Abu Dhabi Court Throws Out Dh950,000 Loan Claim Over Bank’s Regulatory Lapse

The Abu Dhabi Commercial Court has dismissed a bank’s attempt to recover Dh949,938 from a woman and her guarantor, holding that the lender failed to comply with central bank regulations requiring proper guarantees for credit facilities.

The bank had sought a joint repayment order against both defendants, along with 9 per cent annual interest from the date of default until full settlement, in addition to legal costs and expenses.

Court records showed that the loan was issued to the first defendant, while the second signed as guarantor. To support its claim, the bank submitted a loan agreement, account statement and a copy of the guarantee.

However, the court found that no valid guarantees had been secured from either party at the time the loan was granted.

In its ruling, the court referred to Article 150 of Federal Decree-Law No. 6 of 2025 on the Central Bank and regulation of financial institutions, which requires licensed entities to obtain and maintain adequate guarantees for all loans extended to individuals or sole proprietors.

The judgment underscored that failure to meet this requirement makes any related claim inadmissible before courts or arbitration bodies.

It further clarified that banks cannot rely on a single cheque covering the entire loan amount unless the loan is repayable in one installment within a prescribed limit. For loans structured in instalments, lenders must obtain multiple cheques corresponding to each instalment, with the total not exceeding 120 per cent of the loan value.

The court observed that there was no evidence on record to show the bank had complied with these obligations, either by securing proper guarantees or by obtaining multiple cheques as required.

While reiterating that contracts are binding, the court emphasised that such agreements must comply with applicable laws and public order. It concluded that the bank’s failure to meet regulatory standards amounted to a legal breach.

The claim was therefore ruled inadmissible, with the bank directed to bear the legal costs.

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