Abu Dhabi court rejects bank’s nearly Dh950,000 loan case over regulatory breach
A bank's lawsuit seeking the recovery of Dh949,938 from a woman and her guarantor has been thrown out by the Abu Dhabi Commercial Court as they failed to meet central bank requirements for offering sufficient guarantees over loans.
In the bank's case, it claimed both defendants were jointly required to repay the balance of the loan owed, with 9 per cent yearly interest from date of default until paid in full, along with legal costs and disbursements.
The loan was made to the first defendant and the second defendant signed as a guarantor, according to court records. In support of its case, the bank had filed documents including a loan agreement, account statement and a copy of the letter of guarantee.
But, it has noticed that the bank granted credit facility without obtaining any enforceable security from either the borrower or the guarantor at time of disbursement.
The court cited Article 150 of Federal Decree-Law No. 6 of 2025 concerning the Central Bank and regulation of financial institutions, which it stated requires licensed financial entities to obtain adequate securities for all credit facilities extended to individuals or sole proprietors and to keep records documenting such provisions.
The court emphasized that without such rather guarantees, any corresponding claim is not admissible before courts or arbitration bodies.
The circular also stated that banks cannot accept one cheque which proposes repayment of the entire loan amount unless, per subsection (d), it is repayable in a single instalment and is under an upper limit. If repayment is done in instalments, the lender shall get several cheques equal to the number and value of instalments with total cover up to only 120 per cent maximum of the loan value.
The court observed that the bank did not produce anything on record to show these conditions were satisfied in the case file, or even if they got guarantees/covering multiple cheques as required.
With reference to this principle, the court stated that contracts bind both parties. It ruled that the bank's non-compliance with regulatory requirements amounted to a violation of law.
As a result, the court deemed the claim unfit and directed the bank to pay its legal charges.
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