Debt Collection in Bangladesh

Debt collection in Bangladesh begins with a legal and practical assessment of the debtor, the basis of the debt and the documents available to prove it. At this stage, it is important to identify whether the claim arises from a commercial contract, unpaid invoices, delivered goods, services, a dishonoured cheque, a loan granted by a bank or financial institution, or a foreign court judgment that must be used against assets in Bangladesh. This classification affects the recovery route, the evidence required, the limitation analysis, the competent court and the available enforcement measures.

The initial assessment should also cover the debtor’s solvency, business sector, business history, registered or operating address, ongoing court cases, existing enforcement proceedings, bankable assets, receivables, movable or immovable property, securities, company shares and the debtor’s possible objections to the claim. For a foreign creditor, the practical value of the case often depends not only on the existence of a debt, but also on whether the debtor can be served, whether the documents are complete, whether the limitation period is preserved and whether the debtor has assets that can later be reached through court enforcement or bankruptcy-related remedies.

If the debtor has no ongoing court cases or outstanding judgments for debt collection and is actively engaged in business activities, then it is advisable to use the out-of-court debt collection stage.

The out-of-court debt collection stage involves active negotiations with the debtor to reach an agreement on payment of the creditor’s claims or other lawful settlement options, including return of goods, restructuring of payment, transfer of the debt to a third party, exchange of services or goods, or another commercially acceptable arrangement supported by written evidence.

Interaction with the debtor begins after sending a documented payment demand or notice by mail, email, phone or instant messengers, depending on the available contact details and the nature of the debt. Communication should be structured as a lawful demand and settlement process: the creditor should identify the debtor’s decision makers, request a clear payment position, record replies, preserve delivery confirmations, keep payment promises and collect any written acknowledgment of the debt.

The average time for informal out-of-court collection is up to 60 days, except in cases where a payment plan or another settlement timeline is agreed upon. If this stage does not bring the expected results, if the debtor disputes the claim without sufficient grounds, if limitation risks require faster action, or if the initial analysis shows that amicable recovery is not suitable, then it is necessary to proceed to collection through the courts.

Before initiating judicial collection, it is worth paying attention to the limitation period. For many contractual debt claims in Bangladesh, the limitation period is 3 years, but the exact calculation depends on the legal nature of the claim, the due date of the obligation, the documents confirming the debt and any later actions of the debtor. The limitation period may be affected if the debtor acknowledges the debt obligation in writing or makes a partial payment before the expiry of the applicable limitation period. After such acknowledgment or payment, the limitation period begins to count anew according to the Limitation Act, 1908.

The legislation of Bangladesh provides for several routes of judicial debt collection, depending on the legal nature of the claim, the debtor’s position and the documents available to the creditor. Ordinary civil proceedings are generally used for commercial debt claims based on contracts, invoices, delivery documents, services, reconciliation statements or other documentary evidence. Separate routes may apply to claims based on cheques, bills of exchange, foreign judgments or loans granted by banks and financial institutions.

The usual judicial procedure is carried out by filing a statement of claim with the court, after which the court checks the compliance of the claim with the requirements of the law and, if so, registers the claim. If the claim has been properly registered, the defendant must be issued a summons to appear in court and respond to the claim. The summons must be sent to the defendant within 5 days from the date of registration of the claim.

The defendant must, within 30 working days from the date of service of the summons, file a written statement in his defense. If there are valid reasons, the response period may be extended to 60 working days. If the defendant fails to file a written statement in his defense within the specified period, the court will consider the claim unilaterally.

The defendant must raise in his written statement all issues that show that the claim cannot be satisfied, and also give his reasons for each statement of fact the truth of which he does not admit. Each statement of fact in the claim, unless it is directly or indirectly refuted or indicated as inadmissible in the defendant’s statement, shall be considered accepted.

For a creditor, the strength of the case usually depends on the quality of the documentary file prepared before and during the court process. The evidence may include the contract, purchase order, invoice, delivery note, acceptance certificate, statement of account, reconciliation statement, bank payment records, correspondence with the debtor, proof of partial payments, written acknowledgment of the debt, demand notice, information about the debtor’s legal status and documents identifying assets that may later be relevant for enforcement. Digital records may also be important, including emails, electronic correspondence, scanned documents and other computer-generated records, where they are preserved and presented in a manner compatible with the rules of evidence.

On the date specified in the summons for the defendant to appear and testify, the parties must appear in the courthouse in person or accompanied by their lawyers for the hearing of the claim. If the defendant fails to appear in court and fails to provide valid reasons for such failure, the court may enter a default judgment against the defendant, except in cases where the court doubts the validity of the claim.

If the parties appear at the first hearing, the court must find out from each party or its lawyer whether he admits or denies such statements of fact that are made in the claim or written statement, if any, of the opposing party and that are not expressly admitted or denied by the party against whom they are made. The court must record such admissions and denials. If the parties admit the statements of fact, the court may immediately issue a decision.

For statements denied by the parties, the court formulates a list of issues that must be considered for the correct decision of the case. The court begins to consider the case, paying particular attention to the analysis of the evidence and documents presented. These materials help the court to understand the issues at issue, identify key disagreements between the parties, and assess the validity of their positions.

During the proceedings, the court examines the factual circumstances and legal arguments, which allows it to gain a full understanding of the situation. Once all issues of fact and law are clear, the court concludes the hearing and makes a decision based on its analysis and assessment of the evidence presented.

For debts arising from loans granted by banks or non-bank financial institutions, Bangladesh has a special legal framework under the Artha Rin Adalat Ain, 2003. This route is connected with the recovery of loans by financial institutions and should be separated from ordinary commercial debt claims between private companies. In such cases, the strategy may involve special rules on loan recovery, secured assets and court proceedings before the competent money loan court.

