The Bhutanese Leading the way.
The final Supreme Court civil verdict in January 2025 meant that Phajo owes the banks and private individuals around Nu 1 billion (bn) to be paid back by auctioning his properties.
Phajo is liable to pay the principal and interest payment of Nu. 657.759 million (mn) to various banks.
The Special Bench ruled that that loan interest and penalty amounting to Nu. 129.154 mn is imposed on various banks to fix accountability, however, the High Court during the appeal reversed this back to Phajo which the Supreme Court upheld.
Phajo Nidup owes a sum of Nu.342.186 mn to different private individuals excluding the liabilities of previous judgments pending before the Bench for enforcement.
He has a total of 25 Thrams registered in his name (individual and joint) and 35 Thrams registered in the name of other individuals – properties that were already purchased by Phajo Nidup.
Phajo is set to receive Nu. 49.233 mn from various parties.
The Supreme Court has directed banks to auction mortgaged properties which were seized during the Time-Bound Bench’s ruling. A committee will soon be formed by the Financial Institution Association of Bhutan (FIAB) which will include all the involved banks in Phajo Nidup’s case.
Currently, legal heads of banks are tasked to study and evaluate the mortgaged properties valuation, and only after the completion, it will be decided whether the properties will be able to generate the recovery of the outstanding loan amounts including multiple mortgage issue.
One main challenge in Phajo’s case is that he has mortgaged the same property multiple times across different banks.
Here, the court shared those priorities and entitlements of mortgaged lands, including those with multiple mortgages, has been determined according to the order of registration with authorities such as Thromde, Dungkhags, and Dzongkhags. Hence, the chronological order as stipulated in the judgments will be followed for the enforcement.
The Enforcement Unit of court has met multiple times with legal officers from financial institutions.
As per the court, “Some loans have already been settled per court orders, and mortgaged properties have been seized. The financial institutions will soon auction these properties to recover outstanding loan amounts, as directed by the court. The auctions will adhere to the RMA Guidelines.”
The court shared that most of the individuals involved in the case, who did not appeal, have already paid their fines. The Office of the Attorney General (OAG) will pursue enforcement only if convicted parties fail to comply.
Meanwhile, some defendants have requested payments extensions until completing their sentence or approval for installment payments. Final resolution will be determined after the OAG initiates enforcement actions.
Amount received from Phajo’s debtors remains held in a judiciary escrow account.
The court in its ruling has identified procedural and substantive failures by financial institutions and other agencies that contributed to the commission of these offenses.
On 21st May 2025, Phajo Nidup was convicted by Supreme Court with sentence of 15 years, 5 months, and 28 days, without the option of a fine. However, he was allowed to pay fines for the rest 5 years, 7 months, and 29 days within 3 months.
Phajo Nidup has been in detention since 2022, with his bank accounts frozen and all properties seized by the Time-Bound Bench. With no income to pay fines in lieu of imprisonment, the option for recovering outstanding debts is to sell his assets.
