NOTES ON ARTHA RIN ADALAT AIN

2003

Matters Covered by the Statute:

Matters regarding recovery of loans by financial institutions are covered by this statute. This is
apparent from the preamble of this statute given at the very beginning of this Act prior to section
1 and also from section 5. Please note that, these matters are regarded as matters of civil nature.
[section 5(11) of ARAA]
Irrespective of Public Demand Recovery Act (PDRA) 1913, if the loan is recoverable under
ARAA then it has to be recovered using the Artha Rin Adalat no matter whether this loan is
considered as ‘Public/Government Loan’.[section 5(5) of ARAA]
However, cases involving claims by Bangladesh Krishi Bank and Bangladesh Krishi Unnoyon
Bank and other state-owned financial institutions not exceeding the amount of taka 5 lacs can be
filed as certificate case using the PDRA 1913 instead of filing in Artha Rin Adalat.[section 5(5)
of ARAA]
If there are special provisions for recovering loan by financial institutions established by special
law, then the ARAA provisions will be counted as additional to those provisions. However, if
that financial provision files a case in Artha Rin Adalat for recovering loans, then the ARAA will
be applicable.[section 5(6) of ARAA].
Mortgage suit for sale or foreclosure of immovable property in pursuant to section 67 of The
Transfer of Property Act 1882 and Order XXXIV of CPC has to be filed in the Artha Rin Adalat
and the procedures laid down in CPC and ARAA have to be followed in combination, so far as it
is possible.[section 5(2) of ARAA]

Loans Not Recoverable Under the Statute:

1. Loans given to the Government by the following institutions are not recoverable by the Artha
Rin Adalat:
 International Finance Corporation,
 Commonwealth Development Corporation,
 Islamic Development Bank,
 Asian Development Bank,
 International Bank for Reconstruction and Development and
 International Development Association.[section 2Ka (12-17)]
2.Appropriation of money by the officers or employees of a financial institution can not be
entertained with this Act.[section 18(1) of ARAA]
3. The loan-receiver cannot file a case against the financial institutions under this statute. Neither
he can counterclaim or put any claim of set off against the financial institution while filing the
written statement.[section 18(2) of AARA]
4. Any case pending in any other court by the loan receiver being plaintiff cannot be heard
analogously with the case filed by the financial institution against that loan receiver in Artha Rin
Adalat and vice versa. Neither it is possible to stay the case under Artha Rin Adalat on that
ground.[section 18(3) of ARAA]

Establishment of Artha Rin Adalat:

According to Section 4 of the said act Government has established Artha Rin Adalat in every
district for trial of suits and carrying out other matters related to this Act. A Joint District Judge
shall be the Judge of the Artha Rin Adalat and shall be addressed as Judge, Artha Rin Adalat.

Jurisdiction of the Artha Rin Adalat:

According to Section 5 the Artha Rin Adalat Ain 2003, Artha Rin Adalat shall be deemed to be a
Civil Court and it shall have all powers and jurisdiction of a civil court. All the matters under this
statute, as long as it is regarding recovery of loans by financial institutions, has to be entertained
by Artha Rin Adalat of the relevant district. The judge of the Artha Rin Adalat is a Joint District
Judge.[Section 4 & 5]

Procedure of prosecution under the statute/Procedure of an Artho Rin

Suit:
It must be borne in mind that as the matters covered by this statute are of civil nature, therefore,
the Code of Civil Procedure (CPC) is the prime code that has to be followed regarding
procedural issues. If this is so, then the relevant steps for a civil case/suit under CPC are to be
complied with for cases under Artha Rin Adalat Ain 2003. The normal steps for a civil suit that
are to be followed for cases under Artha Rin Adalat Ain 2003 are:

1.Proceeding Stage:
Issue of Plaint:
If any property is given in mortgage or pledge or lien then before filing the plaint the financial
institution has to sell the property and adjust the loan or has to fail after trying to sell the
property. But for that, the financial institution has to have the lawful right or been given the right
to sell the property.[section 12 (1) and (3) of ARAA]
If the plaint has already been filed without the property being sold, then the plaintiff has to sell
the property and adjust the loan and inform the court in written form.[12(2) of ARAA]
Any third party mortgagors or third party guarantors involved with the loan, if there is any, are to
be made as opposite parties/defendants of the plaint along with the principal debtor.[section 6(5)
of ARAA]
The contents that are to be included within the plaint and the relevant formalities to be followed
are mentioned in section 8 of the ARAA. ARAA 2003 says that the plaint should be supported
by Affidavit and Ad Valorem court fees has to be paid with the plaint.[section 6(2) of ARAA]
However, these are mentioned concisely in rule 3 order XIX of CPC and rule 1 Para (2) of Order
XLVIII. This plaint supported by affidavit will be counted as substantial evidence and the court,
in case of default or summary judgment, can give order or judgment by solely relying on the
plaint without examining any witness.[section 6(4) of ARAA]

