Cassation No. 453 of 2021 - Commercial
Issued on 31/05/2021
Court Panel: Chaired by Mr. Judge Shihab Abdul Rahman Al-Hammadi, Chief Judge of the Circuit, accompanied by Messrs. Judges: Al-Bashir bin Al-Hadi Zaytoun and Abdullah Boubaker Al-Siri.
1- Prerequisites for the feasibility of seeking judicial receivership.
2- The party with a vested interest in the asset may request a receivership proceeding if there are reasonable grounds to apprehend an imminent threat that the asset will persist in the hands of its current possessor.
3- The trial court possesses the authority to extract substantive reasons for imposing or refraining from imposing receivership solely from the presented documents, without further review. This is contingent upon the court confirming the veracity of the dispute and the presence of grounds for imposing receivership as an interim measure, based on the documents that the opposing party has presented and acted upon.
(1 - 3) Judicial receivership, “its nature,” “the summary justice’s jurisdiction over it,” “the authority of the trial court to assess the seriousness of reasons for imposing it.” Summary justice “jurisdiction over judicial receivership.”
(1) Judicial receivership. Nature thereof? Temporary procedure. The jurisdiction of the summary justice. Conditions therefor.
(2) Evaluating the gravity of the justifications for imposing judicial receivership falls within the purview of the trial court, Conditions therefor. Deviation from these conditions renders the ruling deficient in reasoning.
(3) The appellant bank upheld in its plea to institute judicial receivership on real estate owned by the second respondent, asserting a breach by both first and second respondents of their obligations towards the bank regarding the repayment of the granted banking facilities and associated interest. Despite a court ruling obliging them to fulfill these obligations, implementation proved impractical due to the absence of bank accounts for provisional seizure. Meritorious defence. The contested ruling, however, rejected the imposition of receivership, contending that the properties were not central to the dispute and belonged to the second respondent without a thorough examination of the meritorious defence presented. Such oversight renders the ruling deficient in reasoning. The rationale for this lies in the fact that the imposition of receivership falls within the domain of summary justice, serving as a provisional measure to safeguard the appellant's proven right, without prejudice to the underlying merit of the right.
1- It is prescribed, as per the ruling of this court, judicial receivership is an interim measure within the jurisdiction of summary justice. This authority is granted, contingent upon meeting specific conditions, which include the presence of a substantial dispute over the right between the involved parties and an imminent peril. It is crucial to note that this provisional measure does not impinge upon the essence of the right. For instance, if an individual with a vested interest in a fund possesses reasonable grounds to apprehend an immediate danger of the fund remaining under the control of its possessor, they are entitled to petition the court for the imposition of this temporary measure.
2- It is prescribed, as per the ruling of this court, that the exclusive authority of the trial court to extract and assess substantive reasons for either imposing or refraining from imposing receivership, from the presented documents without further review, is contingent upon the court grounding its judgment on valid reasons substantiated by documented facts. This requires a thorough consideration of the actual dispute's reality and an evaluation of the extent to which justifications for imposing receivership as a temporary measure are available. The court shall rely on the documents presented by the opposing party in support of their defence. Failure to adhere to these conditions renders the court's ruling fatally flawed.
3- Given this context, the appellant upheld in its defence that it had extended banking facilities amounting to 254,000,000 dirhams, conditioned on the transfer of rental income from properties owned by the second respondent to an account with the appellant bank for the purpose of repaying loan instalments. The respondents breached their obligations by failing to pay the loan instalments and ceasing to transfer the rental returns. The appellant secured a ruling in Case No. 1178 of 2020, Sharjah Commercial Plenary, on 3/5/2021, mandating the respondents to jointly pay the bank 266,533,353 dirhams with interest. Despite this ruling, the respondents refused to comply, and the public banks reported a lack of accounts or balances to enforce provisional seizure. However, the contested ruling declined to impose receivership on the properties, asserting they were not the subject of the dispute and belonged to the second respondent. The ruling failed to scrutinise the appellant's defence, which aimed at safeguarding its right from loss, substantiated by the aforementioned ruling and accompanying documents. Consequently, the appellant argued for the urgent imposition of receivership as a temporary measure under the purview of summary justice, without prejudicing the underlying right. This meritorious defence, if properly examined, may change the formation of opinion in the case and could lead to a reassessment of the gravity of the dispute or the imminent danger, rendering the ruling defective. Therefore, the ruling is to be reversed, and the case is to be remanded for further consideration.
