Arif Naqvi Image Credit: Bloomberg

Dubai: A Sharjah court will on Thursday deliver its judgement on a bad cheque case against Arif Naqvi, founder of private equity company Abraaj and a colleague, Mohammad Rafique Lakhani.

The public prosecutor’s office in Sharjah issued arrest warrants earlier this month against Naqvi and Lakhani.

The prosecutor is pressing ahead with charges against Abraaj executives for issuing cheques with insufficient funds. In the UAE, bouncing a cheque is treated as a criminal offence.

The bounced cheque relates to an approximately $300 million (Dh1.1 billion) in loans from Hamid Jafar, the founder of the Sharjah-based Crescent Group to Abraaj and Naqvi.

At last Thursday’s hearing the court reserved the case for judgement to July 5, 2018. Naqvi was not present in court; he is understood to be out of the country. If found guilty, lawyers say, Naqvi and Lakhani could face up to 3 years in prison.

While Naqvi is represented by Dr Habib Al Mulla, executive chairman at Baker McKenzie Habib Al Mulla, Hamid Jafar is represented by Essam Al Tamimi, Senior Partner at Al Tamimi & Co.

Asset sales

Although Abraaj made some progress in the sale of some of its assets, there are no indications of resolving the case relating to the bounced cheque ahead of the court verdict.

Earlier this week, Dubai-listed Amanat Holdings said that it has agreed to acquire Middlesex University’s campus in Dubai, which is partly owned by Abraaj. It is not clear at what valuation the sale is being finalised.

“Amanat entered into a share purchase agreement on an “arm’s length basis” on June 8 to acquire the university’s owner and operator, Middlesex Associates, from Mocha Education Holdings Limited,” the company said in a statement to the Dubai bourse this week.

Earlier this month Abraaj filed for a court-supervised restructuring and sale of its funds. The liquidation move followed lawsuits by creditors on loan defaults and allegations of commingling of funds.

Abraaj’s troubles began with investors including the Bill & Melinda Gates Foundation and the International Finance Corp making allegations of commingling and mishandling of their money in a $1 billion health care fund. Abraaj denies the misuse of funds.

Although audits by Deloitte did not find evidence of embezzlement or misappropriation, it highlighted a lack of adequate governance.

Last month Abraaj Group announced that it reached an agreement with New York listed Colony Capital Inc, 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.

More probes

In addition to the court case relating to bounced cheques, Naqvi and senior Abraaj officials are under probe by UAE’s financial regulators. Last month the UAE’s Securities and Commodities Authority (SCA) initiated an investigation to gauge the level of exposure of locally listed companies to Abraaj.

Dubai Financial Services Authority (DFSA), the regulator of Dubai International Financial Centre (DIFC), has confirmed that the regulator is looking into the affairs of Abraaj Group and a DFSA regulated entity in the DIFC.

The company with an estimated $13 billion plus assets under management is facing legal challenges from investors and creditors. With various investigations Abraaj and Naqvi are facing in the UAE, Abraaj group is expected to face further challenges in the sale of assets to meet its financial obligations.