Issue, Service and Return of Summons:

Explanation regarding Issue, Service and Return of summons is given in section 7 of ARAA. For
example, summon has to be personally served and returned within 15 days of issue. If the
summon returns without being served then within the next 15 days from the date of return, the
court, if considers just, will serve the summon by advertising it in a popular national and a local
newspaper, if there is any. In this way the court can get rid of the requirement of serving
personally as in many cases the address of the defendant is wrong or something unexpected
occurs.[section 7(2) of ARAA]

Filing of written statement:

The contents to be included within the written statement and the relevant formalities to be
followed are mentioned in section 9 of the ARAA. The written statement has to be submitted
within 40 days after the defendant first appears in the court in order to answer the summon.
[section 11(1) of ARAA]
ARAA 2003 says that the written statement should be supported by Affidavit and Ad Valorem
court fees has to be paid with it.[section 6(3) of ARAA]
However, these too are mentioned concisely in rule 3 order XIX of CPC and rule 1 para (2) of
Order XLVIII. This written statement supported by affidavit will be counted as substantial
evidence and the court, in case of default or summary judgment, can give order or judgment by
solely relying on the written statement without examining any witness.[section 6(4) of ARAA]
If the plaintiff wants to give an additional written statement in reply to the written statement of
the defendant then he has to file it within 15 days of the filing of the written statement by the
defendant. [section 11 of ARAA]

Framing of issues:
If the parties are not at issue on any question of law or fact, irrespective of their presence or
absence at court, the court may at once pronounce judgment or order after the submission of
written statement or at any stage of the trial if it appears to the court upon scrutinising the plaint
and written statement.[Section 13(1), (2) and (3) of ARAA]
In CPC the rules 1 and 2 of Order XV are almost of same effect. If the defendant admits the
statement of the plaint whether by written statement or any other way, the court can at once
pronounce judgment or order by ignoring other pending issues awaiting to be disposed of.

Settling a date for hearing:

The date settled for hearing can be stayed only once upon application of any of the parties.
[section 14(1) of ARAA]
However if a party applies for staying the settled date again by paying an amount (between 1000-
3000 Tk) before a due date, the court can again allow to stay the settled date for hearing.[section
14(2) of ARAA]
2.Trial Stage:
Peremptory or final hearing:
If the defendant is absent on any date of final hearing the court can ex parte dispose of the case
by giving ex parte decree.[section 19(1) of ARAA]
In this case, the defendant can vacate the ex parte decree by applying within 30 days of the date
of passing of the decree or the date of his getting notified about the decree by depositing 10% of
the decreed amount in the court or in the financial institution.[section 19(2) and (3) of ARAA]
If the plaintiff is absent on any date or fails for any reason, the court cannot strike out the plaint.
In this case the court has to scrutinise the papers and dispose of the matter accordingly.[19(6) of
ARAA]

Arguments:
It is not obligatory for the judges to hear oral arguments before pronouncing judgment.[section
15(1) of ARAA]
Within five days of the completion of peremptory hearing (i.e. after examining all the witnesses),
the parties or any of them can submit written arguments to the court after notifying the court in
writing and supplying copies of the written arguments to all other parties. There is no option to
answer the arguments in written form.[Section 15(2) of ARAA]
The court can order the parties to give oral arguments for/against the written arguments if it
considers necessary.[section 15(3) of ARAA]

3.Post-Trial Stage:
Judgment and Decree:
Within 10 days of completion of peremptory hearing the court has to pronounce judgment.
However, if the court admits written or oral arguments then it has to pronounce judgment within
10 days of completion of written or oral arguments.The decree given by court is to be counted as
final decree in all respect except in case of mortgage suit for foreclosure of immovable property
under section 5(2). In this case, the decree given by the court is to be counted as preliminary
decree.[section 5(3) of ARAA]
This decree will become a final decree after the auction sale of the immovable property.[section
5(4) of ARAA]

Some important procedural provisions:

Selling the properties under mortgage, lien or pledge:
We have already seen above under the heading of ‘issue of plaint’ that selling the properties
under mortgage or hypothecation [12 (2)] or lien or pledge [12(1)] is a pre-condition for filing a
plaint. Now, if getting the possession of the property by the financial institution or transferring
the possession to the purchaser is necessary for complying with those sections then the defendant
will have to transfer the possession to the financial institution or to the purchaser. The financial
institution has to request the defendant in written form for the transfer. If the defendant rejects
the request then the financial institution will have to apply to the district magistrate having the
territorial jurisdiction to recover the possession and transfer the same to it or to the purchaser.
[section 12(5) and (5Ka)]

