Investor ordered to pay Dh16.5 million to Amlak

A Dubai Judicial Committee that hears cases against Islamic mortgage lender Amlak has dismissed a lawsuit filed by an investor against Amlak and ordered him to pay Dh16.5 million to the company.

The investor had filed a lawsuit against Amlak, seeking dissolution of the murabaha contract worth Dh17 million signed between him and Amlak.

The investor also wanted Amlak to pay him Dh651,000 as the value of the first installment of the purchase price paid by him under the murabaha contract. He also demanded that Amlak return the cheque for Dh16.5m issued by him.

The investor filed his suit against Amlak on the basis of a murabaha contract where he made a proposal to Amlak to purchase aluminium in London through the Islamic finance system.

Amlak purchased aluminium for Dh15m, expecting to make a profit of Dh2m.

Amlak then issued a letter of finance approval, requiring the investor (plaintiff) to pay the value of the murabaha in two installments. The first instalment of Dh651,000 was paid and a cheque for the second instalment of Dh16.5m was issued by the investor.

The investor pledged shares valued at over 65 per cent of the value of the murabaha and authorised Amlak to sell it.

The investor and Amlak agreed to purchase aluminium through a London brokerage identified as Abro Ltd.

They agreed to deposit the sales price in a specific account  of Amlak-affiliated Emaar Company for Financial Services. The investor refrained from withdrawing any amount from it and delegated Amlak to deduct his debt repayment instalments from the account under the murabaha contract.

The plaintiff said in the lawsuit that the murabaha between him and Amlak was a Shariah-compliant contract while in reality it was not.

He added the contract included another provision that he actually inspect the product while in reality the investor did not inspect it.

Meanwhile, Amlak warned him and asked him to pay the rest of the price of the deal and threatened to present the cheque to the bank for encashment and take legal action against him.

The investor (plaintiff) said in his lawsuit that the procedures contradicted with Islamic concept of murabaha. Also, there were no quotations attached to the purchase order signed by him.

He claimed that Amlak  has compelled him to deal with a firm affiliated to it, held the proceeds of the sale and give this firm the sole right to sell and purchase, which led him to great loss.

Meanwhile, Amlak (the defendant) sought dismissal of the case, stating that the plaintiff’s accusations and justifications are incorrect and contradicted by facts.

Amlak said the investor is obliged to pay Dh16.5m as the value of the guarantee cheque.  It said the investor has previously submitted a funding request to buy shares worth Dh12m and had requested rescheduling of his debt.

Amlak said the investor once again applied for a murabaha contract worth Dh17m and paid the first cheque of Dh651,000 and issued a guarantee cheque of Dh16.5m for the balance value of the contract.

But he didn’t adhere to the agreed deadline of payments and initiated a case against Amlak.

In its 28-page verdict, the judicial committee dismissed the investor’s plea, saying  that  Federal Law No. 4 of 2004 on the establishment of the Emirates Securities and Commodities Market makes the trading of securities such as stocks, bonds and commodities legitimate, and confined dealing in these things by registered brokers only. What  happened in this deal was accordingly to this law.

The Judicial Committee said depositing money in a special account does not invalidate the contract since it was agreed to by both the parties to ensure access to the funds.

The committee added that the financing contract is completely valid. It said the contract will become invalid only if the investor can prove that the seller had misled or cheated him.

Regarding the justifications of the investor that he did not know the sale price of the product, the committee said it was clear through faxes between Amlak and Abro Ltd that 1.4m metric tons of aluminum was purchased at  a price Dh15.1m.

Since the deal was managed within the agreed framework of the murabaha contract, it remains valid, said the Judicial Committee.
 

Follow Emirates 24|7 on Google News.