Sunday, February 11, 2024

Cayman court upholds enforcement in fight over KE in landmark ruling

Liquidators later sold IGCF GP to a company linked to Pakistani businessman Shaheryar Chishty

A view of the K-Electric head office, with solar panels at the parking area, in Karachi. — K-Electric website/ File
A view of the K-Electric head office, with solar panels at the parking area, in Karachi. — K-Electric website/ File

  • Claimant argues IGCF GP had taken loan from Chishty’s company.
  • Chishty is alleged of running IGCF for his own benefit.
  • Asiapak has obtained security over all of IGCF’s remaining assets.

LONDON: The Grand Court of the Cayman Islands has upheld the enforcement of London Court of International Arbitration (LCIA) award requiring disclosure of records relating to a former Abraaj Group investment fund that holds a $1.6 billion stake in a Karachi power utility.

The Grand Court of the Cayman Islands rejected an application by GP IGCF (The General Partner of Infrastructure Growth & Capital Fund) to set aside an order for enforcement of the award. IGCF’s remaining primary asset is a substantial stake in K-Electric, a vertically integrated utility company in Karachi.

IGCF is a $2 billion investment fund whose biggest asset is a $1.6 billion stake in K-Electric, a power utility serving 3.4 million consumers in Karachi and surrounding areas.

The fund is managed by IGCF GP, which was formerly owned by Abraaj before the Dubai private equity group collapsed in 2018. Liquidators later sold IGCF GP to a company linked to Pakistani businessman, former Citi banker and Daewoo bus services owner Shaheryar Chishty.

White Crystals, a special purpose vehicle set up by Saudi Arabia’s Al Jomaih Group to invest in IGCF, brought the arbitration against the general partner under an LCIA clause in the deed of limited partnership for IGCF. It said the claim was prompted by serious concerns that Chishty was running IGCF for his own benefit and not that of the limited partners.

The claimant argued that IGCF GP had entered into a loan agreement with one of Chishty’s companies, Asiapak Investments, at an alarming rate of interest of up to 60% per annum compounded monthly and that Asiapak had obtained security over all of IGCF’s remaining assets. It also contended that around $66 million belonging to the fund had been “moved from bank to bank” in Pakistan and had ended up in a bank account in the name of one of Chishty’s companies.

It was alleged in the court that Chishty was exercising his control to prevent KES Power’s board from resolving to appoint solicitors to defend the English litigation, and that the businessman has directed another IGCF entity in the Cayman court for the winding up of KES Power based on the “contrived deadlock” among its board.

Without deciding on the truth of the allegations, the LCIA tribunal was satisfied that White Crystals’ concerns about these matters were genuinely held and ordered that the books and records should be turned over within five days of the award. It rejected IGCF GP’s defence that White Crystals was being used as a “cypher” to obtain information to be used by third parties in separate litigation.

After the general partner initially refused to comply with the award, White Crystals obtained an ex-parte order for the enforcement of the award from the Grand Court of the Cayman Islands on 5th January.

The general partner applied to discharge or vary the order on grounds of public policy and sought an injunction to restrain White Crystals from using the books and records, once obtained, on grounds of confidentiality.

At a hearing in person last week, the Chief Justice of the Cayman Islands Mr Margaret Ramsay-Hale, sitting in the Grand Court rejected those applications. The Judge held that the IGCF GP was looking to amend the Award by adding a confidentiality rider, which the Court did not have jurisdiction to do and which was not required as a matter of public policy. On the contrary, public policy required the Court to enforce the Award on its terms, the judge noted.

She also affirmed the open justice principle by refusing the IGCF GP’s application to sit in private.

The Grand Court’s written judgment will be handed down at a later date. Only a summary judgment has been issued for now.

A legal representative of IGCF GP said it is normally “happy to cooperate and work with limited partners who have a genuine interest in the financial condition of the fund” and White Crystals’ requests “represented a serious risk to the fund and to the investments of the other limited partners”.

Al-Jomaih of Saudi Kingdom has challenged Chishty's acquisition of control over IGCF in the Pakistani courts. The representative said that Chishty rejects the various allegations made by White Crystals.

The hearing were attended by other concerned and pertinent parties to this case which included legal representatives from Mashreq Bank and Ernst & Young as well as PWC being the liquidator for Abraaj Holdings who also had a substantial stake in the IGCF Fund as an investor.

Originally published in The News