Article 16 of the Saudi General Warehouses Law
المادة 16 من نظام الإيداع في المخازن العامة
The article allows the holder of the pledge document, separated from the storage receipt, to ask the Board of Grievances for permission to sell the pledged goods if the debt is not paid when due; the Board determines the method of sale and notifies the warehouse keeper and the owner of the receipt.
Official text (Arabic)
This article has not been amended since the law was issued.
إذا لم يدفع الدين في ميعاد الاستحقاق جاز لحامل مستند الرهن ـ منفصلا عن إيصال التخزين ـ أن يطلب من ديوان المظالم الإذن له في بيع البضاعة المرهونة، ويحدد الديوان طريقة البيع ويبلغ الخازن ومالك إيصال التخزين بذلك.
This is the official Arabic wording, the only legally binding version. We do not translate the law itself; the explanation below is ours. Official source: Bureau of Experts at the Council of Ministers
Article 16 explained in plain English
This article gives the holder of the pledge document, that is, the secured creditor, a way to satisfy his right if the debt is not paid:
- The condition: the debt is not paid on the due date.
- Who has the right: the holder of the pledge document separated from the storage receipt.
- The procedure: he asks the Board of Grievances for permission to sell the pledged goods. He does not sell on his own.
- The Board's role: it determines the method of sale and notifies the warehouse keeper and the owner of the storage receipt of it.
This article is the counterpart of Article 15. Article 15 protects the holder of the storage receipt, since it allows him to pay the secured debt even before its due date, and to deposit it with a local bank if payment is impossible or refused, whereupon the goods are released. Article 16 protects the secured creditor when the due date passes without payment.
It is followed by Article 17, which explains how the proceeds of sale are distributed: the secured creditor satisfies his right from the price of the goods in priority over all creditors, after deducting the taxes and fees due on the goods and the expenses of their sale, storage, keeping and delivery. If the holder of the storage receipt is not present at the time of sale, the surplus amount is deposited in a local bank.
A secured creditor or an owner of pledged goods facing this situation is best advised to consult a lawyer specializing in commercial matters or enforcement.
Practical example
A finance company lent a merchant in Riyadh money secured by a pledge document for stored goods, and the due date arrived without payment. Under this article the company may ask the Board of Grievances for permission to sell the pledged goods, and the Board determines the method of sale and notifies the warehouse keeper and the owner of the storage receipt.
Translated from our Arabic explanation with machine assistance. For guidance only; it does not replace advice from a lawyer on your situation.
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Frequently asked questions about Article 16 of the Saudi General Warehouses Law
What happens if the debt secured by a pledge document is not paid?
The holder of the pledge document, separated from the storage receipt, may ask the Board of Grievances for permission to sell the pledged goods.
Can the creditor sell the pledged goods himself?
No. The sale is with the permission of the Board of Grievances, which determines the method of sale and notifies the warehouse keeper and the owner of the storage receipt.
More articles on Loans Secured by Pledged Goods
- Article 5
The article allows the general warehouse to provide loans secured by a pledge of the goods kept with it, and to deal in the pledge documents representing them after the pledgor's consent.
يجوز للمخزن العام أن يقدم قروضا مكفولة برهن البضاعة المحفوظة لديه، وأن يتعامل بمستندات الرهن التي تمثلها بعد موافقة الراهن.
- Article 15
The article allows the holder of the storage receipt, separated from the pledge document, to pay the secured debt before it falls due, and if payment is impossible or refused, to deposit it with a local bank, whereupon the goods are released.
يجوز لحامل إيصال التخزين ـ منفصلا عن مستند الرهن ـ أن يدفع الدين المضمون بهذا المستند ولو قبل حلول ميعاد استحقاق الدين. وإذا تعذر الوفاء لحامل مستند الرهن أو رف
- Article 17
The secured creditor satisfies his right from the price of the goods in priority over all creditors after deducting taxes, fees and the expenses of sale, storage and keeping, and any surplus is deposited in a bank if the receipt holder is absent.
يستوفي الدائن المرتهن حقه من ثمن البضاعة بالامتياز على جميع الدائنين بعد خصم المبالغ التالية : أ- الضرائب والرسوم المستحقة على البضاعة. ب- مصروفات بيع البضاعة و
- Article 18
The holder of the pledge document may have recourse against the debtor or endorsers after the goods are sold and their price proves insufficient, within 10 days of the sale; recourse against endorsers lapses if enforcement is not started within 30 days.
لا يجوز لحامل مستند الرهن الرجوع على المدين الراهن أو المظهرين إلا بعد بيع البضاعة المرهونة وعدم كفاية ثمنها للوفاء بالدين وأن يكون ذلك خلال عشرة أيام من تاريخ
The texts are reproduced from the official website of the Bureau of Experts at the Council of Ministers for reference; where they differ, the officially published Arabic text prevails. This content is not legal advice.