Creditor in Abu Dhabi court is mandated to receive Dh646,000 bank loan repayment from debtor.
In a recent ruling at the Abu Dhabi Commercial Court of First Instance, a man has been ordered to repay Dh646,000 to a bank due to a loan default. The dispute centres around the man's failure to repay a loan and credit card debt.
According to court records, the borrower obtained financing under a Murabaha agreement valued at Dh613,979, in addition to a credit card. However, the man stopped making payments shortly after taking out the facilities, leading to the bank filing a lawsuit seeking Dh641,000 in unpaid facilities, Dh20,000 in compensation, and recovery of legal fees.
The court's judgment stated that the borrower's actions caused the bank financial harm by preventing it from recovering and investing its funds. The court concluded that the borrower had breached his obligations by failing to make regular payments.
It is worth noting that the bank was found to have met all required procedures, including obtaining legally recognized guarantees, such as salary certificates and cheques. Other claims made by the bank were dismissed. The borrower was also ordered to pay an additional Dh5,000 in compensation and cover the bank's legal fees.
Loan default cases in the Abu Dhabi Commercial Court of First Instance are not uncommon, though publicly available specific statistics on the frequency of such cases are limited. The courts require banks to follow due diligence protocols, and non-compliance by the lender can work in favour of the borrower in litigation.
Usual penalties for borrowers who are found liable for default include repayment of the outstanding loan balance, payment of legal interest at prescribed rates, and potential legal costs, depending on the judgment. However, the courts also emphasise regulated financial practices and borrower protections, as seen in this case where the bank was required to obtain guarantees proportional to the borrower's income and loan amount to proceed with litigation.
This case serves as a reminder to borrowers about the importance of meeting their repayment obligations and the potential consequences of default. On the other hand, it also underscores the need for financial institutions to adhere to strict regulatory compliance when extending credit facilities.
[1] Source: Abu Dhabi Judicial Department, Case No. 373 of 2021, Judgment dated 15th October 2021.
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