Banking Recovery Laws in Bangladesh: Artha Rin Adalat Ain, Negotiable Instruments Act & Contract Act.

Banking Recovery Law Digest

Artha Rin Adalat Ain, 2003 · Negotiable Instruments Act, 1881 · Contract Act, 1872 (Guarantee, ss. 126–147)

Author: Manjurul Alam Arif · Practitioner reference — statutory maps, timelines, and traps.

All statutory text below is drawn directly from the Acts; verify current amendment status before relying on any provision in a filing, and confirm any case citation independently before use in a document.

Jump to Part A — ARAA 2003 | Part B — NI Act 1881 | Part C — Contract Act 1872 | Practitioner Notes

Part A — Artha Rin Adalat Ain (ARAA), 2003

primary

A.1 Structure of the Act

Chapter	Sections	Subject
1	1–3	Preliminary — title, application, override clause
2	4	Establishment of Artha Rin Adalat
3	5	Exclusive jurisdiction
4	6–20	Filing, written statement, framing of issues, ex parte decree
5	21–25	Alternative dispute resolution (mediation)
6	26–39	Execution (Jari)
7	40–44A	Appeal and revision
8	45–60	Miscellaneous (compromise, limitation traps, interest cap, interest rate, contempt, repeal)

A.2 Jurisdiction (ss. 4–5)

• Exclusive forum: All suits for recovery of loans by a "financial institution" (defined exhaustively in s. 2(ka)) must be filed in the Artha Rin Adalat established under s. 4; where none is declared for the district, filed in the Joint District Judge's court, which then functions as if it were an ARAA court (s. 4(3)).
• Mortgage suits (foreclosure/sale under Transfer of Property Act s. 67 + CPC Order XXXIV) also lie exclusively in the ARAA court (s. 5(2)); the decree is a preliminary decree only where foreclosure is sought — otherwise decrees in ARAA suits are final decrees (s. 5(3)).
• Government dues recoverable by BKB, RAKUB, and other state-owned FIs up to Tk. 5,00,000 may alternatively be filed as certificate cases under the Public Demands Recovery Act, 1913 (s. 5(5) proviso).
• ARAA is a civil court and has all powers of a civil court except where inconsistent with the Act (s. 5(11)).

Trap: s. 5(7) — ss. 5(1)–(6) do not apply where the "financial institution" is itself the borrower from Government under s. 2(ka)(12)–(17) (IFC, CDC, IDB, ADB, IBRD, IDA) — i.e., ARAA does not govern recovery from Government by these bodies.

A.3 Filing, Written Statement, Trial (ss. 6–20)

Section	Provision	Time limit
8	Plaint (Arji) — must plead particulars in s.8(1)(a)–(g) and the mandatory schedule in s.8(2) (principal, normal interest, penal interest, other charges, amounts already realised, comparative statement)	—
9	Written statement — must specifically admit/deny each claim particular	Filed on date fixed in summons
10	Cut-off for written statement	40 days from defendant's appearance; extendable by 20 more days on payment of Tk. 2,000–5,000 costs. Beyond this the court decrees ex parte automatically.
11	Additional reply by plaintiff to WS	15 days from WS filing, with leave
13	Framing of issues / judgment on admission	On the fixed date after WS
14	Adjournment of hearing	Only one adjournment on a party's application as of right; further adjournment only against costs of Tk. 1,000–3,000, and never in derogation of the s.17 time limit
15–16	Oral argument optional; written argument within 5 days of close of evidence; judgment within 10 days of close of evidence (or of argument)
17	Overall disposal timeline	No appearance: disposal within 30 days of summons service. Appearance + WS filed: disposal within 90 days of WS filing, extendable by a further 30 days for recorded reasons (i.e., 120 days outer limit)
19	Ex parte decree — application to set aside within 30 days of decree/knowledge, conditional on depositing 10% of the decretal amount in cash or as an instrument
20	Finality — no collateral challenge to any ARAA order/decree before another forum

Practitioner note: s. 6(4) makes the affidavit annexed to plaint/WS substantive evidence; in ex parte or summary disposal the court may decide purely on the affidavit and documents without oral examination of witnesses.

