BUS 201

Assignment: Case Study

Business Law

August 6, 2012

11304043 Samiya Yesmin 11304018 Protiti Khan 07310029 Shawlee Tasreen

Q.1. BRAC Bank Ltd. maintains a posh and luxurious branch office in Gulshan, Dhaka under a ‘Contract of Tenancy’ with the landlord of the premises. The tenancy in question is a long one (for a period of 10 years) because the BRAC Bank Ltd paid Tk. 50,00,000/- as advance to the landlord and also invested quite a sum of money for facing-up and internal decorations of their branch office too.

Eventually BRAC Bank Ltd. received a notice from the Revenue department of Government of Bangladesh addressed to their landlord for payment of arrear revenue of Tk. 5, 05,000 that remain unpaid/due to the landlord for a considerable period of time and the notice also signifies that in the event of failure to pay in time the Government shall cancel the landlord’s lease and take position of the property (the branch office of BRAC Bank Ltd.). Thus, the management of BRAC Bank Ltd. not finding the landlord in Bangladesh, immediately paid the arrear government revenue in time in order to avoid any untoward situation, eviction from the property and also to protect their own interest.

Afterwards, when the BRAC Bank Ltd. ask for reimbursement from the landlord (by deducting the amount from monthly rent) landlord objected by saying that payment of arrear revenue by the BRAC Bank Ltd was irregular and if they did so, they did that on their account .The landlord further argued that neither the arrear revenue was due to the BRAC Bank Ltd. nor their exist any such obligation in the ‘Contract of Tenancy’ that they (BRAC Bank) would have to pay for him.

BRAC Bank Ltd. is eager to realize the money paid by them. Advice them.

- Contract Act 1872- Contract of Tenancy- Quasi-Contract sec 69- Landlord unavailable in BD during the crucial time - Unjust benefit/enrichment - Threat of the event of failure to pay in time the Government shall

cancel the landlord’s lease and take position of the property- To save BRAC’s own interest- So file a suit and get the money based on all the above-

Q. 2. Mr.Y, an elderly descendant from the Nabab family of Bogra, while in need of cash fund handed over an old sofa-set with ornamental engraved designs on it (in fact, an antique) made of Burma-teak wood to an Auction House at Dhaka to sell the same in auction on his behalf and informed them that the sofa-set should not be sold below an amount of Tk. 300,000/-. One Mr. Chowdhury (an antique collector having good knowledge of antiques and their values) became interested in it and followed the items on different auction dates and found that nobody is bidding for the same for more than Tk. 1,00,000/- or so (not understanding the real value of it). But he still keeps on waiting and finally bought it for Tk. 120,000/- only knowing that ‘reserved price’ for the said item was earlier fixed at Tk. 300,000/-.

In terms of the auction, Mr. Chowdhury paid Tk. 120,000/- to the Auction House and took delivery of the sofa-set accordingly.

While the Auction House asks the owner of the antique (Mr. Y) to take the sale proceeds of the auction sell, he (Mr. Y) refused to accept the same from the Auction House saying that they cannot sell the antique below the price set by him earlier (which is taka 300,000/-). But the Auction house replied that they have done nothing illegal and as such, they are not bound to give any formal reply to his allegations.

The antique owner (Mr. Y) came to you for advice. Advise him.

BRAC Bank Ltd. was under the “Contract of Tenancy” with the landlord of the bank’s Gulshan Branch office. Receiving a notice to pay the arrear revenue from the Revenue Board of Bangladesh the bank management decides to make the payment on behalf of the landlord, as he was not available at that moment. Later on the bank asks for reimbursement by adjusting the amount from the monthly rent. The landlord refuses to comply saying there existed no such contract between them. BRAC Bank Ltd. was in a long term contract with the landlord, paying him an amount of 50,00,000 in advance. The Contract of Tenancy was for a period of 10 years. The bank also invested money for facing up and decorating the interior of the office.

The bank received a notice from the Revenue board of the country stating that an amount of 5,05,000 remains due to the landlord for a substantial period of time. The failure to pay the due in time will result in cancelation of the lease and the Government taking possession of the property. The notice was addressing the landlord but he remained unreachable. To serve their own interest the management of the bank decided to pay the revenue on behalf of him, to avoid any unpleasant situation like eviction from the property which may damage the image of the bank.

Soon after the bank asks for reimbursement from the landlord by deducing the amount paid for the arrear revenue from the monthly rent. The landlord objects and refuses to refund, arguing that it was irregular and they paid it on their own account. He points out that the Contract of Tenancy existing between them does not specify any such reimbursement. The bank was not obliged with paying the arrear revenue as it was not due to them, so in paying the amount they embark the responsibility on themselves, and he is not liable for any refunds.

The Law in question here is the Contract of Tenancy. This agreement regulated the Tenant’s and the Landlord’s rights and obligations. It precedence over any contractual terms and conditions. It sets out the legal

terms and conditions of the rent contract. The contract between BRAC Bank Ltd. and the landlord does not specify a problem like this.

Nevertheless the situation falls under the rule of the Quasi-Contract referring to the Section 68-72 of the Contract Act, 1872. Contractual obligations are generally voluntarily created; but there are some obligations which are not contractual, but which are treated as such by law, that is to say, there in no contract in fact, but there is one in the contemplation of law. Such contracts are called quasi-contracts. The principle of quasi-contract is based on unjust benefit of unjust enrichment. A person who has received benefit from another person, must pay for it. Otherwise it would be unjust for him to retain such benefit. Law does not support unjust benefit or unjust enrichment at the cost of another person.

