KARACHI: Troubles continued to mount for Dubai-based Abraaj Capital and its Karachi-born founder Arif Naqvi as details from a court case heard on Thursday emerged and the prospect of a possible jail term became the subject of extensive media reports.

Another law suit was brought against the company by a former managing director Sivendran Vettivetpillai, who was also global head of impact investing and member of a global investing committee at the private equity fund. The suit claims $2.92 million from Abraaj.

On Thursday a court in Sharjah heard arguments from Hamid Jafar who said he lent $300m to Abraaj to support the embattled fund, with post dated cheques as security. Jafar is owner of the Crescent Conglomerate (no connection with the Pakistani group by the same name). “Three cheques signed by Arif Naqvi totalling an amount of $300m were presented to the bank and subsequently dishonoured due to insufficient funds. These cheques stem from an emergency short-term loan made to Abraaj management six months ago, without which Abraaj would likely have collapsed,” said a statement by Jafar after the court hearing. The judge adjourned the hearing till next week.

The statement continued: “The loan was a reflection of the trust placed in Arif Naqvi. In time, however, it has emerged that the promises were not made in good faith, and that there was no intention of repaying the debt. It has also now become apparent that the representations made at the time the loan was requested and the cheques provided were false and misleading and the funds have been used for wholly other purposes, whilst the debt remains unpaid.”

Abraaj’s lawyer rejected the statement. “This statement is not correct. The parties have been in continuous discussions on repayment terms and the cheques and the complaint to the prosecution (of Sharjah) were submitted during the course of the negotiations. If there was bad faith, then it is by the Jafars.”

Arif Naqvi did not attend the hearing. He is believed to be in London.

Further reports pointed out that Abraaj, which has been hit by a series of departures by senior executives, is struggling to raise as much as $20m required for making end-of-service payments to its employees.

A Bloomberg report, citing “people familiar with the matter”, said “90 employees such as back-office staff, secretaries and receptionists are owed money after working for the buyout firm.” Departure of senior executives from the fund continued in recent days, with Sean Cleary, said to be the chairman of the fund, resigning earlier this week.

Dubai-based The National cited an emailed statement from Abraaj said that “Sean determined that his role as an independent non-executive director would serve no further legal or fiduciary purpose in the interests of creditors or other stakeholders” since the company entered into a court supervised provisional liquidation process in the Cayman Islands where it is registered.

The process seeks to chart advance a restructuring plan for the fund’s estimated $1 billion in debts.

Abraaj Capital owns controlling stake in K-Electric, Pakistan’s largest integrated power utility. It has struggled to effect its exit from that investment that it made back in 2008 due to delays in regulatory approvals and issues stemming from outstanding payments to fuel suppliers.

Published in Dawn, June 30th, 2018