NORTH SOUTH UNIVERSITY

SCHOOL OF BUSINESS AND ECONOMICS

DEPARTMENT OF LAW

Course: Legal Environment of Business

Course Code: Law 200

Spring 2020

Assignment about

JUDICIAL INTERFERENCE IN TRADE

AND BUSINESS: BANGLADESH
PERSPECTIVE
 JUDICIAL INTERFERENCE IN TRADE AND BUSINESS:
BANGLADESH PERSPECTIVE
Judiciary means the system of courts that interprets and applies law in legal cases. The
judicial system of Bangladesh has a known history of over thousands of years. The present
judicial system of Bangladesh has been evolved as a result of gradual process during the
different period of Indian history. After independence of Bangladesh in 1971 the Acting
President propagated the Laws Continuance Enforcement Order, 1971 by which all laws that
were in force in Bangladesh on 25th March, 1971 continued to be so in force.  At present we
have about 740 Acts, 507 Ordinances and some Regulations in Bangladesh. Bangladesh basically
follows the Common Law Legal System which was founded by the British (UK). (OrangeBd, 29th
Jan, 2020) Common Law is more developed than other laws. It is recognized by most of the
countries. Here, Judge has Discretionary power which means one has individual freedom. And,
also the court has Inherent power which means Judges can do whatever they want for the
benefit of the country and for the justice of people. Furthermore, a common law judge cannot
investigate outside of the court.

All of the above-mentioned categories sum up this one fact that, how important it is to
have judiciary interference in our lives. Otherwise people could have done anything they want
without getting proper judgments and also, they could have destroyed our country’s peace &
harmony. All the countries need judiciary. In short, no one is without problem. Born one can
never die without any problems or misunderstanding. If misunderstandings precipitate, they
lead to complications. It's the human tendency. Justice to one may not be justice to the
other. So, the parties at dispute cannot have a neutral thought and the parties will surely not
accept though the rival says a correct thing. One of the Principles of Natural Justice is no one
can be a judge of his own cause. So, a third party who has no interest in the controversy is
necessary to say what is right, who is right, which is correct. So, it is crucial to have judiciary
interference in trades and businesses as well. (Dharmaprabhu Muthuchamy, June 15, 2017)

Judiciary interference can have both positive and negative impact in trade and business.
It depends on the excessiveness because there are many laws regarding this. Here, we are
going to explain such important laws regarding trade and business which will clarify the
consequences of judiciary interference.

THE CONTRACT ACT, 1872

There are total 11 chapters in this act. It would be quite impossible to explain all the
chapters of the contract act. So, here is a brief explanation of a small part of Chapter 2 which
will include what considerations and objects are lawful and what not.

The consideration or object of an agreement is lawful, unless- it is forbidden by law; or is

of such a nature that, if permitted, it would defeat the provisions of any law; or is fraudulent; or
involves or implies injury to the person or property of another; or the Court regards it as
immoral, or opposed to public policy. In each of these cases, the consideration or object of an
agreement is said to be unlawful. Every agreement of which the object or consideration is
unlawful is void. 

ILLUSTRATIONS:

(a) A agrees to sell his house to B for 10,000 Taka. Here B's promise to pay the sum of 10,000
Taka is the consideration for A's promise to sell the house, and A's promise to sell the house is
the consideration for B's promise to pay the 10,000 Taka. These are lawful considerations.

(b) A promises to pay B 1,000 Taka at the end of six months; if C, who owes that sum to B, fails
to pay it. B promises to grant time to C accordingly. Here the promise of each party is the
consideration for the promise of the other party and they are lawful considerations.

(c) A promises, for a certain sum paid to him by B, to make good to B the value of his ship if it is
wrecked on a certain voyage. Here A's promise is the consideration for B's payment and B's
payment is the consideration for A's promise and these are lawful considerations.

(d) A promises to maintain B's child and B's promises to pay A 1,000 Taka yearly for the
purpose. Here the promise of each party is the consideration for the promise of the other party.
They are lawful considerations.

(e) A, B and C enter into an agreement for the division among them of gains acquired, or to be
acquired, by them by fraud. The agreement is void, as its object is unlawful.

(f) A promises to obtain for B an employment in the public service, and B promises to pay 1,000
Taka to A. The agreement is void, as the consideration for it is unlawful.

(g) A, being agent for a landed proprietor, agrees for money, without the knowledge of his
principal, to obtain for B a lease of land belonging to his principal. The agreement between A
and B is void, as it implies a fraud by concealment by A, on his principal.

(h) A promises B to drop a prosecution which he has instituted against B for robbery, and B
promises to restore the value of the things taken. The agreement is void, as its object is
unlawful.

