How 'threats', lawsuits hinder Islami Bank's recovery of Tk10,500cr S Alam Group loans

Highlights:

• Islami Bank seeks Tk10,538 crore from defaulting S Alam
• Auctions failed; buyers allegedly threatened, deterred from bidding
• S Alam disputes mortgages, files case blocking asset sales
• Mortgaged properties worth Tk2,000 crore, far below loan value
• Bangladesh Bank, ACC investigating questionable loans, fund siphoning abroad
• Islami Bank plans to sell other S Alam assets

A legal battle is brewing between Islami Bank and the S Alam Group over a massive Tk10,538 crore loan that has been in default for years.

The country's largest private bank is struggling to recover the debt from S Alam Refined Sugar Industries, accusing the company of using intimidation and legal maneuvers to block the sale of mortgaged properties.

Islami Bank's Chattogram Khatunganj corporate branch officials said the initial auction attracted no bidders, alleging potential buyers were discouraged through threats and pressure. When the bank attempted a second auction, the company filed a case in court, claiming the properties had never been mortgaged.

Infograph: TBS

Potential buyers 'scared off'

Muhammad Jamal Uddin, senior vice-president of Islami Bank's Khatunganj branch, told The Business Standard that the first auction attempt in April failed as no one came forward, while the second attempt in July also floundered after potential buyers were allegedly threatened.

"Those who showed interest [in the first auction] were intimidated and warned off by people linked to S Alam. This is why no bidders turned up. When we announced the second auction the group went to court, claiming the assets were not mortgaged. This is false," he said.

The court responded by issuing a show-cause notice, asking the bank to justify its actions.

Jamal described the claims as a "delaying tactic" and said all legal documents proving the mortgage were with the bank. "No bidders appeared because of S Alam Group's pressure and propaganda. We will call another auction soon, and if it fails, we will pursue court action to recover the money," he added.

Islami Bank officials, however, fear the sale of mortgaged assets would likely yield no more than Tk2,000 crore, a fraction of the total loan. The bank may be forced to sell other S Alam-owned properties not directly mortgaged to recover the debt.

History of default and legal troubles

A Bangladesh Bank report last year indicated that Islami Bank disbursed large, questionable loans to S Alam-linked companies during the tenure of the ousted Awami League government.

From the Khatunganj branch alone, Tk50,000 crore in loans were sanctioned. Most of these loans turned default after the regime change as S Alam Group Chairman Mohammad Saiful Alam, known as S Alam, remained abroad.

In a separate development, the Anti-Corruption Commission has launched an investigation into the S Alam Group, accusing it of syphoning funds abroad under the guise of loans.

Legal manoeuvres, warnings

In April this year, Islami Bank put up S Alam's sugar mill and about 20 acres of mortgaged land in Chattogram, Dhaka and Narayanganj for auction under the Money Loan Court Act.

The auction list includes nearly 11 acres of land, factory buildings, farmland, and warehouses in Ichhanagar mouza of Charpatharghata union, Karnaphuli upazila, Chattogram.

The assets were pledged through registered deeds, with Chairman Mohammad Abdullah Hasan and Managing Director S Alam as the signatories.

A second auction was scheduled for 24 July, but S Alam Group had filed a case with the Chattogram Money Loan Court on 11 July to block the process, arguing the properties were not mortgaged and the court responded by issuing a show-cause notice to the bank, asking it to justify its actions. 

Following the court notice, S Alam Group published newspaper advertisements, claiming the company had no liabilities to the bank. The statements warned bidders against participating in the auction, asserting the properties were not mortgaged.

Full recovery difficult

Officials say S Alam Refined Sugar borrowed about Tk8,000 crore between 2010 and 2014, without repaying a single instalment.

By July 2025, with accumulated interest and charges, the amount had ballooned to over Tk10,538 crore. After gaining control of Islami Bank in 2017, the group allegedly secured additional loans.

An official at the branch told TBS that the loan cannot be fully recovered through the sale of mortgaged assets, which are worth at most Tk2,000 crore.

He added that S Alam Refined Sugar inflated the valuations of these properties several times, making auction recovery insufficient. "The bank has since filed cases to sell other S Alam properties to recoup the remaining debt."

Barrister Imran Ahmed Bhuiyan, a banking law expert, explained that legally, collateral for a loan must match the loan's value if immovable property is used, though cheques may also serve as collateral.

He said that for S Alam Group's loans, mortgaged assets were often overstated hundreds of times, with many fake mortgages, making full recovery extremely difficult.

What S Alam's lawyer says

S Alam's lawyers maintain the bank has no legal claim. Advocate Mahdi Ibne Hasan said auction notices unlawfully included properties free of any mortgage.

"Our client is not liable. The bank misused its authority by not issuing prior notices as required by law. We have filed a case, and the court has ordered the bank to show cause. Until then, people should avoid participating in any auction," he said.

When asked why the group filed a case if mortgage documents exist, the lawyer declined to comment.

Omar Faruk Khan, managing director of Islami Bank's head office, stated that the bank has all the necessary legal documents to prove the mortgages. He called the S Alam Group's claims "baseless".

He added that if the mortgaged assets fail to cover the full loan, the bank will move to sell other S Alam Group properties not directly mortgaged to Islami Bank.

"We have identified several properties under S Alam's ownership. The law empowers us to recover dues by taking control of those. We will act accordingly," Faruk said.