People's Leasing moves for legal action as Tk1,785cr remains unrecovered from ex-directors

Despite repeated notices and a High Court directive, People's Leasing and Financial Services has failed to recover any dues from four former directors who collectively owe Tk1,785 crore.

The non-bank financial institution is now moving towards legal action to recover the long-overdue loans.

"We sent multiple letters to the permanent addresses of the four directors requesting repayment but have not received any response," managing director Md Sagir Hossain Khan told The Business Standard. The court gave them six months to repay, but the January deadline passed without compliance.

"Action is being taken under prevailing laws. Legal notices have already been served, but no response has been received. It has been decided to file cases, which are also in process," he added. "The company has also filed a fresh petition seeking further directions from the court."

The four directors

Recovery efforts have been complicated by the status of the accused directors. Former chairman Motiur Rahman and former director Khabir Uddin have died. Another director, Bishawjit Kumar Roy, remains absconding and his whereabouts remain unknown. Arafin Samsul Alamin remains active in business as a director of Shamsul Alamin Real Estate and managing director of SA Spinning Mills.

A special forensic audit, ordered by the court in 2021, revealed that the four sponsor-directors alone accounted for Tk1,413 crore of the Tk2,800 crore outstanding to major defaulters as of 2022.

The audit, conducted by MABS & J Partners covering 2009-2022, was submitted in January last year. Based on its findings, the High Court's company bench in January 2022 directed the defaulters to clear their dues within six months. The order was later published on the company's website in September.

According to the audit, outstanding loans as of 2022 were Tk565.47 crore for Motiur, Tk404.38 crore for Khabir, Tk415.66 crore for Arafin, and Tk28.47 crore for Bishawjit. By March 2026, the total outstanding to these four had risen to Tk1,785 crore.

The report detailed the nature of borrowing: Arafin and Bishawjit took direct loans, Motiur availed both loans and margin loans for share trading, while Khabir Uddin borrowed solely for share trading.

Motiur was chairman of MK Group, a major importer of fertilisers and commodities, while Khabir was engaged in jewellery and real estate development, according to the company's 2014 annual report.

Attempts to reach Arafin were unsuccessful. A woman who answered his phone denied that the number belonged to him and disconnected the call after the reporter identified himself.

Managing Director Sagir said the audit exposed deep-rooted governance failures. "The company's directors colluded among themselves to take loans and diverted funds from People's Leasing," he said.

"Some loans had collateral, while others had none. Even where collateral exists, it is negligible compared to the loan amount. We also found that for 65% of the loans, the required collateral was not provided, which has severely damaged the institution," he added.

Struggles of People's Leasing

People's Leasing has been struggling for years under the weight of non-performing loans, negative interest margins, operating losses, and mounting obligations to depositors. Since 2015, it has not paid dividends due to continuous losses.

Following a petition by Bangladesh Bank under the Financial Institutions Act, the High Court in July 2019 placed the company under liquidation. That order was later recalled in July 2021, when the court formed a new board, which has since been restructured to manage the institution.

The company's 2024 annual report, citing the forensic audit, pointed to widespread financial irregularities, systemic governance failures, and gross mismanagement. These included irregular loan approvals and disbursements, inaccurate interest calculations, unapproved waivers, dubious loan adjustments, regulatory non-compliance, and unreliable financial statements.

It also highlighted the involvement of former directors, board-level oversight failures, and negligence by officials, noting that repeated warning signals from external auditors since 2014 had been ignored.

In response to a query from the Dhaka Stock Exchange, People's Leasing said the current board and management have been working to stabilise the institution.

Since July 2021, around Tk200 crore has been recovered from default borrowers, while Tk85-90 crore has been repaid to depositors in phases. The third phase of repayment has also begun.

The company said its financial distress stemmed largely from irregularities, weak governance, and non-performing loans disbursed before 2019, with the forensic audit identifying significant liabilities linked to former directors.

As part of revival efforts, the company has sought around Tk750 crore in government support following court directives involving Bangladesh Bank and the Ministry of Finance. It has also resumed limited lending on a fully secured basis, disbursing approximately Tk25 crore in new loans so far.