Court adjourns ruling against Abraaj founder in bounced cheque case

Judge in Sharjah is expected to issue verdict in a criminal case against Arif Naqvi on July 5

Arif Naqvi, the founder of Abraaj Group, is said to be the subject of a DFSA inquiry along with other executives. Sarah Dea / The National
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UPDATE: A Sharjah court has adjourned until July 5 a judgment against Arif Naqvi, the founder of embattled private equity firm Abraaj Group, in a criminal case for issuing a cheque without sufficient funds.

The prosecution has asked the court for Mr Naqvi to receive the maximum sentence possible in this case of three years in jail.

The case relates to a Dh177.1 million cheque jointly signed by Mr Naqvi and Abraaj executive Rafique Lakhani, and issued to Hamid Jafar, another founding shareholder in Abraaj.

It was used as partial security for around US$300m (Dh1.1bn) of loans made to Abraaj by Mr Jafar, whose lawyers claim Mr Naqvi had no intention of repaying.

Mr Naqvi and Mr Lakhani were summoned to the court on Thursday, but did not attend the hearing. Mr Jafar’s legal representative, Hassan Arab of UAE law firm Al Tamimi & Company, told the court the pair should be convicted based on the details of the offence held in court records.

“We have the right to file a civil case following the issuance of a verdict in the current criminal case,” Mr Arab said. The cheque was issued in February this year and bounced because of insufficient funds, he added.

The decision was expected, said Mr Naqvi’s lawyer Habib Al Mulla, the executive chairman of Baker McKenzie Habib Al Mulla. “It is a normal procedure for courts in the UAE to adjourn the case to render its judgment.

“We expect the court to issue the judgment unless the parties reach a settlement before that. We still believe that this is a commercial transaction and should be dealt with in a commercial context. Resorting to criminal pressure does not help in solving the issue.”

He told The National on Wednesday that Mr Naqvi would not attend the court hearing because he could be arrested if he did. UAE authorities issued an arrest warrant against the defendant over the bounced cheque in advance of Thursday's hearing.


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Essam Al Tamimi, managing partner of Al Tamimi & Company and the lead lawyer acting for Mr Jafar, said in a statement on Thursday: “Three cheques signed by Arif Naqvi totaling 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. We are pursuing claims for the full sums owing under these cheques.

“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.”

He added that over the past day “the accused has made attempts to negotiate a resolution of this claim but without acceptable proposals and yielding no result”.

Abraaj declined to comment further but Mr Al Mulla said: "This statement in not correct. The parties have been in continuous discussion on repayment terms and the cheques and the complaint to the prosecution were submitted during the course of the negotiations."

Thursday's hearing is the latest twist in the unravelling of Abraaj, which was once the Middle East’s biggest private equity firm with more than $13.6bn of assets under management at its peak. It has been left reeling over investor claims this year that it misused funds in a $1bn health-care investment vehicle. Abraaj denies any wrongdoing.

An Abraaj spokeswoman on Sunday confirmed that a loan was granted and security was provided in a pure commercial transaction.

"Partial repayment has been made and settlement discussions are ongoing with the intent to arrive at a satisfactory solution for all parties. It should be noted that the cheques were provided as part of a security package and as such should not have been submitted to a criminal court,” the spokeswoman added at the time.