Dubai court orders contractor to pay Dh28.7m after subcontractor bankruptcy

Dubai: A Dubai commercial court has ordered a construction company to pay Dh28.7 million to an electromechanical company after ruling it was liable for pushing the smaller company into bankruptcy by delaying project payments.

The court also dismissed a counterclaim and directed the contractor to bear legal costs.

The dispute began in 2017 when the two companies signed a subcontract worth Dh113 million for electrical, mechanical, and plumbing works on a Dubai real estate project.

Court records show the subcontractor completed between 99% and 100% of the work, but the main contractor withheld payments and, without justification, liquidated performance and advance payment guarantees.

The subcontractor argued that the non-payment triggered a financial collapse, leaving it unable to pay suppliers, subcontractors, and employees.

In 2022, the firm was declared bankrupt. A court-appointed engineering expert later determined that Dh77.6 million, including VAT, was owed for the completed works.

When negotiations failed, the bankrupt company sued for payment along with Dh20 million in damages. The contractor countered with a claim of Dh39.6 million for alleged delays and defects.

However, a panel of engineering, accounting, and scheduling experts rejected the claim, confirming only the subcontractor’s entitlement to outstanding dues.

Dr Alaa Nasr, legal representative of the bankrupt firm, noted that the UAE’s insolvency law is one of the most advanced in the region, ensuring the protection of insolvent companies and safeguarding debtor assets under court supervision.