The Court
Whereas in the facts, as apparent pursuant to the perusal of the contested ruling and accompanying documents, the appellant initiated lawsuit No. 4799 of 2020 - Summary - against the two respondents. The primary request in this suit was the imposition of receivership on properties owned by the second respondent. The appellant sought the appointment of a judicial receiver responsible for managing and exploiting these properties, including leasing the units to third parties. The revenue generated from these activities was to be deposited into a bank account. The basis for this request lay in the fact that the first respondent company, owned by the second respondent, entered into a financial arrangement with the appellant bank. This involved securing a loan amounting to 245,000,000 dirhams. The company committed to making monthly instalments as part of the repayment plan, with the second respondent providing a guarantee for this financial obligation. Additionally, a contractual agreement was reached between the second respondent and the appellant. This contract outlined the transfer of rental returns from four properties situated in the Emirate of [Name]. Due to the failure of the debtor company and its owner (the second respondent) to fulfil the agreed-upon monthly instalments, the outstanding amount reached approximately 263,000,000 dirhams by 31/5/2020. In response to this non-payment, the appellant initiated legal action by filing Suit No. 1178 of 2020 at the Sharjah Commercial Plenary. The purpose of this legal action was to demand the payment of the amounts owed by the respondents, and the court awarded the amounts to the appellant. The rental returns from the properties served as one of the guarantees provided by the second respondent to secure the repayment of the loan. Given the importance of this issue, the lawsuit was processed under summary justice. The court of first instance rejected the case, and upon the appellant's appeal in Appeal No. 1605 of 2020, the Court of Appeal, in a session dated 6/3/2021, confirmed the initial ruling. Dissatisfied with this outcome, the appellant filed the current cassation. Upon presentation to this court, it deemed the cassation valid for consideration and scheduled a session for its hearing. Whereas the appellant objects to the contested ruling citing violation of the law and the error in its application by rejecting the case due to the absence of a dispute over the ownership of the real estate subject matter of the dispute, which is owned by the second respondent. The appellant argues that the contested ruling erroneously concludes that there is no serious dispute warranting the imposition of receivership because it does not relate to the ownership of the owner on whom the receivership is sought. The appellant asserts that the imposition of receivership on the four properties is supported by documents, serving as a necessary measure to temporarily protect the creditor's money from loss when it remains in the hands of the debtor who refuses to pay. The appellant emphasises that the lawsuit filed is based on these properties as a guarantee, demonstrating the seriousness of the dispute and urgency, without prejudicing the origin of the right in Commercial Case No. 1178 of 2020, where the respondents were obligated to pay. This, according to the appellant, renders the ruling flawed and necessitates its reversal.
This objection holds merits, since it is prescribed, as per the ruling of this court, judicial receivership is an interim measure within the jurisdiction of summary justice. This authority is granted, contingent upon meeting specific conditions, which include the presence of a substantial dispute over the right between the involved parties and an imminent peril. It is crucial to note that this provisional measure does not impinge upon the essence of the right. For instance, if an individual with a vested interest in a fund possesses reasonable grounds to apprehend an immediate danger of the fund remaining under the control of its possessor, they are entitled to petition the court for the imposition of this temporary measure.
It is prescribed that the exclusive authority of the trial court to extract and assess substantive reasons for either imposing or refraining from imposing receivership, from the presented documents without further review, is contingent upon the court grounding its judgment on valid reasons substantiated by documented facts. This requires a thorough consideration of the actual dispute's reality and an evaluation of the extent to which justifications for imposing receivership as a temporary measure are available. The court shall rely on the documents presented by the opposing party in support of their defence. Failure to adhere to these conditions renders the court's ruling fatally flawed.
Given this context, the appellant upheld in its defence that it had extended banking facilities amounting to 254,000,000 dirhams, conditioned on the transfer of rental income from properties owned by the second respondent to an account with the appellant bank for the purpose of repaying loan instalments. The respondents breached their obligations by failing to pay the loan instalments and ceasing to transfer the rental returns. The appellant secured a ruling in Case No. 1178 of 2020, Sharjah Commercial Plenary, on 3/5/2021, mandating the respondents to jointly pay the bank 266,533,353 dirhams with interest. Despite this ruling, the respondents refused to comply, and the public banks reported a lack of accounts or balances to enforce provisional seizure. However, the contested ruling declined to impose receivership on the properties, asserting they were not the subject of the dispute and belonged to the second respondent. The ruling failed to scrutinise the appellant's defence, which aimed at safeguarding its right from loss, substantiated by the aforementioned ruling and accompanying documents. Consequently, the appellant argued for the urgent imposition of receivership as a temporary measure under the purview of summary justice, without prejudicing the underlying right. This meritorious defence, if properly examined, may change the formation of opinion in the case and could lead to a reassessment of the gravity of the dispute or the imminent danger, rendering the ruling defective. Therefore, the ruling is to be reversed, and the case is to be remanded for further consideration.

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