The value of a loan granted to a person with a guarantee contract signed by the company manager

He rejected a bank lawsuit demanding a company for 27 million dirhams

The Dubai Court of Appeal upheld a ruling by the Commercial Court of First Instance to reject the lawsuit of a foreign bank requesting a local company to pay more than 27 million dirhams, as a guarantor for a businessman, due to the signing of the guarantee or guarantee contract by the director of the defendant company, who does not have legal authority Borrowing from banks or guaranteeing others in the name of the company, something that the plaintiff bank did not notice.

The lawsuit papers stated that the plaintiff bank provided banking facilities to one of the persons, consisting of a loan of 27 million and 232 thousand dirhams, with the guarantee of the defendant company, and when the original debtor failed to pay the value of the loan owed by him, the bank filed a guarantee case against the company under the guarantee contract.

The defendant's defense attorney, Lawyer Badr Abdullah Khamis at the International Center for Advocacy and Legal Consultation, made a contradictory claim calling for the cancellation of the bail contract because it was issued without having any capacity, as it was in violation of the provisions of the annex to the company’s foundation contract, which does not allow its manager to sign on behalf of the company by bailing it for the loan.

For its part, the Court of Appeal ordered the assignment of a tripartite committee of banking experts, who concluded in their report that the company director, according to the appendix of the articles of incorporation, did not have the authority to borrow from banks or guarantee others in the name of the defendant, and it was necessary for the plaintiff bank to investigate the accuracy and good scrutiny in the texts of the appendix The contract is a document indicative of the manager’s authority to sign on behalf of the company, because the borrowing, guarantee, or guarantee operations with their legal effects require clear clauses that entitle those powers, which is something that the aforementioned Memorandum of Association appendix lacks.

The court ruled the dismissal and nullity of the bail contract that is the subject of the lawsuit, as it was established without a legal basis, given that the guarantee contract on which the plaintiff bank is based is frustrated, as it is not enforceable in the defendant company.

The signature owner does not legally have the power to borrow or guarantee others in the company’s name.

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