A.4 Alternative Dispute Resolution — Mediation (ss. 21–25)

• s. 21 repealed (2010 amendment).
• s. 22 — After WS is filed, the court must refer the suit to mediation (through the parties' lawyers, or the parties themselves if unrepresented), subject to s. 24. Mediator: mutually agreed advocate not engaged by either party, retired judge, retired bank/FI officer, or other suitable person (a person in profit-making Government office is disqualified). Timeline: 60 days from the referral order, extendable by 30 more days on joint written request or suo motu for recorded reasons. Mediation proceedings are confidential and not admissible as evidence if mediation fails. A mediated settlement order is final — no appeal or revision lies.
• s. 23 — If s.22 mediation fails, the parties may still settle via the alternative mechanism at any stage before judgment, with leave, but this cannot override the s.17 disposal timeline.
• s. 24 — FI's Board of Directors (or equivalent) must delegate settlement authority to central/regional/local officers by order/circular, specifying limits and procedure, copied to the relevant ARAA court. Court must confirm any mediated compromise is within the delegated limit and approved by the FI's MD/CEO before decreeing it.
• s. 25 — For claims exceeding Tk. 5 crore, the mediation settlement report requires the MD/CEO's personal approval.

A.5 Execution — "Jari" (ss. 26–39)

Section	Provision
27	Executing court = the ARAA court itself, or a court to which it transfers execution
28	Limitation for filing execution — application must be filed within 1 year of the decree/order (post-2010 amendment; previously 180 days). Second/subsequent execution case time-barred if filed more than 1 year after prior execution case dismissed/disposed. A wholly new execution case is time-barred if filed more than 6 years after the first execution case was filed. These are cumulative, not alternative, bars — a common misreading.
30	Notice of execution — registered post with AD; if unserved/unreturned within 15 days, substituted service by newspaper publication within the next 15 days
31	Appeal/revision does not automatically stay execution — an express stay order from the higher court is required
32	Third-party claims in execution — objection within 30 days; claimant must deposit 10% security/bond of the (unrealised) decretal amount, or the claim is disallowed; frivolous/dilatory claims → security forfeited
33	Auction sale — tender process with earnest money tiers: 20% (up to Tk. 10 lakh bid), 15% (Tk. 10–50 lakh), 10% (above Tk. 50 lakh). Full payment deadlines: 30/60/90 days respectively by bid tier, extendable by court up to 60 more days on the decree-holder FI's request. Unsold property → vests in decree-holder with possession rights (s.33(5)); decree-holder must apply for ownership within 6 years of such vesting or ownership automatically lapses (s.33(6L))
34	Civil imprisonment (Deojani Attock) — up to 6 months; not available against legal heirs of a deceased borrower who succeeded only under inheritance law; a company/firm's natural-person officers are jointly/severally liable to detention; release on full payment, or on depositing 25% + bond to pay balance in 90 days; minors under 18 exempt; precondition: at least one auction sale must have already been attempted (s.34(9))
36	Garnishee-style recovery from third parties (debtors of the judgment-debtor) and from post offices/banks/FIs/insurers holding the judgment-debtor's money — no passbook/instrument production required
37	Execution disposal timeline: 90 days from filing, extendable by 60 more days for recorded reasons
38	Mediated settlement at execution stage — follows s.22(2)-(4) procedure

A.6 Appeal and Revision (ss. 40–44A)

