Barwa Real Estate Company has won a significant ruling in excess of BD6.1mn (QR61mn) through its wholly-owned subsidiary, Barwa International, in the Bahrain Chamber of Dispute Resolution (BCDR) against the defendants – two prominent Bahraini companies, Inovest and Al Khaleeji Development Company.
Barwa has now obtained the attachment order from the Bahraini courts and is presenting this order to the Central Bank of Bahrain (CBB) to instruct all banks in the GCC country to freeze the defendants’ accounts to the amount of the judgment awarded to Barwa.
The case, which was filed by Barwa in the BCDR in June 2012, related to an investment product promoted by Inovest in 2008, prior to Inovest obtaining an appropriate licence from the Central Bank of Bahrain.
The investment product, an offering of shares in Dannat Resort Development Company, aimed to raise SR733mn from investors through a private placement offering so the investors could participate in the profits of a real estate development project to be known as Half-Moon Bay in the Eastern Province of Saudi Arabia.
The investment was to be managed by the defendants and completed within three years.
In April 2008, Barwa invested SR60mn with Inovest (then known as Tameer) through the private placement of shares in an investment special purpose vehicle, Dannat Resort Development Company Limited. BCDR found that the defendants failed to raise sufficient capital in the private placement in order to proceed with the proposed investment and the project. Indeed, the private placement raised only 40% of the target capital and yet the defendants “short-closed” the offering and still utilised the funds raised from Barwa and other investors against the best interests of those investors.
It was also confirmed that at the time of the private placement, Inovest was not licensed by the CBB to be able to offer such investment products to investors or invest money on behalf of others and so any commitment received by or on behalf of the defendants from investors at that time was therefore in violation of regulations in Bahrain.
BCDR also ruled that after more than five years since the investment offering took place, no substantial works had commenced on the project site in Saudi Arabia. The chamber engaged the assistance of a judicial appointed expert to investigate the claims, interview the relevant parties and produce a detailed report on the investment and the project.
It endorsed the expert’s findings. BCDR stated that the defendants clearly lacked the sufficient funds to complete the project. They refused to return the funds prior to formal proceedings when requested to do so by Barwa.
BCDR further ruled that the defendants used investors’ funds in a way that constituted a major deviation from the agreed contract under the Civil Code of Bahrain.
Consequently, BCDR handed down a compelling judgment accepting Barwa’s claims and comprehensively rejecting the arguments of the defendants.
BCDR ordered that the defendants repay to Barwa the full amount of Barwa’s SR60mn investment.
BCDR also ordered that the defendants pay Barwa compensation for lost profit of 1.5% from February 2009 until the judgment payment is received by Barwa, a further BD300,000 as compensation and that the defendants pay additional costs and expenses.
Barwa group chief executive officer Abdulla Abdulaziz al-Subaie welcomed the ruling and said: “Barwa is delighted with the outcome of the BCDR proceedings and the clear judgment that was handed down in our favour.”
“Barwa diligently pursues those parties that do not honour their commitments to us or act in breach of applicable regulations. Barwa follows a clear and comprehensive legal strategy to ensure, as far as possible, that our interests and those of our stakeholders are protected,” he said.
“Where those interests are prejudiced, Barwa seeks recovery and redress through all appropriate legal means. We were impressed with the efficiency and clarity of judgment of the BCDR and we now look forward to collecting the judgment award.”
Reported by: Caye Global News, Gulf Times
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