Auction sale:
Where a financial institution sells a property under mortgage or hypothecation in compliance
with section 12(3) of ARAA, then it has to follow the procedure of auction sale, so far as it is
possible, as written within section 33(1) to (3) of ARAA. Please note that, these procedures of
auction sale are normally applied during the execution of decree. The court by its own initiative
or upon application of the defendant, if the financial institution has not sold the property yet, has
to adjust the loan with the amount of the property give the decree accordingly. Please note that,
the court will not sell the property, it will just adjust the loan with the value of the property. It
will know the value from the financial institution’s estimate or from sub-registrar.[section 12(6)
of ARAA]
In this regard, if the financial institution wants to get the ownership of the property then upon his
written application to the court, the ownership of the property will be transferred to the financial
institution through a court’s certificate.[section 12(7) and 33(7)]
If the property under mortgage etc. is being sold to a purchaser then this will create a legal title in
favour of the purchaser. Nothing can challenge the purchase irrespective of whatever is written
in other Acts [section 12(8) of ARAA]. However, if there is any irregularity in the sale, then the
defendant can claim damages from the financial institution.[section 12(8) of ARAA]

Exclusivity of order given by Artha Rin Adalat:

No question about the judgment, decree, order or proceedings of Artha Rin Adalat can be
questioned in any court or authority without observing the provisions of ARAA. Nor any remedy
can be sought in any court without ignoring the provisions of ARAA.[section 20 ARAA]

Questions:
Query a: How long will it take to complete the money suit? How long will it take to complete
the execution case? Please describe the detailed procedure that has to be followed?
Please note that in accordance with section 5 (1) of the Artha Rin Adalat Ain 2003 (“Act”), all
suits relating to the recovery of loans granted by any financial institutions or banks as listed in
section 2 (ka) of the Act, shall have to be filed in the Artha Rin Adalat. And any suit filed under
the Act shall be registered in the name of Artha Rin Suit.
Section 5 of the Act provides that:
“(1) Notwithstanding anything contained in any other law, all suits relating to recovery of loans
of financial institutions shall have to be filed in the Artha Rin Adalat and shall be disposed of by
the said Adalat.
(8) Suits filed under this Act shall be registered in the name of “Artha Rin Suit”
The detail procedure of the suit along with the time schedule, from institution till decree has been
passed is stated in following sections:
Section 6 – Trial Process:
“(1) In the proceedings relating to trial or disposal of any suit filed in the Artha Rin Adalat
under this Act, the provisions of the Code of Civil Procedure, 1908 shall, subject to not being
inconsistent with the provisions of this Act, be applicable.
(2) Any suit under this Act shall be filed by financial institution by submitting a plaint, an
affidavit in support of the statements of the plaint and related documentary evidence shall be
annexed, ad valorem court fees payable with the plaint shall have to be paid and if the plaint is in
order, it must be registered serially in the concerned register of the Court.
(3) The defendant can oppose the suit filed by financial institution under this Act by submitting a
written statement, an affidavit in support of the statements of the written statements and related
documentary evidence shall be annexed and the submitted written statement shall be put in the
case file.
(4) In the disposal of suits under this Act, affidavits attached in accordance with the provisions
of sub-sections (2) and (3) shall be deemed to be substantial evidence, and in case of ex parte
hearing or immediate disposal of any suit, the Court shall, without examining any witnesses,
upon examination of the plaint along with affidavit or written statement along with affidavit and
related documentary evidence, pronounce judgment or order.”
Section 7 – Rules regarding Service of Summons:
“Notwithstanding anything contained in any other act still in force, in order to be served by
registered post by the process server of the court, the plaintiff shall submit all process fees in
order to serve summon with the plaint and the court shall immediately take steps to serve those
together and if it never returns or returns without being received within 15 (fifteen) working days
of the summons being issued, then the court shall within the next 15 (fifteen) working days, issue
summons in accordance with Rule 20 of Order 5, Code of Civil Procedure, 1908.”
Section 10 – Time limit for submitting Written Statement:
“(1) Subject to the provisions of sub-section (2), the Artha Rin Adalat shall not accept any
written statement filed by the defendant after 40(forty) days from the date of appearance of the
defendant, and in such case, the Court shall immediately dispose of the suit ex parte.
(2) Notwithstanding the provision of sub-section (1), the Court may increase the above-
mentioned time limit for a maximum period of 20(twenty) days on condition that the defendant
pays for expenses an amount, not less than Tk. 2000.00 and not more than Tk. 5000.00.”
Section 11 – Additional Statement against Written Statement:
“If the plaintiff financial institution intends to file additional statement in reply to the written
statement submitted by the defendant, subject to permission of the Court, the plaintiff shall
submit the same within 15(fifteen) days of submission of the written statement.”
Section 15 – Provisions relating to Oral or Written Arguments:
“(2) Subject to the provisions of sub-section (3), if any party or parties so wish, on notifying the
Court in writing immediately after completion of examination of witnesses and upon supplying a
copy thereof to the other party or parties, may submit written arguments within 5 (five) days, but
there shall be no scope for replying to the written arguments.”
Section 16 – Provisions relating to Delivery of Judgment:
“(1) The Court shall deliver judgment of the suit within maximum 10 (ten) days after
completion of examination of witnesses, but if the party or parties submit written arguments
under section 15(2) or the Court hears to oral arguments under sub-section (3), the Court shall
deliver judgment within maximum 10 (ten) days from the date of submission of written
arguments or hearing of oral arguments.

