Abraaj founder faces new bounced cheque case in latest blow to private equity firm

Court hearing scheduled for August 14 in UAE, says Arif Naqvi’s lawyer

The bounced cheque case is the second criminal case filed against Mr Naqvi by Mr Jafar in recent months on the same grounds.Sarah Dea / The National

Arif Naqvi, the founder of the Dubai-based Abraaj Group, faces a new criminal case over a bounced cheque, complicating ongoing negotiations between Mr Naqvi and a creditor to reach an out-of-court settlement over unpaid debts, his lawyer said.

The value of the bounced cheque is Dh798 million and a hearing has been scheduled in the UAE on August 14, Habib Al Mulla, executive chairman of Habib Al Mulla Baker Mackenzie, told The National via email on Tuesday.

Earlier this month, a court in Sharjah dismissed a bounced cheque case brought against Mr Naqvi by Hamid Jafar – another founding shareholder in Abraaj – after the parties reached a provisional out-of-court settlement, according to their lawyers.

That case related to a cheque for Dh177.1 million ($48m), jointly signed by Mr Naqvi and an Abraaj executive Rafique Lakhani, and was made out to Mr Jafar. The cheque was used as partial security for around $300m of loans made to Abraaj by Mr Jafar.

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The new case relates to a second cheque used by Mr Naqvi as partial security for the loans, Mr Al Mulla said. “Mr Jafar has submitted it to the prosecution,” he said.

Essam al Tamimi, senior partner at Tamimi and Co and attorney for Hamid Jafar, said there is no longer a settlement.

"The accused has already reneged on what was promised. There has been no settlement, and the matter is for the criminal court under UAE law," he told The National.

After the first case was dismissed, Mr Al Mulla told The National that the "interim" settlement between the two parties covers the entire $300m of loans, not just the Dh177.1m bounced cheque. "The settlement relates to the total outstanding amount," he said.

A spokesman for Mr Jafar confirmed at the time that there was an interim settlement, but a final one has "yet to be reached”. Mr Jafar is now pursuing a fresh bounced cheque claim against Mr Naqvi, according to Mr Al Mulla, who maintained on Tuesday that “a [provisional] settlement has been reached and this case should not have been filed as the settlement should include all cheques for the same loan.

"There are fine details that are still pending and this is a way of exercising pressure to reach a settlement," he told The National.

The punishment for issuing a bounced cheque under UAE law can be jail or a fine. Mr Naqvi, who is in the UK but a Dubai resident, did not attend the hearings for the first case this month, and is not expected to attend the one on August 14.

The new case is the latest blow in a five-month saga involving Dubai-based Abraaj, the private equity firm that is accused of mismanaging investors’ money in a $1 billion healthcare fund. Abraaj has denied the allegations.

Once the biggest private equity firm in the Middle East and North Africa region with about $14bn in assets under management, Abraaj is undergoing a court-supervised restructuring in the Cayman Islands as it seeks a resolution with creditors.

Last month it agreed to sell a chunk of its businesses including its investment management unit to US-based Colony Capital. The sale has yet to complete.

In the meantime, prospective buyers are circling Abraaj, seeking to acquire other parts of its business and funds at fire-sale prices. The provisional liquidators are seeking more bids for the embattled firm’s funds management unit after investors rejected some earlier offers, Bloomberg reported on Tuesday.

Interested buyers reportedly have until August 24 to bid for all of the asset-management platform or some of its private equity funds.