NBQ appeals court order on GIH deposit

The National Bank of Umm Al Quwain (NBQ) has challenged a Dubai Court of First Instance judgement of July 19 that ordered the bank to pay the Kuwait-based Gulf Investment House (GIH) $250 million and interest accrued on the same since February 28, 2009.

NBQ, through its lawyers, appealed the said judgement within the statutory time limit.

However, at the first hearing held on September 29, the case was adjourned until November 8, "in order to consolidate NBQ's appeal with GIH's appeal in respect of interest," notes to the bank's financials stated.

Meanwhile, as per provisional attachment order dated August 23, 2010, NBQ has deposited the funds in  the court's account, pending final decision on the case.

The dispute dates back to July 2008 when the Kuwait investment company placed $250m with NBQ. The Umm Al Quwain bank kept arguing from the beginning that this money was kept with the bank as advance payment against a proposed issue of bonds to be converted into 330 million NBQ shares of Dh1 each at a premium of Dh6.15 per share totaling Dh2.359 billion.

"There is a Memorandum of Understanding (MoU) dated July 16, 2008 signed between the two institutions," NBQ stated in its financials for the three-month period ending September 30, 2010. The bank financials show that this amount appears on the list of other liabilities amounting to Dh1.159bn as of September 30, 2010.

In December 2008, NBQ had received a letter from GIH seeking the cancellation of the said transaction and hence the refund of the advance of Dh918.25m.

On legal advice, NBQ took the view that GIH request was not valid and that the MoU was a binding sale purchase agreement.

Accordingly, NBQ went ahead with the so-called deal by seeking the balance due from the Kuwaiti company. This led to GIH filing a lawsuit during 2009 in the First Instance Court of Dubai and the following legal battle between the two.

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