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At least 68 people were rescued from the vessel, while one remains missing.
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Officials in Bahrain say it is too early to say what caused the boat to overturn, killing mainly foreigners including 21 Indians and 12 Britons.
The BBC's Jon Leyne in Bahrain says the revelation that the boat did not have the right paperwork - in a country where regulations tend to be followed - only adds to the questions being raised.
The boat was in the style of a traditional Arab dhow but rather than being made of wood was made of much lighter fibreglass, our correspondent says.
In addition, three extra decks had only recently been added to the top which could have made the boat less stable.
The coastguard has said it never expected to see the boat go to sea, our correspondent adds, although it probably sailed past its headquarters many times.
'Happened so quickly'
Most of those on board were employees of South African-based Murray and Roberts, which had chartered the cruise to celebrate completion of part of the Bahrain World Trade Centre towers.
Manager Simon Hill, who survived the disaster, said the company had told the captain not to sail if it was unsafe.
CONFIRMED DEAD
21 Indians
12 Britons
5 South Africans
5 Filipinos
4 Pakistanis
4 Singaporeans
2 Thais
1 Irish
1 German
1 South Korean
CONFIRMED SURVIVORS
30 Indians
9 Britons
8 South Africans
5 Filipinos
3 Bahrainis
3 Egyptians
2 Singaporeans
1 Bangladeshi
1 Pole
1 Pakistani
1 Nepali
1 American
1 Sri Lankan
1 Thai
He described how a number of passengers had been uneasy about the boat's swaying while it was still moored and had got off before it left.
Discussions followed between the tour operator and the boat's owners and captain, Mr Hill said.
"We asked the captain if he was happy to leave, and if he wasn't he should say so, and we would not leave. At 8 o' clock we sailed."
Mr Hill recounted how he was thrown into the water as the boat capsized.
"One minute we were stood talking, and having a good time, enjoying a very nice evening, it was a pleasant evening. And then in seconds, it went very quickly.
"I looked and I saw people sliding down the boat to one side, through the gap, and before I knew it I was in the water, under the water, and there were people everywhere in the water."
Bahraini officials have said those who died were of 16 nationalities, including Egyptians, Filipinos and South Africans.
The boat's owners, the al-Dana company, have blamed overcrowding, pinning responsibility on the tour company operating the vessel, Island Tours. It has been unavailable for comment.
A boat which capsized off Bahrain with the loss of at least 57 lives was not licensed to sail as a pleasure cruiser, officials have said.
The boat was registered as a fishing boat and had permission only for use as a floating restaurant, said interior ministry spokesman Col Tariq al-Hassan.
A cruise permit had been applied for but had not yet been granted, he said.
A representative of the company that chartered the boat for a staff party has insisted it was not to blame.
The boat's captain is being questioned by local prosecutors, who have suggested he was not qualified to be in charge.
Click here to see a graphic of the boat
At least 68 people were rescued from the vessel, while one remains missing