(i) A's estate is sold for arrears of revenue under the provisions of an Act of the Legislature, by
which the defaulter is prohibited from purchasing the estate. B, upon an understanding with A,
becomes the purchaser, and agrees to convey the estate to A upon receiving from him the price
which B has paid. The agreement is void, as it renders the transaction, in effect, a purchase by
the defaulter, and would so defeat the object of the law.

(j) A, who is B's Mukhtar, promises to exercise his influence, as such, with B in favor of C, and C
promises to pay 1,000 Taka to A. The agreement is void, because it is immoral.
(k) A agrees to let her daughter to hire to B for concubinage. The agreement is void, because it
is immoral, though the letting may not be punishable under the Penal Code.
(Legislative.gov.bd, 2019)

A company or an organization can’t cancel a contract without legal procedures when the
contract law is implemented. So, there is no chance of fraudulency because the Valid law is an
agreement enforced by the law. Also, in this law the buyers have to be cautious because they
can’t say “No” to an agreement if previously they said “Yes”. So, we can say that if there was no
judiciary interference thus the contract law, the company would be in huge jeopardy. In short,
judiciary interference is needed in trade and business.

THE COMPANY ACT LAW, 1994

According to Sec. 2 (1) (c) the Companies Act, 1994- “Company means a company formed and
registered under this Act or an existing company”.

Thus, a company is a combination of persons formed under the Companies Act, 1994 with a view to
achieving some common objectives. Though a company is regarded a legal person, it possesses similar
rights and owes similar obligations like a natural person.

PRIVATE COMPANY
Sec. 2 (1) (q) of the Companies Act, 1994 provides, “Private company means a company
which by its articles-

1. Restricts the right to transfer its shares, if any,

2. Prohibits any invitation to public to subscribe for its shares or debenture, if any,
3. Limits the number of its members to fifty not including persons who are in its
employment.”

Thus, in a private company, the members cannot transfer their shares and the number of
members cannot exceed 50 (minimum 2). Invitation to public to subscribe for its shares is not
allowed.

PUBLIC COMPANY
Sec. 2 (1) (r) of the Companies Act, 1994 speaks, “Public company means a company
incorporated under this Act or under any law at any time in force before the commencement of
this Act and which is not a private company.”

In short, a public company is one the AOA (articles of association) of which don’t provide any
restrictions on-

1. the transfer of shares,

 2. maximum number of members and
3. the invitation to public seeking their subscription for its shares.

The minimum limit of its member is 7.

HOLDING & SUBSIDIARY COMPANY

When a company holds ‘majority of shares’ i.e. more than 50% of the equity shares of
another company, the former is called holding company or parent company and the latter is
called subsidiary company. EXAMPLE: B is a company incorporated under the Companies Act,
1994 having share capital of TK 6 lacs divided into 6000 shares of TK 100 each. Out of the total
shares, 3100 shares are held by A, another company. In this case, A is a holding company
and B is the subsidiary company.

OUTSIDER RIGHTS
The rights which attach to the outsiders of the company i.e., the third persons who are
not the members of the company are called ‘outsider rights’ Interestingly, a member will be
considered an outsider, if he does not purely remain in a capacity of a member. EXAMPLE: A
member as a solicitor, promoter or a director is considered an outsider in the company laws as
he possesses a capacity other than that of a member. Thus, such a member has no right to
enforce the articles of association against the company as the articles of association do not
create a contract between the outsiders and the company.

PRE-INCORPORATION CONTRACTS
The ‘pre-incorporation contracts’ are those contracts entered by the promoters on
behalf of the company before its incorporation. EXAMPLE: A contract for the purchase of
assets for the proposed company is a pre-incorporation contract.

LIFTING THE CORPORATE VEIL

By the decision of Salomon v. Salomon and Co. Ltd. (1897), we knew that there is
a fictional veil between the company and its members and the company is a separate legal
entity distinct from its members. Thus, lifting the corporate veil means disregarding or
ignoring the separate legal entity of the company and examining the character of the persons
who are in real control of the company. In other words, where a fraudulent and dishonest use
is made of the legal entity, the individuals concerned will not be allowed to take shelter behind
the corporate personality. In this regards the court will break through the corporate shell and
apply the principle of what is known as “lifting or piercing through the corporate veil.”

