Sonali Bank faces penalty for unpaid bill to Indian exporter

Sonali Bank finds itself in deep trouble over the non-payment of an Indian exporter's bill 13 years ago. An Indian court has now ordered Bangladesh's state-owned bank to pay the original bill amount of $60,234 plus its interest since 12 March 2011 until the present date.

On 8 March, Kolkata High Court Judge Apurba Sinha Ray also asked Chief Executive Officer (CEO) Mohammad Aslam Hossain of the Kolkata branch of the lender to provide an explanation as to why he should not be arrested, according to information obtained from Sonali Bank sources.

According to sources, on 5 September 2010, Fair Washing Limited opened a back-to-back letter of credit (LC) for the import of cloth from Nandan Demin Limited of Ahmedabad, Gujarat, through the Ramna Corporate Branch of Sonali Bank, which operates two branches in India – one in Kolkata and another in Siliguri.

The value of the LC was $71,764. Of this, the exporter sent products worth $60,234. The goods arrived at Benapole Port in November of that year. Although the LC was cancelled by the importer in November, the exporter's UCO Bank in India sent documents for the collection of the bill as the goods had already been shipped.

Sonali Bank's Ramna Corporate Branch informed UCO Bank on 15 November that the LC had been cancelled and that there were no LC references in the document sent for bill collection. However, the exporter claims that his goods were sent, and as a result, the dues must be paid.

The issue took a turn for the worse as the Ramna Branch deposited the entire export proceeds of that LC into the account of Fair Washing without clearing the bill of the back-to-back LC. Consequently, the Indian exporter remains unpaid.

Bankers assert that this occurred due to the Ramna Branch's negligence in carrying out its responsibilities and providing illegal benefits to its customers.

Subsequently, the exporting company filed a case in 2011 in a court in Ahmedabad, which in 2018 ordered Sonali Bank to pay the dues. However, the bank did not comply with the order.

Then, in 2021, Nandan Denim filed a case with the Kolkata High Court, naming Sonali Bank's Ramna Corporate Branch and Kolkata Branch as defendants.

Usually, bill acceptance is provided in the case of back-to-back LCs upon the receipt of documents after goods are loaded onto a shipment. Once this acceptance is given, the bank is obligated to pay the bill.

There are exceptions, though. If the importer notices any defects after receiving the goods, the bill can be withheld, discounted, or cancelled by informing the exporter.

When this correspondent contacted Sonali Bank Managing Director Md Afzal Karim on 21 March, he declined to comment and suggested contacting Deputy Managing Director Subhash Chandra Das.

Das told The Business Standard that the Ramna Corporate Branch has been instructed to take necessary steps and declined to provide any further details.

When contacted to inquire about the measures being taken by the Ramna Corporate Branch, General Manager Nazrul Islam, who heads the branch, said, "The court notice will be responded to through the legal process. Instructions have been given to the Kolkata branch for this purpose. New lawyers are being hired."

Multiple sources indicated that Sonali Bank did not take proper action in time in this case. Neither the Ramna Corporate Branch nor the head office, nor even the Kolkata Branch, wanted to take responsibility, and they engaged in a blame game among themselves.

In a letter dated 27 April 2023, the Kolkata Branch requested that the issue of disposing of the case be considered with utmost importance, but the Ramna Corporate Branch did not comply.

On the other hand, a senior official of the Ramna Corporate Branch stated that in 2021, the general manager of the Ramna Branch sent a letter to the head office, requesting further action regarding this case based on the opinion of a lawyer and the Kolkata Branch. However, no instructions have been given in this regard from the head office.

At the time, the bank's lawyer, Zakir Hossain, said in his review of the case documents that there was no reason to continue the case. Continuing would result in no gain other than incurring legal fees and interest costs for additional time. Hence, it is reasonable to implement the judgement of the Ahmedabad court. However, the head office has not made any decision in this regard.

Jasim Ahmed is the owner of Fair Washing Limited, headquartered at New DOHS, Mohakhali, in the capital. Its factory is located in Shafipur, Kaliakair, Gazipur, and it is a member of the Bangladesh Garment Manufacturers and Exporters Association. This company is a defaulted borrower of Sonali Bank and owes the bank around Tk600 crore.