Confusions Stemming from the Bank Company (Amendment) Act 2023

Taking a loan with the intention of repaying through installments as per the loan agreement is an integral part of modern economy. However, some take loans with prior intentions to default and then go on to misappropriate the borrowed money. This phenomenon has now become widely common in our country. In this backdrop, a recent amendment of the Bank Company Act 1991, has introduced a new category of defaulter i.e., 'willful defaulter borrower' by Act no 13 of 2023.

After amendment, section 5(KaKaKaKa) of the 1991 Act provides that 'intentional defaulter borrower' means any defaulter borrower person, institution, or company who (1) in personal capacity, in favour of family member, interested person, institution, or company, obtains loans, advances, investment, or any other financial benefits from any bank-company or financial institution but does not repay the same or any part of it or interest or profit thereof despite having the ability to do so, or (2) obtains loans, advances, investments, or other financial benefits from any bank-company or financial institution by using forgery, fraud, or giving false information in their names or in favor of family member, interested persons, institute or company, or (3) uses the loan amount, advance, investment, or financial benefit or part of it after something otherwise than the purposes for which the money is obtained for, or (4) transfers or delivers the collateral without taking prior permission from the bank-company or financial institution which provided the loan or advance. Besides, Bangladesh Bank can formulate necessary directives from time to time to accomplish the purpose of the aforesaid definition.

This definition does not change the earlier definition provided under section 5(GaGa) of the Act of 'defaulter borrower'. Defaulter borrower means any debtor individual, institute, or company who personally or on behalf of interested persons, obtains loans, advances, or other financial benefits but does not pay the same, any part of it, or any interest or profit thereof even after the expiry of six months of overdue. Therefore, under the existing legal framework, there are two kinds of defaulter borrowers: defaulter borrower and willful defaulter borrower. To be a willful defaulter borrower, one must be a defaulter borrower first.

Section 5(GaGa) includes the borrower, guarantor, and interested concerns within the scope of defaulter borrower; but Section 5(KaKaKaKa) canvasses a wider scope compared to the former. Section 5(KaKaKaKa) also states that any person falls within the definition of willful defaulter borrower if they fail to repay a loan obtained in favour of or in the name of a family member. The definition of family is provided under Section 5(JhaJha) which is added to the said Act by the amendment. It provides that "family" or "family member" means wife, husband, father, mother, son, daughter, brother, sister, or any other person dependent. The amendment does not categorically clarify the liability of the family members in whose favour or name, the loan is obtained. On many occasions in practice, family members are harassed for loans obtained in their names, even when they are unaware of the same. The amendment should have made it clear that the family members who do not give out any personal guarantee, mortgage or otherwise furnish any security against the loan obtained by one of their family members, would not be held responsible.

Moreover, this definition does not make it clear as to what is to be understood from the words "they do not repay though they have the capacity to do so". There are no determining criteria of this qualification anywhere in the Act. As a result, it can lead to widespread confusion and misapplication of the Act as this can be interpreted in many ways.

It is to be noted that no judicial interpretation has come out after the new amendments to the definition of defaulter borrower. The clarification of these definitions can be made through judicial interference. However, it would have been certainly better had the legislators not left any ambiguity or confusion within the Act.

The writer is advocate, Supreme Court of Bangladesh.