April 14, 1999

Sharif family told to return $32.5m to Al-Towfeek Co
By Nasir Malick

LONDON, April 14: The London High Court has ordered Punjab Chief Minister Shahbaz Sharif, his brother Abbas Sharif and father Mian Mohammad Sharif to jointly pay a sum of $32.5 million (around Rs1.7 billion) to Al-Towfeek Company for Funds Ltd, the investment company from which they had taken a loan for Hudabiya Paper Mills Ltd.

The Queen's Division Bench of the London High Court passed the ex-parte order on March 19, 1999 as the defendants -- Hudabiya Paper Mills Ltd, Mian Mohammad Shahbaz Sharif, Mian Mohammad Sharif and Mian Mohammad Abbas Sharif -- had not defended themselves in the court.

The defendants have also been ordered to pay the costs of the case.

The court on Sept 7, 1998 had issued writ of summons to the defendants and given 23 days after the service of writ to return the loan as claimed by the plaintiff company or give their intention to contest the case.

The writ of summons had clearly stated that: "If you (defendants) fail to satisfy the claim or return the acknowledgement within the time stated, or if you return the acknowledgement without stating therein an intention to contest the proceedings, the plaintiff may proceed with the action and judgment may be entered against you forthwith without further notices."

In its one-page short order issued on March 16, 1999, a copy of which has been obtained officially by the Dawn, the Queen's Division Bench said: "No Notice of Intention to Defend having been given by the Second, Third and Fourth Defendants herein, it is this day adjudged that the Second Defendant Mian Mohammad Shahbaz Sharif do pay the Plaintiff:

"US $16,889,152.06 and US $830,163.20 contractual interest at the rate of 9.5 % being the contractual rate per annum from the date of issue of the writ to the date hereof making a total of US $17,719,315.26 or its sterling equivalent with costs.

"And it is this day adjudged that the Third Defendant Mian Mohammad Sharif and the Fourth Defendant, Mian Mohammad Abbas Sharif do pay the Plaintiff:

"US $14,019,613.39 and US $693,298.79 contractual interest, at a rate of 9.5 % per annum being the contractual rate of interest from the date of issue of the writ to the date hereof making a total of $14,712,912.18 or its sterling equivalent with costs (of case) £ 666.75".

Al-Towfeeq Investment Funds Ltd, a company incorporated under the laws of the Cayman Island, which provides banking facilities and finance for industrial development in Pakistan, had entered into a lease agreement with Hudabiya Paper Mills Ltd, one of the companies owned by Sharif family, on February 15, 1995 under which the plaintiff leased certain machinery to Hudabiya Mills for the manufacture of paper and paper board for six months.

The leasing price of the machinery was US $12,046,803 with profit calculated at 3.5 per cent above six months LIBOR at a minimum of 9.5 per cent payable every six months.

At the time of the lease contract, Mian Mohammad Shahbaz Sharif, his father Mian Mohammad Sharif and his brother Abbas Sharif, had given written guarantees to pay to Al-Towfeek Investment all loans taken up to $10 million by Hudabiya Paper Mills together with all profits, charges and other related expenses.

While the actual loan is $12 million, almost $20 million has been accrued as interest.

Mr Shahbaz Sharif further provided another separate guarantee to the plaintiff to pay on demand any sum due to Al-Towfeek by Hudabiya Paper Mills to a maximum of $12 million together with all profit, charges and other related expenses.

Hudabiya Paper Mills, under the agreement was to return the loan in instalments on the due dates but it did not make the first instalment or on any date thereafter.

When the Sharif's company failed to return the loan, Al-Towfeek served notices to the guarantors namely Punjab Chief Minister Shahbaz Sharif, his brother Abbas Sharif and father Mohammad Sharif to repay the loan but they failed to honour their guarantees and make payment to the plaintiff.

Finally the investment company went to the London High Court to recover the loan from the Sharif family. Sources close to the PML said that Punjab Chief Minister Shahbaz Sharif during his last visit to London had tried to make an out of court settlement but did not succeed.