High Court: Why won’t Uttara Finance be liquidated? 

Infographic: TBS

The High Court on Sunday asked the authorities concerned to explain why Uttara Finance and Investments Limited – a listed non-bank financial institution (NBFI), which came to the spotlight for financial scams and embezzlements – will not be liquidated.

Upon a petition for liquidation by SM Shamsul Arefin, a former managing director of the institution, the single-member bench of Justice Muhammad Khurshid Alam Sarkar asked the board of the company to come up with its replies within four weeks. 

At the same time, the court asked the Bangladesh Bank to explain why it should not be asked to appoint an administrator to the NBFI and an auditor to carry out a comprehensive audit at all sister concerns of Uttara Group to find any irregularities in disbursing loans by the financial institution. 

In 2019 and 2020, there were irregularities in loan disbursements of Uttara Finance and Investments. Later, an inquiry committee of the central bank found irregularities of Tk5,100 crore.

Bangladesh Bank removed SM Shamsul Arefin from the post of managing director in June this year for financial irregularities and activities harmful to depositors.

Earlier, following a petition for liquidation of People's Leasing and Finance Company due to a scam of around Tk2,500 crore, the High Court asked the central bank to appoint a liquidator to the institution.

Later, the court ordered the reconstruction of the board to revive the non-bank financial institution.

However, Shamsul Arefin appealed to the High Court for the liquidation of Uttara Finance and Investments and appoint an independent auditor to the company, calling the investigation into irregularities one-sided.

Barrister ASM Shahriar Kabir moved the petition on behalf of SM Shamsul Arefin on Sunday. Then, senior lawyer Rokanuddin Mahumd placed arguments on it.

In the petition, 23 people, including the Financial Institutions Division secretary, the Bangladesh Bank governor, the Bangladesh Securities Exchange Commission, the registrar of joint stock and companies, Dhaka Stock Exchange, Chittagong Stock Exchange and the chairman and managing director of Uttara Finance have been made defendants.

SM Shamsul Arefin told The Business Standard, "The court was convinced by the petition for liquidating the institution and sought explanations from the authorities concerned."

He said there should be an impartial investigation into the irregularities of the institution. "Because I'm confused about an impartial investigation with the people on the board of the company. I don't trust them."

"Let there be a comprehensive audit in the institution, let the truth come out, let it come out through an impartial investigation to identify who is responsible for the trouble, irregularities or anomalies of the institution," he added.

The Bangladesh Financial Intelligence Unit (BFIU) found evidence of fraud as Uttara Finance reportedly disbursed loans from 2016 to 2021 without proper assessment.  

In the BFIU investigation, there was evidence suggesting direct involvement of chairman Rashidul Hasan and former managing director SM Shamsul Arefin in Tk3,800 crore embezzlement. It also mentioned that several directors and officials of the company were also involved in the scam.

On 26 September, nine officials of the company were banned from traveling abroad, as the BFIU submitted a 34-page report to the Anti-Corruption Commission (ACC) recommending legal action against the culprits.

Citing the BFIU report, the ACC says it has traced Tk3,000 crore of the amount swindled in the name of loans. 

The ACC said Tk1,800 crore against 20 companies in the first phase, Tk483 crore against 34 companies in the second phase, Tk45 crore against 16 companies in the third phase and Tk445 crore against 12 companies in the fourth phase were embezzled.

Another Tk483 crore of Uttara Finance was embezzled in the name of loans to 34 other companies without proper approval. In this case too, collateral and necessary documents were not submitted against the loan.

Some Tk45 crore loans against 16 firms were transferred to other bank accounts and the money was embezzled subsequently.

Another 445 crore was taken from Uttara Finance against 12 companies and the money was embezzled by transferring it to other accounts.

Uttara Finance was listed in the capital market in 1997 after starting operations in 1995. The company had paid good dividends to its shareholders since the bourse listing due to good financial condition. But the financial irregularities pushed the company into trouble subsequently. 

According to the latest financial statements of 2019, the company's profit was Tk118 crore as it paid 15% cash and 5% bonus dividend to shareholders that year. The company has not released any financial statements after that.

Uttara Finance's loan disbursement till June 2022 was Tk2,317 crore. Of which classified loans stand at Tk1,248 crore – which is 53.86% of total loans.