Banking Law Case: Wasir Ahamad Rain vs. Agricultural Development Bank Bardiya, NKP (2060), No. 9/10, P. 835, DN: 7284
Case: Appeal for Injunction (Banking/Loan Recovery Dispute)
Plaintiff/Applicant: Wasir Ahamad Rain
Defendant/Respondent: Manager, Agricultural Development Bank, Branch Office, Gulariya, Bardiya, and others
Decision Number: 7284
This case concerns whether a bank could auction mortgaged property for loan recovery when the borrower claimed inability to repay due to a natural disaster, with a loan waiver request pending before the bank’s board.
Facts of the Case:
Wasir Ahamad Rain took a loan of NPR 2,14,500 from Agricultural Development Bank, Branch Office, Gulariya, Bardiya, on 2051/2/29, to run a fish farming business. As security for this loan, he mortgaged four pieces of land in Gulariya VDC; Kitta No. 316 (0-3-1), Kitta No. 222 (0-0-5), Kitta No. 344 (0-0-10), and, in Ward No. 5(kha), Kitta No. 220 (1-0-0), altogether measuring 1 bigha-3 katta-16 dhur. The loan was to be repaid over 5 years, with principal and interest paid back in yearly installments.
Rain built a pond on 1 bigha-11 katta of this land and started fish farming. But before he could sell his fish, a big flood came in the third week of Shrawan 2052, and swept away all his fish. He said this felt like losing everything he had. Because of this, he could not pay his loan installments, and he applied to Agricultural Development Bank and other offices asking for his loan to be waived off due to this natural disaster (daivi pareko). He said this application was still pending before the bank’s Board and he had not been told any final decision on it. Later, he repaired his pond and started fish farming again.
While his waiver request was still pending, the bank published a notice in the newspaper on 2055/4/13, saying it would auction his mortgaged land to recover the loan. Rain went to the bank and asked them not to take any action until his pending application was decided, but the bank told him they would recover the loan “by whatever means”. Rain then filed this petition asking for an injunction, with an interim order, to stop the bank from auctioning his land until his waiver request was finally decided, saying this would otherwise violate his rights under the Civil Rights Act, 2012 (2012 B.S.).
The Appellate Court, Nepalgunj, initially granted an interim order stopping the auction of Kitta Nos. 316, 222, 344, and 220 scheduled for 2055/4/13. But after hearing both sides, the Appellate Court, Nepalgunj held in its final decision dated 2055/12/4, that under Section 20(a) of the Agricultural Development Bank Act, 2024, the bank was entitled to recover its principal and interest by auctioning the mortgaged land, and dismissed Rain’s petition. Rain then appealed this decision to the Supreme Court.
Legal Issues:
- Whether a pending loan waiver request before the bank’s Board bars the bank from proceeding with auction of mortgaged property.
- Whether inability to carry out the loan’s purpose (due to natural disaster) exempts repayment obligations.
- Whether the bank’s auction action under Section 20(a) of the Agricultural Development Bank Act, 2024 was lawful.
- Whether the Appellate Court, Nepalgunj’s dismissal should be upheld.
Different Courts’ Decisions:
High Court or Appellate Court:
Appellate Court, Nepalgunj, in its final decision dated 2055/12/4, held that under Section 20(a) of the Agricultural Development Bank Act, 2024, the bank could recover its principal and interest by auctioning the mortgaged immovable property. It therefore ruled that continuing the injunction was not appropriate and dismissed Rain’s petition.
Supreme Court:
Supreme Court (Joint Bench of Justice Dilip Kumar Paudel and Justice Baliram Kumar) upheld the Appellate Court’s decision and dismissed the appeal.
The Court noted that Rain had taken the NPR 2,14,500 loan on 2051/2/29, agreeing to repay principal and interest by a fixed schedule, but even though he mentioned the flood of Shrawan 2052 as the reason he could not repay in 2052, and also could not run the fish farm in 2053 and 2054, no law says that a person is excused from repaying a loan’s principal and interest simply because they could not carry out the work for which the loan was taken. The Court also said it is not fair for a borrower to simply stop paying principal and interest just because their loan waiver application has not yet been decided. Importantly, the Court noted that Rain, even in his appeal, could not show that he had paid back any principal and interest since taking the loan, or that he had resumed fish farming in any real way. In such a situation, the bank cannot be said to be barred from recovering its money.
The Court held that Section 20(a) of the Agricultural Development Bank Act, 2024, clearly allows a bank to recover its principal and interest through auction of mortgaged property or other arrangements, where a person, industry, village committee, or organization has failed to fulfil the terms of its loan agreement with the bank. Since this is a clear legal provision permitting such recovery, the Appellate Court, Nepalgunj’s decision to dismiss the petition was correct and was upheld. The appeal did not succeed.
Principle Established :
- No law excuses a borrower from repaying a loan’s principal and interest just because they could not carry out the work for which the loan was taken (for example, due to a flood or natural disaster).
- A loan waiver application pending before a bank’s Board does not, by itself, stop the bank from going ahead with recovering its dues through auction of mortgaged property.
- Under Section 20(a) of the Agricultural Development Bank Act, 2024, a bank may recover outstanding principal and interest through auction of mortgaged immovable property or other means, where a borrower has failed to fulfil the terms of the loan agreement.
Relevancy of the Case:
This case illustrates that statutory recovery powers of specialized lending institutions take precedence over equitable claims of hardship, and a pending administrative relief request does not bar lawful recovery.