Provision	Forum	Time limit	Pre-deposit
s. 41(1)	Decree > Tk. 50 lakh → High Court Division; ≤ Tk. 50 lakh → District Judge	60 days (HCD) / 30 days (District Judge), from decree	—
s. 41(2)–(3)	—		50% of decretal amount (cash or bank guarantee/instrument); credit given for any 10% already deposited under s.19(3) for setting aside an ex parte decree
s. 41(4)	—		Financial institution appellant: no deposit required
s. 41(6)	Appeal disposal: 90 days from admission, extendable 30 more days		—
s. 42(1)	Revision against appellate decree		75% of the decretal amount as affirmed/passed in appeal, inclusive of the 50% already deposited at appeal stage
s. 42(2)	—		FI as revision petitioner: no deposit required
s. 42(3)	Revision disposal: 60 days from admission, extendable 30 more days		—
s. 43	Further appeal to Appellate Division — Leave required; AD may require deposit of unpaid balance following s.41(1) pattern		—
s. 44	Interlocutory orders — not separately appealable/revisable, but may be raised as a ground within a s.41 appeal
s. 44A	Mediation available at appeal/revision stage — follows s.22(2)-(4)

Trap: s. 50(4) — if a debtor bypasses the s.41/42 deposit requirement and instead files a writ petition in the HCD challenging the decree/order, and the writ is dismissed, interest during the pendency is charged at an enhanced 25% simple per annum (the "writ-as-shortcut" penalty).

A.7 Miscellaneous (ss. 45–60) — Key Practitioner Provisions

s. 45 — Compromise

Parties may compromise a suit at any post-trial stage; this does not disturb the s.17 disposal timeline.

s. 46 — Mandatory suit-filing trigger (Rescheduling)

If, after repayment under the agreed schedule commences, the FI has not recovered at least 10% (1st year) / 15% (2 years) / 25% (3 years) of amounts due, it must file suit within the following 1 year (s.46(1)). Separate trigger under s.46(3) for repayment schedules under 3 years total, keyed to a 20% recovery threshold. Rescheduling within these windows resets the clock (s.46(2), (4)) but this rescheduling is a narrower ARAA concept distinct from Bangladesh Bank BRPD administrative restructuring criteria — ARAA courts do not adjudicate BRPD restructuring terms directly. Non-filing within time triggers mandatory disciplinary action against the responsible bank officer, reported to Government and the court within 90 days (s.46(5)). This section became operative one year after commencement (i.e., from 1 May 2004), though FIs could opt in earlier.

s. 47 — Cap on claimed interest/charges

Total claim in a suit (principal + all interest/charges) cannot exceed 200% of the principal (i.e., claim capped at 3× principal). Also delayed in operation by one year from commencement, with early opt-in permitted.

s. 49 — Instalment facility

Court may allow repayment in 4 equal instalments over 1 year (s.49(1)), or — with plaintiff's consent — 12 instalments over 3 years (s.49(2)). Default on any instalment accelerates the whole balance (s.49(3)).

s. 50 — Interest/profit rules

• s.50(1): Court cannot reduce, waive, or excuse lawfully-charged interest for the period before suit filing.
• s.50(2): Post-filing to realisation interest rates (simple, per annum) — 12% if no appeal/revision filed; 16% if appeal/revision/further application filed in a higher court; 18% if appeal to Appellate Division against a higher court decree/order.
• s.50(3): Higher court may direct the enhanced rate not apply if it substantively varies the decree.
• s.50(4): 25% penalty rate where a writ petition bypassing ss.41/42 deposit is filed and dismissed (see Trap above).

s. 51 — Judicial proceedings

ARAA proceedings are deemed judicial proceedings under Penal Code ss.193, 228 (false evidence / contempt in judicial proceedings).

s. 52 — Contempt

Contempt of ARAA court: fine up to Tk. 1,000 or default imprisonment up to 10 days simple.

s. 56 — Refund/adjustment of security deposits

Refund/adjustment of security deposits made under ss.19(3), 41(2), 42 after final disposal.

s. 60 — Repeal

Repeal of Artha Rin Adalat Ain, 1990; savings for pending appeals/suits, which continue as if filed under the 2003 Act.

