The executive at the centre of $100m fraud allegations rocking Dubai’s property sector has hit back with a counterclaim that his accusers have defaulted on more than $18m of debts owed to his company.
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Kabir Mulchandani, chairman of Dynasty Zarooni, claimed that a series of cheques written by investors had bounced as the real estate industry’s fortunes plunged late last year.
The case – involving one of Dubai’s largest private real estate companies – highlights concerns that the emirate’s legal system is poorly equipped to cope with the slew of disputes arising as the sector turns sour.
Dynasty and Mr Mulchandani deny investor allegations of fraud and misrepresentation of the group’s property portfolio.
In an interview at Dubai’s Port Rashid police station, where he has been held since last month, Mr Mulchandani told the Financial Times he was pursuing cheques totalling Dh68m ($18.5m, €14.5m, £13m) that were written by Dynasty investors to pay for property. He claimed they bounced in late December as the international financial crisis hit the emirate’s business community.
He said: “Certain key investors who had issued post-dated cheques to us got caught in the financial trap. They could not pay.”
Mr Mulchandani said he suspected the investors whose cheques he alleges bounced – a criminal offence in Dubai – had made the accusations of fraud against him because they saw it as a way to recover money after the market fell.
Salem Al Shaali, who is representing investors claiming up to Dh280m from Dynasty, admitted some of their cheques had not cleared. But he said this was because his clients had decided not to honour the cheques because of their suspicions about Mr Mulchandani.
His clients had deposited cheques covering the money they owed, he added, showing that they had the ability to pay if their allegations against the company were satisfactorily addressed.
Hundreds of complaints have been made against Mr Mulchandani, but the initial claims at the heart of the case came from 10 individuals known as Dynasty’s “investment club”. Mr Shaali said: “Mr Mulchandani broke Dubai’s real estate laws by selling properties without a proper licence and misrepresenting construction progress at the buildings”.
Mr Mulchandani, an Indian national, said he was being well treated in custody but expressed frustration at the time taken to investigate a case in which he said he had “nothing to hide”. He is expecting a hearing this week over whether he can receive bail.
He said: “This is a wonderful country but … it is still gearing up to deal with these complaints, because this is the first time they have had a property meltdown.”
The Dynasty imbroglio is a further blow to confidence in Dubai as it scrambles to cope with the sudden end of a six-year property boom on which a good part of its modern-day wealth is founded.
More than 25 executives have been detained over the past year in anti-corruption investigations at state-linked property companies, while lawyers say more claims against private sector property developers are likely to emerge this year as prices collapse and funding dries up.
12 Feb 2009 11:30pm
By Michael Peel and Simeon Kerr in Dubai
Source: Financial Times