SPECIAL RESOLUTION
Special resolution means the resolution which is passed by ‘special majority’ of the
members i.e., by the support of 3/4th majority of the members present and entitled to vote at a
meeting. For the purpose of such a resolution, at least a twenty-one days’ notice is required to
be given to the members specifying the intention to propose the resolution as a special
resolution. [Sec. 87 of the Companies Act, 1994]

EXAMPLE: At a general meeting of the company, 1000 members were present. Out of these
1000 members, 750 members casted their votes in favor of the resolution, and the remaining
250 members casted their votes against the resolution. In this case, the resolution is said to be
passed by special majority (750 members which is 3/4 th majority of 1000 members).
(Legislative.gov.bd, 2019)

By lifting the veil, anyone can see who are the criminals or if there is any fraudulent
representation by any corporate directors or absence/abuse of corporate records. Moreover,
the company law ensures business judgment rule, fair procedures, asset securitization, liability
of an organization, no violation of the Ultra Vires doctrine otherwise there would a Death
Sentence empowered by the Courts etc. So, the company law has a huge impact on trade and
business. Thus, it is important to have judiciary importance in trade and business.

THE INSURANCE ACT, 1938

(Act no. IV of 1938)
There are 5 parts with many sections in the Insurance Act, 1938. We will keep it short by
summarizing some of them.

The government in 2009 repealed The Insurance Act formulated in 1938, and had addressed it
by Bima Act 2010. The government also formulated Insurance Development and Regulatory
Authority Act, 2010 to properly regulate this sector. The newly formulated Insurance
Corporation Act, 2018 is comprised of the provisions from both the Bima Act 2010 and the
Insurance Development and Regulatory Authority Act, 2010. (www.dhakatribune.com,2018)

1. According to The Insurance ACT 1938 (Act no. IV of 1938), Part II, Section 3E (5) which was
inserted by section 8 of the Insurance (Amendment) Ordinance, 1970, “An insurer to whom
a license to open a new branch or office has been refused by the Chief Controller may
prefer an appeal against the refusal to the Government whose decision on such appeal shall
be final.” (legislativediv.gov.bd,2019) In example, to open Agrani Insurance Co. Ltd., they
applied for the license and completed all the requirements and provided essential data to
the Chief Controller of Insurance. But somehow an inconvenience occurred and Chief
Controller refused to give the license. In that case, they can appeal against the refusal to the
Government whose decision on such appeal shall be final.

2. According to The Insurance ACT 1938 (Act no. IV of 1938), Part II, Section 48C (1,2,3) which
was substituted by section 7 of the Insurance (Amendment) Act, 2004,
(legislativediv.gov.bd,2019)
 I. “No insurer shall carry on any insurance business without having appointed a chief
executive officer for that purpose.” In example, to run Bangladesh General Insurance
Co. Ltd., the company must have to appoint a chief executive officer. Without a chief
executive officer, the company can’t continue the insurance business.

II. “No person shall be appointed as the chief executive officer of an insurer without the
prior permission of the Chief Controller of Insurance and he shall not accord permission
for such appointment unless the person proposed to be appointed has prescribed
qualification and experience in the field of insurance.”

In example, Bangladesh General Insurance Co. Ltd. can’t appoint a chief executive
officer by their own choice. The appointment should be done with the prior permission
of the Chief Controller of Insurance. He will follow the procedures to appoint that
officer.

III. “The chief executive officer shall not be removed, terminated or dismissed by the
insurer without the prior approval of the Chief Controller of Insurance and he shall not
give decision in such cases without hearing the concerned chief executive officer and
the insurer or any person authorized by the insurer in this behalf.”

In example, after appointing the chief executive officer, after some period if Bangladesh
General Insurance Co. Ltd. wants to remove that person from that position, simply they
can’t. The Chief Controller of Insurance will give the approval after hearing from the
concerned chief executive officer.
From the summarize of the Insurance Act 1938, we can state that the laws enforcing by
the Legislative and Parliament Affairs Division of Bangladesh have a serious impact on
Insurance Business. The judicial interference will have positive or negative impact here
depending on the situations or the companies. Here, main power is vested nn the Chief
Controller of Insurance. So, his decision carries many values. To start Insurance Business, a
company may have to face many difficulties as they need to follow the rules and procedures of
the centralized Insurance Development and Regulatory Authority of Bangladesh (IDRA) which
is the only government body for regulating and developing the insurance sector of Bangladesh
since 2010. May some corruptions will create problematic situations for any newbie or
established insurance company. But IDRA will regulate all insurance company to ensure
maximum efficiency in the field of insurance. Otherwise, many conflicts and unfair movements
would occur if the insurance companies don’t have to follow those tight rules given by the
Legislative and Parliament Affairs Division of Bangladesh and follow those regulations by IDRA
and face the judiciary steps. So, the consequences of judicial interference have positive and
negative impact in insurance business.