(2) If the Court, in the judgment or order, does not fix a longer time limit for repayment of the
decretal amount by installments, it shall direct the defendant to repay the decretal amount within
a time not exceeding 60 days.”

Section 17 – Provision for Time Limit for Disposal of Suit

“(1) Suits filed under this Act has to be disposed of within the maximum period of 30(thirty)
days from the date of service of summons if the defendant does not appear even after service of
summons, and if the defendant appears and files written statement, subject to the provisions of
sub-section (2), within 90(ninety) days from the date of filing written statement.

(2) Notwithstanding the provisions as contained in sub-section (1), if the Court fails to dispose
of the suit within the fixed time limit of 90(ninety) days, it may, on recording appropriate
reasons, extend the time limit for a further period of maximum 30(thirty) days.”

The relevant provisions specifying the time period for filing execution case is contained in
section 28 and 29 of the Act.

Section 28 – Time Limit for submitting Suit for Execution

“(1) Notwithstanding anything contained to the contrary in the Limitation Act, 1908 and the
Code of Civil Procedure, 1908, if the decree-holder intends to execute the decree or order
through Court, it shall, subject to the provisions of section 29, file suit for execution by
submitting application within 1 (one) year from the passing of the decree or order.

(2) In contravention of the provisions of sub-section (1), on expiration of 1 (one) year after
passing decree or order, any suit filed for execution shall be barred by limitation and the Court
shall summarily dismiss such suit.

(3) The second or subsequent suit for execution, if filed after one year from the date of disposal
or dismissal of the first or previous suit for execution, shall be barred by limitation; and the Court
shall, summarily dismiss such suit which is barred by limitation.

(4) If any new suit for execution is filed after expiration of the next 6(six) years from the date of
filing of the first suit for execution, such suit shall be barred by limitation; and the Court shall,
summarily dismiss such suit which is barred by limitation.”

Section 29 – Special provision regarding Time Limit

“If the Court, during delivery of judgment, fixes any time limit for repaying the decretal amount
at one time or in installments, the time limit mentioned in section 28(1) shall be effective after
expiration or ineffectiveness of such time limit.”

Please note that although the statute expressly mentioned specific time periods for disposal of the
artha rin suit, it may takes more time to dispose of the suit. The duration of the Suit may extend
depending upon the complicacy of the suit and factual disruption that may arise during different
stages of the proceeding.

Query b: Can we file money suit against the guarantors for attaching personal
properties/shares who have given their personal guarantees? What is the procedure and how
much time will it take to complete the entire process? Do we have to file a separate case for
this or it can be associated with the money suit filed against the client?

Please note that provision for filing Artha Rin Suit against the guarantors of the principal debtor
has been made in Section 6 of the Act.

Section 6 states as follows:–

“(5) In case of filing suits by financial institutions against the principal debtor, if there is any
third party mortgagor or third party guarantor related to the loan, they shall be made defendant;
and the judgment, order or decree passed by the Court shall be effective against all the
defendants jointly and severally and suit for execution of decree shall be conducted at the same
time against all the defendants-debtors:

Provided that in case of recovery of loan by execution of decree, the Court shall firstly, attach the
property of the principal debtor-defendant and thereafter, as far as possible, the property of the
third party mortgagor and third party guarantor respectively.”
In accordance with the above provision of law, it appears that if there is any guarantor present
who has provided any guarantee in relation to the loan granted to the principal debtor, they shall
be made party as defendant in the same suit that will be filed against the principal debtor and any
judgment, order or decree passed by the Court shall be effective against all the defendants jointly
and severally. No separate suit for such is required.

