore then he will face problems later. Because even though he has sanctioned a loan of Tk 20 crore, he is actually getting Tk 15 crore. But he will have to pay installments of more than Tk 20 crore. Eventually the loan defaulted.

When the bank goes to sell these mortgaged assets, it often fails to obtain their true market value. Additionally, no one would normally want to buy a mortgaged property of an influential person. And bank officials also do not want to cheat influential borrowers because if they get angry with the bank manager for some reason, he may lose his job. There is a fear of potential repercussions or other forms of punishment in such cases. The higher authorities of the bank are also kind to such borrowers. Many times there are allegations that a borrower takes a loan and diverts the loan money without using it for that purpose and even smuggles it abroad. Among those who take large amount of loans, there is a class who take loans to avoid paying back the loan amount to the bank. So they value the mortgaged assets in such a way that there is no difficulty in selling the property because the amount of loan taken is much higher than the actual value of the mortgaged asset.

In most cases, bank loans are sanctioned and waived under political influence. Most of the borrowers are safe during the tenure of the government in which the loan is taken. Banks generally do not file debt recovery cases when the borrower's preferred government is in power. The case is filed after a change in government. Banks often file cases that end up stuck in the legal limbo because the bank authorities resort to various types of irregularities while giving loans. For instance, they may have disbursed a loan of 60 crore taka. The bank may get Tk 20 crore if the asset mortgaged against that loan is sold at auction. In this case, the bank manager has to answer why the loaned money did not come up. Then the manager will be in danger. So he doesn't want to file a case.

And even if a case is filed, he is not active enough to get the verdict in favor of the bank. From the side of the bank, this case will be delayed. Again, the borrower's lawyers also try to delay the judgment process. That is, due to the efforts of both parties, the case is delayed rather than settled quickly. I'd like to mention a real-life incident I witnessed here. An affluent gentleman had taken a substantial loan from a bank and had become a defaulter. He wanted to have his loan accounts reevaluated. This person was highly influential and financially well-off. When he visited the bank for this purpose, everyone, including the bank manager, treated him with the utmost respect. The bank shows respect to a loan defaulter because, despite being in default, the individual holds significant influence. If they were to perceive any disrespect, they could lodge a complaint with the bank's managing director. This could create trouble for the branch manager and even lead to job repercussions. But, someone like me, as a depositor, has to wait for hours in the bank when I go to make a withdrawal. The bank doesn't show any special respect, even though it operates with my money as a depositor.

In Bangladesh, none of the largest loans are secured with mortgage assets. A class of corrupt bankers, bureaucrats and politicians are collectively paralyzing the banking system. They are building a mountain of wealth by taking money from the bank in the name of loan and dividing it among themselves. Most of the huge amount of loans given by banks every year is diverted to different sectors. Even this money is smuggled abroad. None of the parties wants the cases filed in the money loan court to be settled quickly. As a result, the settlement of the case is delayed. It is not possible to speed up the disposal of cases by law alone. For this, the mindset of all relevant parties needs to be transformed.

Recently, a revised law regarding land ownership has been enacted by the Ministry of Land. In this law, it is stated, "The document belongs to the one whose land it is." This provision in the law has generated significant debate. However, the concept of "The document belongs to the one whose land it is" is not a new legal provision. A law still exists that if a person can occupy privately owned land for up to 12 years without any claim, the occupier can claim the land as his own. In the case of government land, if the government does not claim the ownership of the land for 60 years, the occupier can claim the land as his own. This law still exists. Existing legal provisions are not repealed or suspended. As a result, the new law will conflict with the existing law. The new law has been promulgated to supplement the old law without repealing it. So conflict will arise between the new and existing laws. Sometimes a landowner may not have any document to prove their ownership. Someone created a fake document and grabbed the land and claimed it as their own. What will happen in that case? Will the 'deed whose land is his' law be effective here? If this is done, the trend of creating fake documents will increase abnormally in the country. Seventy percent of those enacting laws are businessmen or bureaucrats. They are not lawyers. Therefore, their understanding of legal implications may not be as comprehensive. This might result in ineffective legal enforcement.

The national parliament is the highest legislative body in a country. They enact laws for the welfare of the people, but the majority of them lack significant legal experience, leading to many inconsistencies and incongruities in the laws they pass. One more thing needs to be mentioned here. In our country anyone above the age of 25 years can participate in the election of the National Assembly unless he is insane or deranged. He does not need any educational qualification. I think, to make the National Parliament truly effective, minimum educational qualification can be stipulated for the Members of Parliament. How educated can a citizen become a member of parliament. The law should clearly specify the qualifications required to become a minister.

Author: Senior Advocate, Bangladesh Supreme Court and Chief Executive Officer, Bangla Foundation

Co-writer: M A Khaleque