THE TRADE ORGANIZATIONS ORDINANCE, 1961

(Ordinance No. XLV of 1961)
Many trade organizations such as BGMEA, FBCCI, DCCI, BKMEA, CCCI, MCCI, BAE, BIA
established under the Trade Organizations Ordinance, 1961. They are operating their activities
for many years. We will try to summarize The Trade Organizations Ordinance, 1961 which was
substituted by the Trade Organizations (Amendment) Ordinance, 1984 (Ordinance No. XV of
1984) by providing some information regarding this act.

1. According to The Trade Organizations Ordinance, 1961 (Ordinance NO. XLV of 1961), Section
4A, “If on the date of commencement of the Trade Organizations (Amendment) Ordinance,
1984, two or more trade organizations are found to be functioning with similar aims and
objects, the Director, may, if he thinks fit, order merger of all these organizations into one
or cancel the license of any of these trade organizations: Provided that no such order for
merger or cancellation of license shall be made without giving the trade organizations an
opportunity of being heard.” (legislativediv.gov.bd,2019) In example, if there are two or
more organizations same as BGMEA with same aims and functions then The Director may
merge all of those similar type of organizations or may cancel any of these trade
organizations.

2. According to The Trade Organizations Ordinance, 1961 (Ordinance NO. XLV of 1961), Section
18, “Whoever contravenes any provision of this Ordinance, or any rule or order made, or
any direction or instruction given, thereunder, or obstructs any officer or person acting
under or in pursuance of any such provision, rule, order, direction or instruction, shall be
punishable with fine which may extend to ten thousand taka [The word “taka” was
substituted for the word “rupees” by section 19 of the Trade Organizations (Amendment)
Ordinance, 1984 (Ordinance No. XV of 1984)] and, in case of contravention of the
provisions of sections 13 and 14A or of any order or notification issued thereunder, with a
further fine which may extend to five hundred taka [The word “taka” was substituted for
the word “rupees” by section 19 of the Trade Organizations (Amendment) Ordinance,
1984 (Ordinance No. XV of 1984)] for every day of the period during which such
contravention continues.” (legislativediv.gov.bd,2019) In example, if any member or
person of any trade organizations disrespects or contravenes the decision, rule, order,
direction of the director or obstructs any officer or individual then he will be punished with
fine which may be extended to ten thousand taka. In addition, if any member or person of
any trade organizations contravenes the provisions of sections 13 and 14A of The Trade
Organizations Ordinance, 1961 (Ordinance NO. XLV of 1961), in that case he/she will be
punished with fine which may extended to five hundred taka for every day of the period
during which such contravention continues.

From the summarize of The Trade Organizations Ordinance, 1961, we can state that
there is a serious impact of judicial interference. In this trade business, a trade organization
can be established only when they will go through and accept all the section under the
Trade Organization Ordinance, 1961 which was substituted by the Trade Organizations
(Amendment) Ordinance, 1984 (Ordinance No. XV of 1984). Here, all the power vested in
the Director. You have to follow the instructions given by the director otherwise you will be
palatalized. So, here someone can lack of independence. On the other hand, the Trade
 Organization Ordinance, 1961 helps to regulate all the trade organizations at a moment.
That’s why the trade organizations are bound to the government to ensure the best
outcomes in the field of trade business. And no can unnecessarily open a trade organization
and do their work which can have negative impact on the society. The consequences of
judicial interference in trade business have both positive and negative impacts. But most
likely positive which ensure the most effective outcome of those trade organizations.

REFERENCES
1. History of Judiciary of Bangladesh [Online]. Available at: http:/ /judiciary/history-of-judiciary
(Accessed: 29th January, 2020)

2. Importance of Judiciary [Online]. Available at: https://www.quora.com/What-is-the-

importance-of-the-judiciary (Accessed: 15th June, 2017)

3. The Contract Act 1872 and The Company Law 1994, Law of Bangladesh [Online]. Available
at: http://bdlaws.minlaw.gov.bd/act-26.html (Accessed: 2019)

4. At a glance: the new insurance corporations act [Online]. Available at:

https://www.dhakatribune.com/bangladesh/law-rights/2018/12/06/at-a-glance-the-new-
insurance-corporations-act (Accessed: 3rd December,2019)
5. The Insurance Act, 1938 (Act no. IV of 1938) Part II Section 3E [Online]. Available at:
http://bdlaws.minlaw.gov.bd/act-175/section-4393.html (Accessed: 2019)
6. The Insurance Act, 1938 (Act no. IV of 1938) Part II Section 48C [Online]. Available at:
http://bdlaws.minlaw.gov.bd/act-175/section-2446.html (Accessed: 2019)
7. The Trade Organizations Ordinance, 1961 (Ordinance No. XLV of 1961) [Online]. Available
at: http://bdlaws.minlaw.gov.bd/act-details-311.html (Accessed: 2019)