BRAC Vs. PROFESSOR MOZAFFAR AHMED
LAWS(BANG)-2001-6-1
SUPREME COURT OF BANGLADESH
Decided on June 04,2001

Brac Appellant
VERSUS
Professor Mozaffar Ahmed Respondents

JUDGEMENT

MAHMUDUL AMIN CHOUDHURY,J. - (1.) These appeals by leave are against judgment and order passed in Writ Petition No.4938 of 1999 by a Division Bench of the High Court Division which was filed as a public interest litigation questioning the validity of certificate dated 4-4-1999 of Bangladesh Bank giving no objection for the incorporation of BRAC Bank Limited by Bangladesh Rural Advancement Committee, briefly known as BRAC, a society registered under the Societies Registration Act, 1860 and the Memorandum and Articles of Association of BRAC Bank Limited and its certificate of incorporation issued on 20-5-1999 by the Registrar of Joint Stock Companies. Further case of the writ petitioner is that pursuant to the issuance of the aforesaid certificate of no objection dated 4-4-1999 BRAC proceeded to incorporate BRAC Bank Limited with the Registrar of Joint Stock Companies and Firms. Thereafter BRAC invested moneys in the purported BRAC Bank Limited to the extent of Taka 19,99,400 being 99.97 percent of the paid up capital of BRAC Bank as is evident from the Memorandum and Articles of association of the Bank. It is apparent from the objectives of BRAC that BRAC is entitled to engage itself in charitable purposes and other activities set out under section 20 of the Societies Registration Act but nowhere under the terms of registration BRAC is permitted to undertake the activities of sponsoring, owning, controlling, or operating a banking company or, operating a banking company or, for that, matter an airline, shipping company, construction company or other commercial enterprises. Further case of the writ petitioner is that, ownership of BRAC in the purported BRAC Bank Limited is not consistent with section 20 of the Societies Registration Act, 1860, briefly SRA, inasmuch as section 20 of the Act contemplates activities of registered societies in the field of promotion of science, literature, fine arts, diffusion of useful knowledge but not as a public company limited by shares. Further case of the writ petitioner is that, the Bank Companies Act, 1991 provides that a bank must be a public limited company and must fulfill several other criteria in order to be considered eligible to be a banking company. Further, BRAC Bank Limited is not a lawfully constituted public limited company since it is composed of less than seven persons inasmuch as Respondent No.7, 8, 9 in the writ Petition not being separable from BRAC are in the eye of law one and the same person and one of the subscribers of BRAC Bank limited Mr. Syed Humayun Kabir is the present Chairman of the Executive Council of BRAC with the effect that BRAC Bank Limited is, in reality, composed of BRAC itself. If BRAC, a registered society, is allowed to own, control, manage and operate, the business of banking in violation of the terms and conditions and laws of incorporation there will be a serious undermining of the commercial, financial and, more importantly, legal framework in the country with the effect that legitimate and otherwise qualified entities and persons will be precluded from undertaking commercial banking and financial activities and serious financial indiscipline will ensue in Bangladesh. The writ petitioners further case is that to allow BRAC to invest moneys in sponsoring, subscribing, owning, controlling and operating the BRAC Bank Limited as a banking company would also render nugatory the intent and purposes of the Bankruptcy Act, 1997 wherein it has been stated that a charity cannot be sued under the Bankruptcy Act and whereas the proposed BRAC Bank Limited being owned by a registered society and or a charitable society cannot be proceeded against under the Bankruptcy Act in circumstances where it would be necessary to do so thereby severely undermining the fundamental rights of the writ petitioner and a multitude of individual creditors and depositors afflicted by a common wrong, injury and invasion. It is also the case of the writ petitioner that by their common action the respondents in the writ petition have attempted to circumvent the law and have committed a fraud on several statues.
(2.) Before the High Court Division respondent No.1 of the writ petition filed an affidavit-in- opposition and his case is that BRAC is a registered society having been registered on 18-12-1972 in accordance with the SRA 1860. Their objection is that the writ petition as filed is not maintainable on the ground of locas standi to the petitioner to file the writ petition and laches as it was filed after over eight months of issuance of the alleged impugned order and after seven months of the date of the certificate of incorporation for which declarations are sought. Their further case is that, BRAC Bank is a lawfully constituted banking company duly incorporated with the Registrar of Joint Stock Companies as a public limited company under Companies Act, 1994 and respondent No.2 of the writ petition has legally given the certificate of incorporation. Neither the Bangladesh Bank Order (Presidents Order 127 of 1972) nor the Banking Companies Act 1991 imposes any particular requirement for a person to be a sponsor of a banking company. Respondent Nos. 8, 9 and 10 of the writ petition are the lawful shareholders of BRAC Bank Limited being citizens of Bangladesh with high experience and having the legal right to sponsor any commercial bank. Respondent No. 1 of writ petition rightly, validly and justly issued letter of no objection dated 4-4-1999 to allow BRAC to incorporate the draft Memorandum and Articles of Association of the proposed BRAC Bank Limited and respondent No. 2 of the writ petition rightly issued the certificate of incorporation of the Bank on 20-5-1999. The Memorandum of BRAC clearly authorises BRAC to invest its moneys in purchasing shares of a corporate entity whether it is a banking company or otherwise. The terms of SRA 1860 has not put any legal bar to argument its income. BRAC by purchasing shares of BRAC Bank Ltd. is in no way covering itself to or acting as public company limited by shares and the ownership of shares in BRAC Bank Limited is conducive to the charitable activities of BRAC which are