A Former Director or Related Entity Cannot Be Declared a Defaulter for Loans Taken After His Resignation: High Court
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| Supreme Court of Bangladesh |
The High Court Division made these observations after hearing a writ petition. The Court declared the inclusion, reporting and circulation of the petitioners' names in the CIB report to be without lawful authority and of no legal effect. It also directed that their names be removed from the CIB report in relation to the relevant loans within seven days.
The judgment was delivered in Shaukat Aziz and Others v. Bangladesh Bank and Others by a Division Bench of the High Court Division comprising Justice Md. Mozibur Rahman Miah and Justice Rezaul Karim on 9 September 2026. The full text of the judgment was published on the Supreme Court's website on 4 November 2026.
Background of the Case
Following the hearing of Writ Petition No. 2165 of 2025, filed by Shaukat Aziz and others, the Division Bench of the High Court Division delivered its judgment on 9 September 2026.
The petitioner, Shaukat Aziz, is the Chairman and Managing Director of Amber Group. According to his submission, a Memorandum of Understanding executed in 2006 divided the business concerns of his late father, M. A. Hashem, among his five sons. Pursuant to that arrangement, he began managing the businesses of Amber Group, while his brother, Rubel Aziz, managed the businesses of Partex Group.
Shaukat Aziz resigned as a director of Partex Foundry Limited in 2009 and transferred his 8,000 shares in the company to Rubel Aziz. Documents relating to the transaction, including a board resolution, Form 117, an affidavit and amendments to the Articles of Association, were placed before the Court.
Subsequently, Partex Foundry Limited obtained loan facilities from Jamuna Bank PLC and Social Islami Bank PLC. In connection with those loans, Shaukat Aziz and entities associated with him were classified as Interested Concerns and included in the CIB report. This created obstacles for them in obtaining banking facilities.
The petitioners contended that, at the time the company obtained the loans, they were neither directors nor shareholders of the relevant company, nor were they guarantors or mortgagors in respect of the loans. Therefore, they argued, it was unlawful to impose liability for the loans of an independent company upon them by including their names in the CIB report.
Observations of the Court
The High Court first considered whether the writ petition was maintainable. The Court observed that although Article 41(1) of the Bangladesh Bank Order, 1972 provides protection to Bangladesh Bank and its officers in respect of certain actions, such protection is not unconditional.
The Court held that an action taken by a public authority beyond the limits of its statutory powers cannot be justified merely on the ground that the authority was performing its administrative duties. The petitioners were not seeking compensation; rather, the issue before the Court was whether their inclusion in the CIB report had been made without lawful authority. Accordingly, the Court held that the writ petition was maintainable under Article 102 of the Constitution.
The Court then examined the provisions of Sections 5(GaGa) and 27Ka of the Bank Company Act, 1991.
According to the Explanation to Section 5(GaGa) of the Bank Company Act, 1991, a person may be treated as an Interested Concern of a borrowing institution if at least one of the following conditions is fulfilled:
- The person is a director of the institution;
- The person holds more than 20 per cent of the shares of the institution; or
- The person is a guarantor of the institution's loan.
The Court observed that unless at least one of these statutory conditions is satisfied, another entity cannot be treated as an Interested Concern of the borrowing institution. The statutory limits cannot be expanded through administrative practice, presumption or any other consideration.
Resignation and Transfer of Shares
The banks argued that Shaukat Aziz's resignation as a director and transfer of shares had not become effective without the approval of the lending bank. In this regard, they relied on Section 27Ka of the Bank Company Act, 1991.
However, the Court observed that no evidence had been produced to show that Partex Foundry Limited had any bank loan or financial liability when Shaukat Aziz resigned as a director and transferred his shares on 22 July 2009. On the contrary, according to the sanction advice issued by Social Islami Bank, the relevant loan facility was sanctioned to the company in 2012.
The Court held that where a director's resignation or transfer of shares takes place before a company becomes a borrower, Section 27Ka cannot be applied retrospectively to invalidate that resignation or transfer merely because the company subsequently obtains a loan.
Furthermore, under Section 38(3) of the Companies Act, 1994, a company registers a share transfer on the basis of a duly executed instrument of transfer. Section 115(2) requires the company to notify the Registrar of changes in its directors. The Court observed that Form XII is essentially a return containing particulars of directors; it does not, by itself, invalidate a director's resignation or a transfer of shares.
Liability Cannot Be Imposed on the Basis of Family Relationship
The banks further argued that the shareholders and directors of the relevant company were members of Shaukat Aziz's family and that he had also benefited from the loan facilities.
The Court did not accept this argument. It observed that the Explanation to Section 5(GaGa) of the Bank Company Act, 1991 does not include family relationship as an independent ground for determining whether a person is an Interested Concern.
The Court noted that where the legislature intends to impose liability on the basis of family relationships, it expressly provides for such relationships in the relevant legislation. Therefore, where no such provision exists, family relationship cannot be introduced as a ground for imposing liability through interpretation.
The Court further observed that, at the time the relevant company obtained the loans, Shaukat Aziz was not a director, did not own more than 20 per cent of its shares and was not a guarantor of the loans. Similarly, no evidence was found that the other petitioner entities fulfilled any of the three statutory conditions.
Order of the Court
On the basis of the above observations and findings, the High Court made the Rule absolute and decided the matter in favour of the petitioners. The Court directed as follows:
- The inclusion, reporting, circulation and publication of the petitioners as Interested Concerns or Sister Concerns in the CIB report in connection with the loans obtained by Partex Foundry Limited from Jamuna Bank and Social Islami Bank were declared to be without lawful authority and of no legal effect.
- The concerned authorities of Bangladesh Bank were directed to remove the petitioners' names from the CIB report in relation to those loans within seven days of receiving a copy of the judgment.
- The petitioners' names cannot be re-included in connection with the same loans without satisfying the statutory requirements.
- The judgment shall not prevent the inclusion of the petitioners in the CIB report in respect of any other loans, including the petitioners Nos. 3 and 8's own loan facilities, in accordance with law.
- If any petitioner subsequently becomes a director of the relevant company, holds more than 20 per cent of its shares or becomes a guarantor of its loan, their names may be included in the CIB report, provided the other statutory requirements are fulfilled.
- The banks' legal rights to recover outstanding loans shall remain unaffected.
The Court made no order as to costs.
Legal Significance
Through this judgment, the High Court clarified that the liability arising from a company's defaulted loan cannot be imposed upon another person or entity merely on the basis of business, historical or family relationships. At least one of the statutory conditions specified in the Explanation to Section 5(GaGa) of the Bank Company Act, 1991—being a director, holding more than 20 per cent of the shares, or acting as a guarantor—must be fulfilled.
The judgment also establishes that a director's resignation and transfer of shares completed before a company obtains a loan cannot subsequently be invalidated retrospectively merely because the company later becomes a borrower. Banks and Bangladesh Bank must strictly comply with the statutory limits and requirements when including any person or entity in the CIB report.
Case: Shaukat Aziz and Others v. Bangladesh Bank and Others
Writ Petition No.: 2165 of 2025
Date of Judgment: 9 September 2026
Court: High Court Division, Supreme Court of Bangladesh
Source: Full judgment of the High Court Division in Writ Petition No. 2165 of 2025.
BD LAW POST / Masum
