S Alam Group faces first auction of mortgaged assets for defaulting Tk1850cr loans

Infographic: TBS

Summary

• Global Trading Corporation is subsidiary of S Alam Group
• It traded industrial raw materials, commercial commodities 
• First loan was Tk650cr in 2012 from Janata Bank's Ctg corp branch
• Its unpaid loan with Janata Bank balloons to Tk1,850cr by Sept
• Janata to auction off Global's 1,860-decimal land in Ctg, Gazipur
• Market value of the lands is Tk358cr, four times less than total due

In a move to recover Tk1,850 crore unpaid loans from S Alam Group, Janata Bank has announced auctioning off collateral assets of Global Trading Corporation Limited, a subsidiary of the controversial conglomerate.

This marks the first time a bank has moved to auction the mortgaged assets of an S Alam Group company amid allegations that the group syphoned off billions of taka from various banks through loans during Sheikh Hasina's 15-year tenure.

The bank announced the auction, set for 20 November, in newspapers on 1 November and invited interested parties to submit their bids.

According to bank insiders, the value of the mortgaged assets, consisting of 1,860 decimals of land across Chattogram and Gazipur, have a maximum market value of Tk358 crore, which is less than a fifth of the total amount due.

They said the auction will not cover the full debt, and further legal steps may be required to collect the outstanding balance.

Under Bangladesh's Money Loan Court Act 2003, banks have the right to sell mortgaged properties even before filing a case in court, an option Janata Bank is now exercising, officials added.

According to a 2021 audit report by the Comptroller and Auditor General (CAG), irregularities were detected in the issuance of loans to Global Trading Corporation. The report revealed that many loan transactions lacked the due diligence required by Bangladesh Bank guidelines.

Global Trading Corporation, established in 2012, was involved in trading industrial raw materials, commercial commodities, and construction materials, according to the S Alam Group's website.

According to the report, the initial loan of Tk650 crore was taken in 2012 by Global Trading Corporation from Janata Bank's Chattogram Corporate Branch located in Sadharan Bima Bhaban.

The loan had accumulated to Tk1,070.65 crore by 2021 due to accrued interest. Of this amount, Tk617.47 crore was under PAD (Payment Against Document), Tk223.18 crore as LTR (Loan against Trust Receipt), and Tk229.99 crore in CC Hypo loans.

With accumulated interest, this amount has surged to Tk1,850 crore by September 2024.

When contacted, S Alam Group Deputy General Manager Md Moniruzzaman, said he was unaware of the matter and suggested reaching out to Mubin, an official at Global Trading, but Mubin's phone was unreachable. 

Attempts were then made to contact Delwar Hossain, general manager of S Alam Group, who said the issue was outside his purview. 

Systemic violations

According to the CAG's report, the amount borrowed by Global Trading exceeded the approved loan limit, suggesting the company had no entitlement to such a large loan. 

One significant observation of the report was that the company frequently used funds from one loan account to settle liabilities in another, a practice prohibited under Bangladesh Bank's regulations. 

The audit also reported that the bank exceeded its lending limit, granting loans over Tk1,070 crore against the permissible limit, largely due to inadequate risk management controls.

The report highlighted that over 1,860 decimals of land, spread across 16 properties in Chattogram and Gazipur, was used as collateral. 

As of 2021, the asset had an estimated market value of Tk358.71 crore, a fraction of the loan amount owed. Bank officials said the land's value was even lower in 2010 when the loans were approved.

Then-CAG Mohammad Muslim Chowdhury signed the report, which also cited violations of loan management guidelines set by the central bank.

During the audit, a letter was sent to then senior secretary of the Finance Division, Abdur Rouf Talukder (later governor of Bangladesh Bank), and Bangladesh Bank governor Fazle Kabir, seeking clarification on actions taken regarding irregularities associated with the loan. 

The audit report noted that despite reminders, no response had been received to date. The report recommended immediate recovery of the loan and urged for accountability measures against those involved in the irregularities.

What Global Trading and Janata Bank say

Md Golam Mortuza, acting managing director of Janata Bank, did not respond to phone calls or text messages from The Business Standard for comment on the matter.

However, Badal Kanti Das, assistant general manager (AGM) of Janata Bank's Chattogram Corporate Branch, confirmed the bank's decision to auction the mortgaged land. 

The bank has posted signs on the properties to deter trespassers and inform the public of the impending auction, he said.

Kanti Das noted that if the auction does not attract any bidders, Janata Bank may appeal to the court to transfer possession of the properties to the bank. 

He further said to cover the total outstanding debt, the bank may pursue additional legal actions to claim other assets of Global Trading Corporation and S Alam Group.

S Alam's more loans from Janata 

S Alam Group is the second largest borrower of Janata Bank after Beximco Group with over Tk7,832 crore loans. According to the bank's audited financial report for 2023, S Alam Group's classified loan amount was Tk1,215 crore.

S Alam Cold Rolled steel Limited, another concern of S Alam Group, is also the 10th largest borrower of the bank with nearly Tk2,000 crore loan.

These are significant violations of the bank's single borrower exposure limit, which restricts lending to any single group to no more than 25% (Tk578 crore) of the bank's capital. 

Despite this limit, S Alam Group allegedly received loans amounting to 420% of Janata Bank's capital during the previous government's tenure. 

Much of these loans were designated for imports, which were reportedly left unpaid, further complicating the group's financial situation.

Frozen shares in Islami Bank

Under Hasina government's patronage, S Alam Group held control over seven banks, including Islami Bank, Al-Arafah Islami Bank, Social Islami Bank, First Security Islami Bank, Global Islami Bank, Union Bank, and Bangladesh Commerce Bank. 

Allegations suggest that the Group syphoned off at least Tk2 lakh crore from these and other banks, with much of the funds reportedly laundered overseas. 

Following a change in government, the central bank dissolved the boards of these institutions to curtail the group's influence. Also, the central bank issued directives to freeze shares held by 56 entities and individuals associated with S Alam Group in Islami Bank. 

The securities regulator has since complied, freezing these shares as per Bangladesh Bank's instructions. Global Trading Corporation Limited, a key entity within S Alam Group, is among those listed.

Ahsan H Mansur, governor of the Bangladesh Bank, at a press conference on 28 August called S Alam's case "the largest bank heist" in the history of Bangladesh's banking sector. 

He urged prospective buyers to avoid purchasing assets linked to S Alam Group, which he said will eventually be liquidated to pay back depositors.

Mohammad Saiful Alam Masud (S Alam), chairman and managing director of S Alam Group oversaw the Chattogram-based company, which is primarily engaged in power and gas trading. He and his family are reportedly outside the country with a travel ban imposed on them.