KARACHI: A criminal complaint has been brought by a prosecutor in Sharjah against Arif Naqvi, the Karachi-born founder of troubled Abraaj Capital, against two cheques that bounced in early May, according to a report in the Financial Times.
The report cited court documents to say that an arrest warrant was issued by the prosecutor against Naqvi and his colleague Muhammad Rafique Lakhani for writing a “cheque without the necessary funds” for a total claim amounting to $48.2 million.
The cheques had, according to the report, been issued as “partial security for loans estimated at $300m made to Abraaj by Hamid Jafar”. Bouncing a cheque is a jailable offence in the UAE.
Complaints relate to two bounced cheques
Naqvi’s lawyer, cited by the report, said “we will not yield to pressure”, adding that “serious discussion on repayment” is underway and “we can come up with a solution that is satisfactory to all parties involved.” But Naqvi himself will not be attending the hearing since he is in London these days.
The hearing is scheduled for Thursday, when a judge is expected to proceed with the case in absentia. For the first time since the troubles at the Middle East’s largest private equity fund began, senior people connected with the fund face the possibility of what the FT report called a “custodial sentence”.
After allegations of misuse of investor funds by Abraaj first surfaced earlier this year, the fund was hit by a series of redemptions by other investors, creating to a liquidity shortage at the fund leading to defaults on its obligations to creditors. Abraaj management entered into talks for an “orderly restructuring” of its obligations, during which secured creditors were guaranteed their money but unsecured creditors were left with little more than promises of later payment, according to widespread media reports of the entire affair.
Two of the unsecured creditors, a Kuwait-based investment vehicle and Hamid Jafar, sought liquidation of Abraaj in a court in the Cayman Islands, where the fund is registered. To preempt that move, the fund applied for provisional liquidation itself, and sought the appointment of a court nominated liquidator.
In papers filed before the court in the Cayman Islands, Abraaj made mention of two cheques given as security against a loan that were “dishonoured” on May 3, according to the FT report.
Published in Dawn, June 26th, 2018