fully within the ambit of the activities as contemplated under SRA 1860 and, as such, are not barred by either SRA 1860 or any other law, rule or regulation for the time being in force. BRAC was given permission to sponsor BRAC Bank Limited fully in accordance with all the relevant provisions of law. Their further case is that the writ petitioner has failed to identify any single provision of law which has been violated in allowing BRAC to own shares in BRAC Bank Limited. Their further case is that BRACs liability in respect of the bankruptcy of BRAC Bank Limited will be limited in any event to the unpaid portion of on any call on any shares held by it in BRAC Bank Limited. BRAC Bank Limited as a public limited company and a banking company and not being a charitable organisation is fully subject to the provision of the Bankruptcy Act, 1997. The writ petitioner has completely failed to identify any particular fundamental right which might even conceivably be affected by virtue of the fact that BRAC is not subject to bankruptcy proceedings under Bankruptcy Act, 1997. The instant writ petition in the nature of public interest litigation is not maintainable in law and also on the ground of gross laches and lack of standing inasmuch as no objection letter was issued by Bangladesh Bank dated 4-4-1999 and seven months after the issuance of the impugned certificate of incorporation dated 21-5.1999 in respect of which declarations were sought in the writ petition and no ground having been made out on which such delay can be justified and on the ground of manifest lack of standing of the writ petitioner and the writ petitioner has no genuine grievance. Their further case is that section 20 of the SRA 1860 permits the registration of the Societies for the purposes stated therein. BRAC Bank Limited is a properly formed banking company which is duly incorporated with the Registrar of Joint Stock Companies as a public limited company having complied with all applicable laws, rules and regulations for the time being in force. The certificate of incorporation section 24 of the Companies Act, 1994 was duly granted by the Registrar of Joint Stock Companies and is conclusive as to the incorporation in respect of BRAC Bank Limited. This company has been lawfully constituted and given certificate for commencement of business dated 20-5-1999. BRAC is a charitable organisation and registered under the SRA 1860. The Memorandum of the Society of BRAC clearly permits the BRAC to invest money in purchasing shares of a corporate entity be it a banking company or otherwise to obtain permission from the Government or any public body for exercise of its right to sponsor a banking company which in its judgment is conducive to the attainment of its charitable and social welfare activities. It is submitted That the participation of BRAC in BRAC Bank Limited is intended to ensure that credit is provided to low and middle income groups in order to enhance their earning capacity and their social welfare and in order to generate income as dividend for BRAC which will be utilised to carry out its charitable and social welfare activities and SRA 1860 has not created a legal bar on the carrying out of such activities by BRAC. BRAC by purchasing shares in BRAC Bank Limited is in no way covering itself to or acting as a public company limited by shares, BRAC has been given permission to sponsor BRAC Bank Limited fully in accordance with all the relevant provisions of law, particularly those of Bangladesh Bank Order 1972, SRA 1860 and BCA 1991 as well as the Companies Act, 1994.
(3.) On hearing Syed Ishtiaq Ahmed, learned Advocate appearing for the petitioners in Civil Petition for Leave to Appeal No.375 of 2000 and Mr Rokanuddin Mahmud in Civil Petition for Leave to Appeal No.441 of 2000 leave was granted in the following terms: (i) The High Court Division erred in holding that for a society registered under the SRA 1860 to start a commercial enterprise like a bank to earn profit should be ultra vires section 20 of the SRA 1860, in that there is no prohibition imposed on a charitable society registered under section 20 of the SRA 1860 to prevent it from investing its moneys in shares in a commercial enterprise, so long as the profits earned are wholly devoted to charitable purposes, and further that the SRA 1860 was enacted, as its preamble states, for improving the legal condition of societies by giving registered societies a legal entity, the right to own property and the legal capacity to sue and to be sued. (ii) The High Court Division erred in making the Rule absolute as by doing so it was in effect winding-up a bank which had been incorporated seven months earlier, obtained a licence, and made all necessary preparation to commence business within a few days time, as it is not permissible, or appropriate, for the writ jurisdiction to be invoked or exercised for the purpose of winding up a Bank, in disregard of the provisions of the BCA 1991 and without any determination of the issues and consideration of the interest of shareholders and other stakeholders of the general public. (iii) The learned Judges of the High Court Division acted wrongly in not holding that the Societies Registration Act 1860 does not put statutory limitation on BRAC to invest their money to BRAC Bank Ltd. and erred in law in holding that such investment would be ultra vires section 20 of the said Act. (iv) The leave petition involves interpretation of several laws and involves the question of general public importance. Mr. Rokanuddin Mahmud, learned Advocate appearing for Bangladesh Bank-petitioner in Civil Petition No. 441 of 2000, submits that the writ petitioner has no locas standi to file the writ petition and he did not disclose how he was aggrieved. He next submits that the writ petitioner is guilty of serious laches in that the writ petition was filed after 8 months and 8 days from issuing no objections and about 7 months of incorporation of BRAC Bank Ltd, the High Court Division committed an error of law in not discharging the Rule on that count alone. Lastly, he submits that the letter of no objection and incorporation of BRAC Bank Ltd. having been done in accordance with law the High Court Division was wrong in striking down the same.;


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