Abraaj founder Arif Naqvi under investigation in UAE for issuing bad cheques

DUBAI: Arif Naqvi, founder of Abraaj Group, has been under investigation in the United Arab Emirates (UAE) for issuing bad cheques, adding to the woes of the private equity firm seeking a court-supervised liquidation in Cayman Islands.

Naqvi is facing arrest in the UAE relating to a cheque bounce case, the Gulf News reported. According to sources the bounced cheque was used as partial security for approximately $300 million in loans from Hamid Jafar, the founder of the Sharjah-based Crescent Group, to Abraaj and Naqvi.

In the UAE, cheque bounce is treated as a criminal offence.

Abraaj in a statement confirmed the ongoing legal proceedings against Naqvi in absentia.

“Abraaj can confirm that a loan was granted and security provided in a pure commercial transaction. Partial repayment of the loan has been made and settlement discussions are ongoing with the intent to arrive at a satisfactory solution for all parties,” Abraaj said in an emailed statement.

Naqvi is represented in this case by Dr Habib Al Mulla, executive chairman of Baker McKenzie Habib Al Mulla.

Al Mulla maintained that the cheques were provided as security for the loans.

“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 company said in an emailed statement.

Earlier this month, Al Jafar family had handed over their debt claims on Abraaj to Auctus Fund that filed a petition against Abraaj in Cayman Islands for liquidation to recover their loans.

Lawyers close to the case said that with the liquidation process under way in the Cayman Islands, Auctus’ claims that include the claims of Al Jaffar family are now covered under the liquidation and should "stand still" until the [liquidation] process is completed.

Abraaj filed for a court-supervised restructuring and sale of its funds as it fights allegations of comingling of funds. Subsequently the Grand Court of Cayman Islands appointed PwC as provisional liquidator of Abraaj Holdings and Deloitte as provisional liquidators of Abraaj Investment Management Ltd.

The liquidation move followed lawsuits by creditors on loan defaults and allegations of comingling of funds. Investors including the Bill & Melinda Gates Foundation had commissioned an audit to investigate the alleged mismanagement of money in Abraaj's $1billion healthcare fund. The group has denied any misuse of funds.

Last week Abraaj Group announced that it reached an agreement with New York listed Colony Capital for the sale of Abraaj’s Latin America, Sub Saharan Africa, North Africa and Turkey Funds management business and the Group’s Limited Partnership (LP) interests in the underlying Funds.

Analysts fear that new legal troubles and pressing of criminal charges against Naqvi and Abraaj in bad cheque cases could jeopardise an early settlement of claims of lenders and investors through liquidation and sale of assets.