High Court rejects depositor’s plea for Fareast Finance liquidation
The Bangladesh Bank has been asked to investigate the depositor’s complaint and give feedback in 3 months
The High Court today (6 May) turned down a depositor's petition seeking appointment of a liquidator at Fareast Finance and Investment, a publicly traded non-bank financial institution (NBFI).
However, the single-member bench of Justice Syed Refaat Ahmed asked the Bangladesh Bank to investigate the complaint of Sterling Creations Ltd and give the client feedback in three months, according to Barrister Sayed Mahsib Hossain, a lawyer for the NBFI.
"It is again established that the High Court is not inclined to shut down financial institutions on the basis of the claims of a depositor," he told The Business Standard.
Barrister Mustafizur Rahman Khan, a lawyer for the petitioner, said the High Court's direction to the central bank also includes how the sum Fareast Finance owes to Sterling Creations would be paid back by March 2025.
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In the case of Fareast Finance's failure to pay back by the stipulated time, his client might appear before the court again, Khan added.
The High Court also directed the Bangladesh Securities and Exchange Commission (BSEC) to take into account the Bangladesh Bank report before reconstructing the board of directors of Fareast Finance, as the current board is constituted by independent directors sent by the securities regulator itself, according to Sayed Mahsib Hossain.
The BSEC, along with appointing a special auditor, also recast the Fareast Finance board twice by appointing independent directors in the last three years.
Sterling Creations Ltd, an apparel exporter, filed its petition in September last year, seeking the NBFI's winding up as its money in two FDRs has been stuck at the troubled NBFI since 2019, despite maturity.
Mustafizur Rahman Khan told TBS that his client had around Tk11 crore in the two FDRs, and with the piling up of interest since maturity in April 2019, the amount had already surged to over Tk20 crore.
Fareast Finance and Investment went public in 2013, and some of its directors' alleged embezzlement of depositors' money by disbursing shady loans dragged it down to near insolvency.
At the end of 2022, its net liability stood at 3.85 times its paid-up capital, according to the Dhaka Stock Exchange. In 2022, its net loss was 140% of the paid up capital.
According to its financial statement, 94% of the NBFI's loans were non-performing till that year.
Shareholders who have been deprived of dividends since 2017 are feeling even more acute pains of capital erosion in Fareast Finance stocks as the price of its shares, which have a face value of Tk10, came down to Tk4 on the Dhaka Stock Exchange, while the historic high was Tk28 during trading debut in 2013.
