South Asians for Human Rights

Promoting Democracy, Upholding Human Rights

David Bergman and M Moneruzzaman

Nobel peace laureate Muhammad Yunus, removed as managing director of the Grameen Bank by order of the Bangladesh Bank on Wednesday, filed a writ with the High Court on Thursday claiming that the order had no ‘lawful authority’ and was in ‘violation of his fundamental rights’.

After hearing lawyers for the petitioner and the government, the court said that it would wait till Sunday before giving its decision on whether to stay the Bangladesh Bank order.

The court, however, verbally ordered the government not to take any adverse steps against the Nobel laureate, the petitioner in the case.

The court was considering two petitions, one filed by Yunus himself and the other by nine of the 12 directors of the Grameen Bank’s board. The other three directors are government appointees, one of whom is the chair of the bank.

Yunus, along with the nine directors, all of them borrowers, were present in a packed courtroom to hear three hours of intense argument made in front of Justices Mohammed Momtazuddin Ahmed and Justice Gobinda Chanda Thakur.

With emotions running high, both Dr Kamal Hossain acting for Muhammad Yunus and Mahbubey Alam, the country’s attorney general, spoke with passion, and moments of real anger.

At one point, the attorney general accused the Grameen Bank of making a ‘fraud on the law’ while Kamal claimed that the conduct of the Bangladesh bank was ‘an insult and impertinence’ to the country’s Nobel laureate. ‘Do you just send away a person like him with a piece of paper?’ he said.

Despite differences in interpretation, much of the factual basis was not in dispute.

The original Grameen Bank Ordinance 1983 gave the government the power to appoint a managing director to the bank and in October of that year, the ministry of finance issued a notification appointing Muhammad Yunus to the position.

Seven years later, in 1990, amendments were made to the ordinance so that the power of appointment for the position of managing director was given to the board of directors.

Section 14(1) of the amended ordinance states: ‘There shall be a managing director of the bank who shall be appointed by the board with the prior approval of the Bangladesh Bank.’

Following this, in August 1990, the then chairman of the board of directors of the Grameen Bank wrote a letter to the Bangladesh Bank stating that the board had unanimously decided at a meeting that month to re-appoint Professor Mohammad Yunus as managing director and requested the Bangladesh Bank’s approval.

This approval was duly given in a letter dated August 25, 1990 and signed by Mominul Huque Khondaker, deputy general manager of the Bangladesh Bank.

The approval letter stated that the ‘Bangladesh Bank had no objection in appointing Muhammad Yunus managing director of the Grameen Bank.’

Three days later Yunus re-joined the Grameen Bank.

This was the first and only time that the Bangladesh gave it formal approval of Yunus’s appointment. At the time, Yunus was about 49 years old.

Nine years later, the 52nd meeting of Grameen Bank directors in July 1999 decided to discuss the issue of Yunus’s retirement. Yunus was by then approaching 60 years of age.

The directors decided that as the power of appointment was vested with the board, the 60-year age limit for retirement for general staff contained in the bank’s service rules established in 1993 would not apply to Yunus.

The meeting then resolved that ‘Dr Yunus would continue as managing director until the board of directors do not decide otherwise,’ and that a ‘regulation should be framed in line with the Grameen Bank’s ordinance… so that in the future there is no complication in appointing the position of managing director.’

Two years later, the 2001 Regulations Regarding the Appointment of the Managing Director of Grameen Bank was framed which stated that that there would be no age limit for the managing director of the Grameen Bank.

According to the petitioners, these regulations are not in fact relevant as they only relate to subsequent appointments of the managing director.

Soon after this, as part of auditing of Grameen Bank’s annual accounts, an inspection report was then prepared by the Bangladesh Bank where it was observed that the Bangladesh Bank had not approved the board resolution of July 1999.

The Grameen Bank responded by stating that no approval was necessary as the managing director had been appointed following the Bangladesh Bank’s approval letter in 1990.

In the next detailed inspection report by the Bangladesh Bank, no further reference was made to the previous query.

Nine years later, at the 88th meeting of the board of directors, Yunus expressed his intention to retire with effect from July 2010 as he was soon to reach the age of 70, however the board did not agree.

It was not until the board meeting in late January, around 10 years since the Bangladesh Bank inspection reports, that the Grameen Bank heard again from the Bangladesh Bank when it received, through its newly appointed chairman, a letter stating the central bank’s view that Yunus was not legally in post.

In court, the two lawyers argued over the meaning of this chronology.

Kamal emphasised that the Bangladesh Bank had given its prior approval to the Grameen Bank board’s decision to appoint his client in 1990 and there was no need to seek further approval.

The board, he said, had appropriate legal authority through the Grameen Bank Ordinance to decide in 1999 that Yunus did not need to comply with the 1993 staff rules.

He made the point that the failure of the second Bangladesh Bank inspection team to raise any further query about his client’s appointment and the lack of any other query by the Bangladesh Bank for a period of eleven years, despite annual audits by the central bank, indicated that the Bangladesh Bank also considered that no further approval of Yunus’s position was necessary.

He also argued that, in any case, the Bangladesh Bank should have given a show cause to Yunus before simply sending such an order.

The attorney general, however, stated that the approval by the Bangladesh Bank in 1990 did not mean that Yunus could be employed indefinitely without further approval.

He argued that the 1993 staff regulations applied to the bank’s managing director and the board did not have the power to countermand these rules by a board resolution.

Mahbubey stated that the 1991 regulations did not have the force of law as the board did not have the power to make such a regulation.

He argued that there was no reason for a show cause as Yunus was already over the age limit. ‘If the Bangladesh Bank wanted to remove him when he was under the age limit, then it would need to send a show cause,’ he said.

He argued that the Bangladesh Bank was the regulator of the Grameen Bank and had the power through the Banking Companies Act 1991 to issue its order sacking Yunus.

Early in the argument, Kamal emphasises that the ‘Grameen Bank is a unique institution and one which we are proud to say is owned almost wholly by poor women from across rural Bangladesh, who have changed their lives and those of their children and communities.’

Source: The New Age – 04.03.2011