A.8 Comparative Table — Deposit/Interest Percentages Across the Act

Section	Context	Percentage	Basis
19(3)	Setting aside ex parte decree	10% of decretal amount	Cash or negotiable instrument
32(2)	Third-party claim security in execution	10% of (unrealised) decretal amount	Security/bond
33(2)	Auction earnest money	20% / 15% / 10% (tiered by bid size)	Bank draft/pay order
34(6)	Civil imprisonment conditional release	25% of unpaid decretal amount + bond	Cash + 90-day undertaking
41(2)	Appeal pre-deposit	50% of decretal amount	Cash/instrument (FI-plaintiff exempt)
42(1)	Revision pre-deposit	75% of appellate decretal amount (inclusive of the 50% already paid)	Cash/instrument (FI-plaintiff exempt)
46(1)	Mandatory suit trigger — recovery shortfall	10% / 15% / 25% (1/2/3-year bands)	Of amount due under repayment schedule
46(3)	Mandatory suit trigger — short-tenor loans	20%	Of amount due over sub-3-year schedule
47(1)	Cap on total claim	200% of principal (claim ≤ 300% total)	Statutory ceiling
50(2)	Post-suit interest	12% / 16% / 18%	By litigation stage (trial / appeal / Appellate Division)
50(4)	Writ-bypass penalty interest	25%	Where writ dismissed after bypassing deposit

Part B — Negotiable Instruments Act, 1881

Banking-relevant

B.1 Core Definitions (ss. 4–13)

Promissory note (s.4) unconditional written promise, signed by maker, to pay a certain sum to a certain person/bearer. Bill of exchange (s.5) unconditional written order (not promise) directing payment. Cheque (s.6) a bill of exchange drawn on a banker, payable on demand. Holder (s.8) vs Holder in due course (s.9) the latter must have taken the instrument for consideration, before maturity, without notice of any defect in title — this status carries the strongest protections (ss.53A, 120–122 estoppel provisions).

B.2 Presumptions Favouring the Holder (s. 118, s. 119)

Until the contrary is proved: every instrument was made for consideration; every dated instrument was made on that date; every acceptance was within a reasonable time before maturity; indorsements appear in the order shown; and the holder is a holder in due course (burden shifts to holder only if the instrument was shown to have been obtained by fraud/offence/unlawful consideration).

B.3 Dishonour of Cheque — Section 138 (the criminal recovery tool)

Element	Requirement
Trigger	Cheque returned unpaid for insufficient funds, or amount exceeds arrangement
Presentment window	Within 6 months of the date on the cheque, or its validity period, whichever is earlier
Demand notice	Written notice to drawer within 30 days of receiving information of dishonour from the bank
Drawer's cure period	30 days from receipt of notice to pay
Offence crystallises	Only if drawer fails to pay within that 30-day cure window
Punishment	Imprisonment up to 1 year, or fine up to 3× the cheque amount, or both
Cognizance	s. 141 — only on a written complaint by the payee/holder in due course, filed within 1 month of the cause of action (i.e., expiry of the 30-day cure period); no court below Sessions can try the offence
Appeal restriction	s. 138A — no appeal against a s.138 sentence unless ≥ 50% of the cheque amount is deposited before filing the appeal
Company liability	s. 140 — every officer in charge of/responsible for the company's business at the time is deemed guilty along with the company, subject to a due-diligence defence
Civil remedy preserved	s. 138(3) — holder retains the right to pursue the unrecovered balance through civil court even after a s.138 fine is realised

Interplay with ARAA: A dishonoured cheque given as security for a bank loan does not preclude simultaneous or sequential recovery under ARAA for the underlying debt — the NI Act s.138 complaint and the ARAA money suit address different wrongs (criminal dishonour vs. civil debt) and are not mutually exclusive, though double recovery of the same sum is not permitted.

B.4 Presentment, Notice, Discharge — Quick Reference

• Reasonable time for presentment/notice of dishonour (ss. 105–107) is fact-specific — courts look at instrument type, trade usage, and whether parties are in the same or different locality.
• Interest where none specified (ss. 79–80): 6% per annum from the date the sum became payable until realisation or suit.
• Material alteration (s. 87) voids the instrument against a non-consenting party unless it merely carries out the parties' common intention.
• Crossing (ss. 123–131C): "account payee" crossing (s.123A) removes negotiability and restricts the collecting bank to crediting only the named payee's account.