Section 69 of the Contract Act, 1872 states, A person, who is interested in the payment of money pays it, is entitled to be reimbursed by the other. Thus, if a tenant, in order to protect his interest, pays off the Government revenue of his landlord, he can recover the same from the landlord (Sec. 69).

The situation in hand is a perfect example of the Quasi-Contract. The bank’s management, to save their own interest, paid the revenue to the Government. The landlord’s claims were right on the fact that the situation can not be explained by the rule of the contract between them (Contract of Tenancy) . But in making the payment the bank and the landlord automatically went into a contract that might not be a contract in writing but one in the contemplation of law. And the law would not support unjust enrichment of the landlord in expense of the Bank. So referring to the Section 69 of the Contract Act, 1872 BRAC Bank Ltd. can actually realize the money paid by them. And the landlord is bound to pay or adjust the amount with the monthly rents

Q. 3. Mr. Chowdhury, a proprietor of a shoe factory, used to borrow money for his business on interest from a group of moneylenders. Business being dull from the very beginning, Mr. Chowdhury could never pay his debts in time to his creditors. Eventually, on the Tuesday, 6th, January 2004 he transferred all his valuable properties to his near relations in order to delay payments to the creditors. So, the creditors decided to go for legal action and thus filed a bankruptcy / insolvency petition against him on the Sunday, 9th January 2005. On the hearing of the said petition Mr. Chowdhury argued that the aforesaid petition of the creditors cannot be maintained under the provision of the Bankruptcy Act, 1997 and also demanded compensation for the same.

- Advice, the creditors.

This is a case of Bankruptcy Act 1997, under which when a person is unable to pay his pay his debts to his creditors the District Court considers him to be declared insolvent and proceeds to distribute his assets among his creditors.

Mr. Chowdhury is in a slow moving shoe production business and lately has not paid any of his debts while transferring all of his valuable properties to his near relations. And as per Section 9 of Bankruptcy Act 1997, he (Mr. Chowdhury) has committed an act of Bankruptcy by transferring his properties to his near relations by “benami”, with intent to delay paying his creditors.

As per the Section 12 of Bankruptcy Act 1997, creditors can petition for Bankruptcy proceeding when:

1. When creditors have a prima facie case that the debtor has committed an act of Bankruptcy under Sec. 9 of Bankruptcy Act 1997. As we know Mr. Chowdhury has done so by transferring his properties to his near relations by “benami”.

2. The act of Bankruptcy on which the petition is grounded has to occur within one year before the presentation of the petition. In this case such has occurred as it was on the , 6th, January 2004 when Mr. Chowdhury transferred his properties to his relatives and on 9th January 2005, one year and 3 days laters, when his creditors have files a suit against him.

3. The debt owing by the debtor to one or more creditors is taka five lacs or more. His creditors can prove to court that Mr. Chowdhury does indeed owe more than 5 lacs taka to them.

By fulfilling all three of the above conditions the creditors have rock-solid grounds for petitioning against Mr. Chowdhury for an order of adjucation, adjudging him insolvent.

But if one of the 3 condition for this petition cannot be fulfilled namely the third regarding debt of 5 lacs or more, then Mr. Chowdhury does have grounds to file a suit against the aforementioned petition of the creditors, which cannot be maintained under the provision of the Bankruptcy Act, 1997 and also demanded compensation for the same.

Thus creditors should all join together and make sure that the debt does accrue to taka five lacs at least. Then if the Court does not dismiss the petition of the creditors against (Mr. Chowdhury) it shall make an order of adjudication declaring debtor (Mr. Chowdhury) insolvent and shall also specify the period within which the debtor shall apply for his discharge. And under the order of adjudication the court shall:

a. Declare the debtor (Mr. Chowdhury) to be a disqualified from, so long as the bankrupt (Mr. Chowdhury) remains undischarged, (i) being appointed or acting as a Magistrate, (ii) being elected to any office of a local authority. (iii) being elected or sitting or voting as member of any local authority.

b. The Order of adjudication will relate back to and take effect from the date of the presentation of the petition on which it was made. Thus the title of receiver shall commence on the date of the presentation of the petition.

c. During the pendency of the bankruptcy proceeding, any creditor of the bankrupt cannot file any other suit against him (bankrupt, Mr. Chowdhury).

d. Any court in which a suit or other proceeding is pending against the debtor (Mr. Chowdhury) shall on proof that an order of adjudication has continue on such term as it may impose.

e. The whole of the property of the bankrupt (Mr. Chowdhury) vests in theCourt or in a receiver, and become divisible among his creditors.

f. The bankrupt (Mr. Chowdhury) shall aid to the utmost of his power in the realization of his property and the distribution of the proceeds among his creditors.

And also under the special powers of Bankruptcy court Section 7, the creditors of (Mr. Chowdhury) may plea to order the defaulting debtor to civil prison for committal of such defaulting.

Thus creditors if you can prove to the court that the amount of debt is taka five lacs or more, then you have a solid case to landing Mr. Chowdhury as defaulter in Bankruptcy Court under Bankruptcy Act 1997.