The simplified judicial procedure may be used to recover debts based on bills of exchange and cheques. This procedure is similar to the general procedure, but is carried out in an accelerated manner, which allows for a quicker consideration of the case and a decision.

Where the debt is supported by a dishonoured cheque, the creditor should also consider the special legal consequences under section 138 of the Negotiable Instruments Act, 1881. A cheque-based claim in Bangladesh requires careful attention to the bank return record, the written demand notice, the time for payment after notice and the filing period for the complaint. This route can be important where the cheque was issued for discharge of an existing debt or liability and was returned unpaid by the bank.

A court decision in a debt collection case may be challenged through the applicable appeal or revision route, depending on the court that issued the decision, the type of decree or order and the procedural law governing the case. In ordinary civil proceedings under the Code of Civil Procedure, 1908, an appeal from a decree or order to a court other than the High Court Division is generally filed within 30 days from the date of the decree or order, while an appeal to the High Court Division is generally filed within 90 days. If the case proceeds further from the High Court Division to the Appellate Division, the creditor or debtor may need to apply for leave to appeal within 90 days from the relevant decree, judgment or order. For money loan cases under the Artha Rin Adalat Ain, 2003, the special appeal period is 30 days. These time limits are important for debt recovery strategy, because the appeal stage affects when the judgment becomes final, when enforcement may begin and whether interim protection of assets should be considered.

If the creditor already has a foreign court judgment against a debtor located in Bangladesh, the creditor should first determine whether the judgment can be relied on under the rules on recognition and enforcement of foreign judgments. Under the Code of Civil Procedure, 1908, a foreign judgment is conclusive between the parties only if it does not fall within the statutory exceptions, including lack of competent jurisdiction, absence of a decision on the merits, incorrect view of international law or refusal to recognize Bangladesh law where applicable, breach of natural justice, fraud, or a claim founded on a breach of a law in force in Bangladesh.

A decree passed by a superior court of the United Kingdom or another reciprocating territory may be executed in Bangladesh under section 44A of the Code of Civil Procedure, 1908, after filing the certified copy and the required certificate before the competent District Court. In other cases, the creditor may need to bring a fresh suit in Bangladesh based on the foreign judgment and satisfy the court that the judgment is enforceable under the statutory test. The limitation period for a suit upon a foreign judgment is 6 years from the date of the judgment under the Limitation Act, 1908.

Once a Bangladesh judgment or an enforceable foreign judgment has entered into legal force, the creditor must initiate enforcement proceedings. A domestic judgment may be presented for enforcement within 12 years from the date of entry into legal force.

As part of enforcement proceedings, the creditor’s claims may be satisfied through court execution measures against the debtor’s identified assets. These measures may include attachment and recovery of funds from the debtor’s accounts, attachment and sale of movable and immovable property, attachment and realization of securities, attachment of company shares and recovery against other property rights or assets available under the execution process. For international creditors, asset identification before and during enforcement is often decisive, because a judgment has practical value only when the debtor’s bank accounts, receivables, property, securities, shares or other enforceable assets can be located.

An alternative option for debt collection is to use the bankruptcy procedure of the debtor. The creditor has the right to initiate this procedure if the statutory grounds exist: 1) the amount of the debt is more than 500,000.00 Bangladeshi taka; 2) the debtor committed an act of bankruptcy during the year preceding the opening of the bankruptcy procedure.

According to the provisions of the Bankruptcy Law, the debtor commits an act of bankruptcy in the following cases: the debtor transfers his property to third parties with the intention of evading the claims of his creditors or postponing their fulfillment; if the debtor is an individual, this condition also applies to property placed in the name of the spouse or children of the debtor; the debtor leaves the territory of Bangladesh; the debtor uses fraudulent means or conspiracy to obtain a judgment or directions contrary to the interests of its creditors; the debtor has notified the creditor in writing that it has suspended the payment of its debts or intends to do so.

For debt recovery purposes, bankruptcy is especially relevant when the debtor’s ordinary assets are insufficient, individual enforcement is ineffective, the debtor has transferred property before or during the dispute, or several creditors are competing for the same asset base. In such a situation, the creditor’s goal is not limited to obtaining a money judgment: it may also include preserving the estate, identifying transactions that reduced the debtor’s assets and increasing the property available for creditor satisfaction.

At this stage, if the debtor’s assets are not sufficient to fully satisfy the creditors’ claims, it is possible to set aside actions by the debtor that were taken with the intent to harm the creditors. Such actions include, but are not limited to: giving preference to one creditor over others; making transactions at reduced prices or without reciprocal obligations on the part of the counterparty; transferring property to related or controlled persons; creating encumbrances that reduce the value available for other creditors; or otherwise moving value away from the debtor’s estate.

In general, the court may set aside any transfer of property by the debtor, his legal representative, heir or other authorized person made within 15 years before the date of declaration of insolvency, if the court finds that the purpose of such transfer was to evade payment of debts.

As a result of the cancellation of the above actions, it is possible to return back to the debtor what he lost from such actions and thereby increase the liquidation estate to satisfy the claims of creditors and cover the costs of implementing the bankruptcy procedure.

If you need support with international debt collection in Bangladesh, GrandLiga can assist at each stage of the recovery process: assessment of the debtor and evidence, limitation analysis, lawful pre-trial communication, settlement negotiations, preparation for court proceedings, cheque-based recovery strategy, recognition and enforcement of a foreign judgment, execution against assets and bankruptcy-related recovery measures. The appropriate route is selected according to the documents, debtor status, type of debt, available assets and the procedural stage of the claim.

# DEBT COLLECTION AGENCY BANGLADESH

16.10.2024

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