Some of common litigations undertaken by commercial banks are recovery suits that are normally filed against borrowers, guarantors and mortgagers, jointly or severally. Very often than not, banks lose such cases due to shoddy preparation and conduct of the same without following procedural rules or understanding substantive laws related to banking business. This article attempts to discuss key issues that must be taken into account prior to the filling of the suit and conduct of the trial itself.
• The first step is to make sure that the transaction documents were perfected in the relevant registry and relevant taxes were paid. Banking transaction documents that include letters of offer, loan agreements, and deeds of guarantee, mortgage deeds, debentures, chattel mortgages and promissory notes are normally perfected at the Land Registry or Brela.
• Ensure that relevant notices and demands under the Land Act, the Companies Act, the Law of Contract Act and general law, depending on the instrument were issued. Also, as per practice a final demand notice must be issued to the borrower.
• Obtain a full bank statement that clearly shows when the loan was granted and utilized and how interest accrued due to default and the amount due. It must be endorsed by the Bank officer according to the law.
• Ascertain the date the cause of action accrued and whether the suit will be within time. Limitation of time is a big problem for the banks particularly when the original loan is not rescheduled.
• Check whether there is a dispute settlement clause in the letter of offer, deed of mortgage loan agreement, debenture, or deed of guarantee. If there is an agreed forum then the suit must be instituted there.
• Review all the documents to see as to whether if properly proved in the trial, will prove the defendant liability.
• Arrange the documents chronologically and start preparing the Plaint by making sure that all relevant documents are referred to and endorsed with marks, with brief description of their import and effect.
• Bankers should advise their advocates to make sure that pleadings are reviewed by them prior to filing to avoid substantive and procedural pitfalls.
• Upon filling and issuance of summons, make sure that proper service is made by a registered court process server. Service by the firm’s staff should be avoided because they cannot swear an affidavit of service.
PREPARATION FOR TRAIL AND THE TRIAL
• Before the conduct of the trial it must be confirmed that original documents are available and duly stamped/perfected. If there are no originals, a litigating counsel must take necessary steps under the Evidence Act to use copies.
• If some documents are electronically generated, necessary affidavits must be sworn under the Electronic Transaction Act and be filed prior to the date of hearing.
• For admission of Banker’s statement, a necessary affidavit of proof must be prepared under Evidence Act and be filed prior to the date of hearing.
• The Banker’s Legal department must be involved in preparation of witness statements or oral testimony. Analysis of the Bank statement to show how the loan was utilized and the accrual of interest to justify the sum claimed is very crucial to prove the liability of the borrower.
LEGENDGLOBE ATTORNEYS