SCB may apply for an attachment of the property of the guarantor at the time of filing an
execution case for execution of the decree passed in the Artha Rin Suit. However, if it appears
that there is a possibility that the guarantor is about to dispose/remove whole or part of his
property, it may apply for an attachment of the property while the Artha Rin Suit is still pending
before the court. However, please note that in accordance with the provision of section 6 (5) of
the Act, in case of recovery of loan by execution of decree, the Court shall firstly, attach the
property of the principal debtor-defendant and thereafter as far as possible, the property of the
third party mortgagor and lastly third party guarantor.

Precedents to be used to avoid the misuse of the Artha Rin Adalat

Ain:
The Artha Rin Adalat Ain, 2003 (Money Loan Court Act, 2003) is the primary legal instrument
dealing with bank and non-bank financial institutions’ (NBFI) loan defaulters, which prescribes
mechanisms for the banks and financial institutions (FIs) to get reimbursed. The Act provides for
the establishment of a separate court for dealing with money loan cases, which can only be filed
by a bank or an NBFI. The Act obliges the banks and NBFIs to auction the mortgaged property
before approaching the Money Loan Court and empowers the Court to give ex parte decrees (by
hearing only one party) provided that summons have been duly served. The whole legislation
carries the spirit of resolving loan default matters as quickly as possible since the objective of
this law is to ensure fast repayment.
Even though the legislation was made to benefit banks and NBFIs, the trend is to use this
legislation to delay the reimbursement process. It is now a usual practice for defaulters to not
show up during the trial and let the Court pass ex parte decrees by only hearing the plaintiffs,
followed up with writ petitions to the High Court Division (HCD) of the Supreme Court of
Bangladesh seeking a stay order. Rarely is the intention of the defaulters to get the ex parte
decrees thrown out; instead, they seek to delay the process for as long as possible, which allows
the defaulters more time to do business with the credited amount and pressurise the banks to
decrease the interest rate. This is one of the many ways to delay the repayment process. Because
of this, many are advocating to amend the Act.
But amending the law is not the only available way of redress in this situation. We live in a
common law system where the judgments of the Judges of the Supreme Court are binding. One
attractive characteristic of the common law system is the adaptability it offers. The legislative
process is rigorous and in Bangladesh, they are enacted by a unicameral body. The lack of
adaptability of legislations is compensated by the decision making power of the judiciary. The
Judges have the power to develop the legal system. Noting the propensity of filing writs against
the special provisions of the Artha Rin Adalat Ain, 2003, the Supreme Court, from time to time
has given judgments to limit the scope of misusing the legal technicalities regarding loan
repayment methods. If they are followed stringently, amending the law will become unnecessary.
For example, defaulters tend to include the government as the primary respondent just to invoke
the writ jurisdiction of the HCD granted in Article 102 of the Constitution, such as in Mamun-
ur-Rashid (Md) v Secretary, Ministry of Law and others (2013), where the petitioner filed a
writ petition challenging the auction proceeding initiated by the bank under Section 12 of the Act
when the petitioner defaulted his loan. In this case the HCD found that the government was made
a party to the petition just as a cunning device to attract the writ jurisdiction, and held, ‘‘[w]rit
petition is not maintainable against the private bank and if in such a case to attract the
jurisdiction under Article 102 a device is taken by impleading the government a party that would
be only a futile exercise.” [para. 6] Upholding this precedent set by the Court will automatically
bar unwarranted writs, put a stop to the floodgate of writs filed with the same intention, and save
a lot of precious time.
Instead of filing an application to set aside an ex parte decree or lodge an appeal, the defaulters
often file writ petitions, looking for a stay order to buy some time. To block this, the Appellate
Division of the Supreme Court held in Gazi M Towfic v Agrani Bank and others (2002),
“[s]ince specific provision for appeal has been made against the judgement and decree passed by
the Artha Rin Adalat no application under Article 102 lies against such judgment and decree.”
To block any writ petition against the auction proceeding provided for in the Act the Appellate
Division held in Banesa Bibi v Senior Vice President (2011) that “In case of an auction held
illegally or with irregularity, the same cannot be challenged.”
So it is clear that many Judges of the Supreme Court have been aware of the misuse of the Artha
Rin Adalat Ain armed with the writ jurisdiction and have developed jurisprudence to combat this
misuse. If these precedents are followed properly and the writs filed with mala fide intentions are
discharged quickly, this trend of embezzlement can be somewhat restrained. The lawyers have a
big role to play here as they suggest these mechanisms to the defaulters fully knowing that the
writ will ultimately be discharged.