Abraaj founder's lawyer to 'vigorously' defend Naqvi in Air Arabia lawsuit

Arif Naqvi's lawyer surprised by lawsuit given settlement talks were under way

Abraaj founder Arif Naqvi faces lawsuit from Sharjah-based low cost carrier Air Arabia.

The lawyer for Abraaj founder Arif Naqvi said Air Arabia's law suit against his client is surprising, given that the parties were in settlement talks and plan to file a defence by the end of this week.

Habib Al Mulla, executive chairman of Baker McKenzie Habib Al Mulla, said Air Arabia's complaint has no basis as it is subject to the continuing provisional liquidation and arbitration process. Mr Al Mulla questioned the timing of the low-cost carrier's legal action against Mr Naqvi as both parties have been in regular negotiations to reach an amicable settlement.

"We will vigorously defend Mr Naqvi and plan to submit a full defence to the prosecution to prove that this criminal complaint has no substance whatsoever," Mr Al Mulla said in an emailed response to questions from The National.

Air Arabia declined to comment on Saturday.

On Wednesday Air Arabia filed a misdemeanour case against Mr Naqvi, becoming the first publicly-listed company to start legal proceedings against the Abraaj founder in relation to the collapse of the Dubai-based private equity company. The Sharjah-based airline's legal action followed arbitration proceedings in July. Air Arabia, which has a market value of approximately Dh4.8 billion, disclosed in June it had an exposure of $336 million to Abraaj through funds and short-term loans, making it one of the companies with the biggest exposure to the group.

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Abraaj Group, once the Middle East's biggest private equity company, which at its peak managed about $14bn, collapsed last year after allegations of misuse of investors' funds. It is undergoing a court-supervised restructuring in the Cayman Islands and trying to sell off parts of the business to pay off more than $1bn in debt.

"Negotiations between the parties have been regularly taking place in order to reach an amicable settlement," Mr Al Mulla said.

Legal action is also surprising because Air Arabia's claim, which centres on the loan that it gave to Abraaj, is related to the company and not to its founder, the lawyer said.

"The liability in question is Abraaj’s and not Mr Naqvi’s. Mr Naqvi was merely a guarantor. His actions in this matter were for the benefit of Abraaj," Mr Al Mulla said. "The claim in question is part of the provisional liquidation proceedings taking place in Cayman. The claim is also governed by an international arbitration clause and Air Arabia has already filed a request for arbitration."

Mr Al Mulla said Air Arabia's move to file a lawsuit against Mr Naqvi indicates "bad faith" on the airline's part.

"We are surprised by Air Arabia’s action to revert to criminal proceedings. This is obviously an attempt to exercise pressure in order to achieve gains that it is not entitled to under the provisional liquidation proceedings or the international arbitration," he said. "This is an abuse of the legal system and shows bad faith on part of Air Arabia."

Mr Naqvi's legal team does not have access to the complaint file and is therefore not aware of what charges have been brought against Mr Naqvi, but will try to obtain a copy, Mr Al Mulla said.

Dubai-listed Air Arabia's shares gained 0.98 per cent at the market close on Thursday after the announcement of its legal action late on Wednesday.

Mr Naqvi settled two claims last year from Hamid Jafar, one of the founding shareholders of Abraaj, for issuing cheques with insufficient funds, which is a criminal offence in the UAE.