High Court Division · Civil Appellate Jurisdiction
Bank Asia Limited and another v Jamuna Bank Limited
First Appeal 37/2022 · Appeal dismissed; connected Rule discharged · Decided 31 August 2026
Jamuna Bank, as negotiating bank, sued Bank Asia in the Artha Rin Adalat, Chattogram to recover Tk 13,62,39,388 under three letters of credit Bank Asia had opened on 13.10.2013 for its client. Bank Asia accepted the documents and confirmed payment on maturity, and Jamuna Bank paid the beneficiary, but Bank Asia did not pay. Bank Asia argued that no goods were supplied, that it was not a borrower or guarantor, and that the Adalat lacked jurisdiction because no forced loan had been created. The Adalat decreed the suit with interest at 12 per cent. The High Court Division dismissed the appeal. It held that under section 2(Ga)(2) of the Artha Rin Adalat Ain, 2003 an issuing bank's liability under a letter of credit is a debt by operation of law, so no forced loan was needed, and that a letter of credit is independent of the underlying sale. With no allegation of fraud, Bank Asia was bound to pay. The connected Rule was discharged.
- Whether an issuing bank's liability under letters of credit it accepted and confirmed is a debt within section 2(Ga)(2) of the Artha Rin Adalat Ain, 2003 without the negotiating bank creating a forced loan.
- Whether the Artha Rin Adalat had jurisdiction over a suit by one bank against another to recover the proceeds of letters of credit.
- Under section 2(Ga)(2) of the Artha Rin Adalat Ain, 2003, a letter of credit or other financial arrangement by which a financial institution accepts liability for its client is a debt.
- That debt is created by operation of law on the issuing bank immediately on issuance of the letter of credit, and the negotiating bank need not create a forced loan to constitute a debt.
- A letter of credit is a contract between the issuing and negotiating banks, separate from the underlying sale contract, and the issuing bank's undertaking is not subject to claims or defences arising from the applicant's relationship with it or the beneficiary.
- An issuing bank that accepted the documents as valid and confirmed payment on maturity is bound to pay the negotiating bank where there is no allegation of fraud or other legal deficiency in the documents.
- A financial institution must sue to realise such a debt in the Artha Rin Adalat, which has exclusive jurisdiction, and cannot file the suit in a civil court (following Sekander (Md) v Janata Bank Limited, 22 BLC (AD) 2017 53).
Above debt is created by operation of law immediately after issuance of the letter of credit on the shoulder of the issuing Bank.
