The Litigation Process for Debt Collection in Bangladesh

International trade between India and Bangladesh has grown significantly over the past decade. However, with increasing cross-border transactions, the risk of non-payment by Bangladeshi buyers has also become a concern for Indian exporters. Understanding the litigation process for debt collection in Bangladesh is therefore essential to protect business interests and recover dues effectively.

Legal Framework for Debt Recovery

Debt collection in Bangladesh operates primarily under the Code of Civil Procedure 1908, the Artha Rin Adalat Ain (Money Loan Court Act) 2003, and related commercial laws. When a debtor defaults, the creditor—whether domestic or foreign—may initiate legal proceedings through the civil courts or specialized money loan courts, depending on the nature of the debt.

Indian exporters who have supplied goods or services to Bangladeshi buyers generally fall under the jurisdiction of civil courts unless the claim involves a financial institution. Before litigation, it is advisable to exhaust all amicable settlement options, including negotiation or mediation, to save time and costs.

Pre-Litigation Considerations

Before filing a lawsuit, exporters should gather all relevant documentation to substantiate their claim. These typically include:

• Sales contracts or purchase orders

• Invoices and delivery receipts

• Correspondence confirming the debt

• Payment reminders and demand notices

Issuing a formal demand notice through a Bangladeshi lawyer is a crucial first step. This letter sets out the outstanding amount, details of the breach, and a deadline for payment. In many cases, debtors settle once they realize the creditor is prepared to litigate.

Litigation Process

If the debtor fails to respond to the demand notice, the creditor may proceed with a civil suit for recovery. The litigation process generally involves the following stages:

1. Filing of the plaint – The creditor files a plaint (statement of claim) before the appropriate court, supported by evidence of the debt.

2. Service of summons – The court serves notice to the debtor, who must appear and respond within the stipulated time.

3. Written statement and evidence – The debtor files a written defense, after which both sides submit evidence and witness testimony.

4. Hearing and judgment – The court examines the evidence, hears arguments, and delivers judgment. If the decision favors the creditor, a decree for payment is issued.

5. Execution of decree – If the debtor fails to comply, the court can attach or sell the debtor’s property to satisfy the debt.

The process can take anywhere from six months to several years, depending on the complexity of the case and the debtor’s level of cooperation.

Enforcement of Foreign Judgments

If an Indian exporter already has a judgment from an Indian court, direct enforcement in Bangladesh is not automatic, as India and Bangladesh do not share reciprocal enforcement arrangements under Section 44A of the Civil Procedure Code. In such cases, the exporter must file a fresh suit in a Bangladeshi court, using the Indian judgment as evidence of debt.

Practical Recommendations for Indian Exporters

To minimize risk and improve the prospects of recovery, Indian exporters should consider the following:

1. Use strong contracts – Ensure contracts clearly specify governing law, dispute resolution mechanism, and payment terms. Including an arbitration clause with the seat in a neutral country can be beneficial.

2. Conduct due diligence – Check the buyer’s credit history and reputation before entering into large transactions.

3. Maintain documentation – Keep all transaction records, emails, and payment proofs well-organized for potential litigation.

4. Engage local counsel – Appoint a reputable law firm specializing in debt collection in Bangladesh early in the process to handle communications and court procedures efficiently.

5. Consider mediation or settlement – Sometimes, an out-of-court settlement can save significant legal costs and time.

Conclusion

The litigation process for debt collection in Bangladesh is structured but can be time-consuming. For Indian exporters, understanding the local legal system and engaging experienced Bangladeshi lawyers can greatly enhance the chances of successful recovery. By combining proper documentation, strategic negotiation, and, when necessary, decisive litigation, exporters can safeguard their business interests and maintain financial stability in cross-border trade.

More information on the Grandliga website.