A court in Sharjah dismissed on Sunday a criminal case against Arif Naqvi, the founder of private equity firm Abraaj Group, over a bounced cheque, after he and the claimant reached an interim out-of-court settlement last week, lawyers said.
"The two parties have a reached a settlement out of court following negotiations and consequently the claimant has dropped the case and requested that the court dismiss it," said Habib Al Mulla, executive chairman of Habib Al Mulla Baker Mackenzie, and Mr Naqvi's lawyer, told The National by telephone on Sunday.
“Accordingly, the court ruled at 9am on Sunday morning that the case is extinguished.” The written judgment will be issued within two days, he added.
A spokesman for Hamid Jafar, the claimant in the bounced cheque case, said there has been an interim settlement, “however final settlement is yet to be reached”.
The case relates to a cheque for Dh177.1 million ($48m) signed by Mr Naqvi, who is in the UK but a Dubai resident, and Abraaj executive Rafique Lakhani, and made out to Mr Jafar, another founding shareholder in Abraaj. The cheque was used as partial security for around $300m of loans made to Abraaj by Mr Jafar.
Mr Al Mulla told The National the settlement between the two parties relates to the entire $300m of loans, not just the Dh177.1m bounced cheque. "The settlement relates to the total outstanding amount," he said.
Mr Al Mulla said he is now pressing UAE authorities to lift an arrest warrant issued against Mr Naqvi while criminal proceedings were ongoing.
The bounced cheque case came to light last month and was the latest blow in a five-month saga involving Dubai-based Abraaj, which is facing a liquidity crisis after being accused of allegedly mismanaging investor 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.
Meanwhile, the Dubai Financial Services Authority, the regulator for the Dubai International Financial Centre where Abraaj is based, is investigating allegations of fund mismanagement at the embattled firm, according to Reuters. The DFSA has interviewed Mr Naqvi and other senior executives in the past few months as part of the probe, the news agency said.
The criminal proceedings in Sharjah were brought against Mr Naqvi personally, not Abraaj Group. The claimant, Mr Jafar, had alleged that the Dh177.1m bounced cheque showed Mr Naqvi had no intention of repaying the full loan at the time the agreement was struck. Mr Al Mulla denied the allegations against Mr Naqvi but confirmed the cheque had bounced.
During an initial hearing on June 28, prosecutors asked the judge to impose the maximum three-year prison sentence on Mr Naqvi. The punishment for issuing a bounced cheque under the UAE law can be jail or a fine.
The defendant was not present at the hearing and the judge adjourned his ruling until July 5. The ruling was deferred to July 11, when it was adjourned again until today. The National had reported earlier that the two parties were close to reaching a settlement over the alleged debt, in an attempt to resolve the dispute out of court.
The interim settlement was reached last week, according to Mr Al Mulla.
“That the personal case is extinguished is positive, as an ongoing criminal case or [subsequent] conviction against the founder would inhibit the restructuring process if he was unable to participate,” said Khalid Howladar, managing director oof Dubai-based credit advisory firm Acreditus.