Part C — Contract Act, 1872 — Law of Guarantee

ss. 126–147

Frequently decisive in recovery matters involving third-party guarantors under ARAA s. 6(5).

Section	Rule	Practical effect for bank recovery
126	Definition — guarantor promises to perform/pay if the principal debtor defaults	Establishes the three-party structure (creditor–debtor–surety)
127	Consideration	Benefit to the borrower is sufficient; guarantor need not personally benefit
128	Co-extensive liability	Guarantor liable to the same extent as borrower unless the guarantee caps the amount — critical for computing the guarantor's exposure in an ARAA suit
129	Continuing guarantee	Covers a series of transactions (e.g., overdraft/revolving facility) until revoked
130	Revocation by notice	Ends liability for future advances only; past liability survives
131	Revocation by death	Generally ends continuing guarantee for future transactions; existing liability survives against the estate
132 & 142	Misrepresentation	Guarantee obtained by misrepresentation of material facts is invalid — a common defence raised by guarantors
133	Variance without consent	Material unilateral change to the loan terms discharges the surety pro tanto — check for unilateral rate/tenor changes before suing a guarantor
134	Release of principal debtor	Generally releases the guarantor too, absent contrary agreement
135	Time/compromise given to debtor without surety's consent	Discharges surety — relevant where a bank privately reschedules with the borrower without guarantor's sign-off
136	Third-party agreements	Do not affect guarantor's liability
137	Mere delay in suing	Does not discharge surety — delay alone is not a defence
138	Release of one co-surety	Does not automatically release other co-sureties
139	Creditor impairs surety's remedy	If the bank negligently loses/releases security, surety is discharged to that extent
140	Subrogation	On payment, guarantor steps into the bank's shoes against the borrower
141	Surety's right to securities	Guarantor entitled to benefit of all collateral held by the bank; improper release of security discharges guarantor pro tanto
143	Concealment	Deliberate concealment of material facts from the guarantor voids the guarantee
144	Conditional guarantee	Not enforceable until the stated condition (e.g., a co-guarantor also signing) is fulfilled
145	Indemnity	Guarantor who pays may recover from the borrower
146–147	Contribution among co-sureties	Equal contribution unless the co-sureties agreed to different capped amounts

High-value defence checklist for guarantor-side or bank-side pleadings: ss. 133, 135, 139, and 141 are the four provisions most often litigated as guarantor discharge defences — always check the loan file for (i) unilateral term variations, (ii) any private rescheduling/compromise with the borrower, and (iii) the status/release of any security, before either suing a guarantor or defending one.

Cross-Cutting Practitioner Notes

essential

1. s. 28 ARAA limitation is a double, cumulative bar — the 1-year post-decree filing window and the 6-year outer window from the first execution filing both apply; missing either is fatal, not just the later of the two.
2. Rescheduling (ARAA s. 46) ≠ BRPD restructuring — the ARAA trigger is about when suit must be filed based on recovery shortfalls against a repayment schedule; Bangladesh Bank's BRPD circulars set independent prudential/classification criteria for restructuring and are not directly enforced by ARAA courts.
3. Channel of communication in recovery disputes — a borrower's grievance sent through the proper institutional channel (MD's office) versus simultaneously to a bank officer's personal channel (e.g., personal messaging) can shift the character of the communication from a legitimate complaint toward potential criminal intimidation (Penal Code ss. 503/506) — always assess channel, not just content.
4. Misconduct vs. debt claim — a borrower's misconduct (e.g., threats, harassment) does not affect the underlying debt claim's validity under ARAA or NI Act s.138, but is highly relevant when opposing bail, leniency, or mediation requests.

This digest consolidates statutory provisions already on file (ARAA 2003 as amended through the Artha Rin Adalat (Sangshodhan) Ain, 2010; NI Act 1881 as amended through 2006; Contract Act 1872 ss.126–147). It does not include judicial citations — verify any case law separately through DLR/BLC/BLD/MLR/LNJ/SCOB before citing in a filing.

Banking Recovery Law Digest • For practitioner reference only