Understanding K-Electric’s Cayman legal battle 

On the 21st of August, a significant development unfolded in the corporate landscape of Pakistan. K-Electric made an announcement to the Pakistan Stock Exchange. The announcement pertained to a decision handed down by the Cayman Grand Court — a ruling that would influence the composition of K-Electric’s Board of Directors. This verdict was the outcome of a dispute between K-Electric’s principal shareholders: IGCF SPV 21, and the duo of Al-Jomaih Power and Denham Investments.

IGCF SPV 21, Al-Jomaih Power, and Denham Investments collectively control KES Power — a substantial shareholder in K-Electric. To put it into perspective, KES Power holds a commanding 66.4% of K-Electric’s shares.

Within this consortium, IGCF SPV 21 — recently acquired by Shehryar Chishti’s AsiaPak Investments — boasts a significant 53.8% stake in KES Power. The remaining 46.2% is divided between Aljomaih Power Limited, based in Saudi Arabia, and Denham Investment from Kuwait.

According to K-Electric’s notification, the court has issued an injunction against Al-Jomaih Power and Denham Investments — effectively suspending their legal actions against AsiaPak, and enabling AsiaPak to appoint representatives to occupy the vacant seats on K-Electric’s board. However, here’s where it becomes intriguing. Both AsiaPak and the defendants (Al-Jomaih Power and Denham Investments) construe this ruling as a triumph for their respective factions.

In an unexpected twist — when the court’s decision was published last week — all parties involved celebrated. Each party selectively highlighted aspects of the verdict that favoured them. Consequently, while K-Electric has disseminated the court’s decision, it remains unclear who emerged as the true victor since all sides are claiming victory.

“In my evaluation, this ruling undoubtedly favours the applicant, IGCF SPV 21 Limited,” asserts Rabel Z. Akhund, Founder & Managing Partner at Akhund Forbes. He further clarifies, “While not legally binding on Pakistani courts, the directives issued to other shareholders, notably Al Jomaih Power and Denham Investments — as outlined in the order — pertaining to the cessation of ongoing proceedings in Pakistan, leave no room for ambiguity.”

“A failure to comply potentially exposes them to repercussions within the Cayman courts — pending any appeals that the Other Shareholders may choose to pursue within the Cayman courts and the eventual outcome of such appeals,” Akhund cautions.

Profit has already covered how the matter has gotten to this point whereby both parties would need to selectively highlight portions of a court’s decision. 

Read more: Major changes in the offing at K-Electric

However, Profit has gotten both sides of the argument and also engaged with legal professionals to understand what the Cayman Grant’s decision even means.  

Hearing both sides of the aisle 

How, then, have these stakeholders responded to the clarion call of the Cayman Grand Court’s pronouncement?

“This court order merely documents the Court’s previous judgement of July 20, 2023. In effect, the Cayman court has only partially granted the relief sought by AsiaPak and recognises that there are important public policy matters which the Pakistan courts and authorities must be allowed to determine and are bound to take very seriously,” Shan Abbas Ashary, Chief Investment Officer at the Al-Jomaih Group and Non-Executive Director of K-Electric, clarifies. 

“K-Electric is an important asset and Al Jomaih and Denham remain committed to the people of Karachi and the success of K-Electric. In recognition of that point, the Cayman Court permits the Pakistan Proceedings to continue with the Government of Pakistan through the Privatization Commission and Power Division Secretaries, NEPRA and SECP,” Ashary continues. 

“We are grateful to the Cayman Courts for recognizing that this is a sensitive matter for the people and Government of Pakistan with implications for national security. Nothing in the 16th August Order can be implemented till a second Hearing takes place which is scheduled for sometime in October,” Ashary adds. 

On the flip side of the legal spectrum, how does AsiaPak interpret this?

“Firstly, the Cayman court’s verdict is unequivocal. It affirms that the initial shareholders — Al Jommaih, the Kuwaitis, and ourselves — are bound by the shareholders agreement, which is under the jurisdiction of Cayman law and English law, and adjudicated by Cayman courts. Consequently, the Sindh High Court lacks jurisdiction in this matter. Any objections must be redirected to the Cayman court,” Shehryar Chishti, CEO of AsiaPak Investment — the parent of AsiaPak — commences with a clear stance. 

“The court abstains from dictating the Government of Pakistan, SECP, or the Privatisation Commission. The Government of Pakistan retains its prerogative to act,” Chishti elaborates.

“The Privatisation Commission’s stance to the Sindh High Court is lucid. If Al Jomaih pursues litigation against the Government of Pakistan, it’s audacious. But, they are free to do so,” Chishti continues.

“Our standpoint is that we haven’t infringed on original shareholders’ rights. We seek to enforce our own rights. We respect Al Jommaih and their partners’ rights, but we assert ours,” Chishti concludes.

While both parties assert their positions and express gratitude for the Court’s verdict, the divergent perspectives remain distinct. What does the Cayman Grand Court’s directive truly signify? Though Akhund provides a concise insight, a deeper dive is essential.

Interpreting the Cayman Grand Court’s decision 

First and foremost, it’s imperative to know that the judgement issued by the Grand Court of the Cayman Islands in this particular case was actually delivered on the 20th of July, 2023. This naturally prompts an inquiry: what was the Court’s verdict that was disclosed on the 16th of August?

“Legally, ‘judgement’ and ‘decree’ or ‘order’ are often used interchangeably, yet they convey distinct nuances. A ‘judgement’ is an anthology of arguments, judicial scrutiny, and decision logic,” explains Salman Ijaz, a partner at KhanIjaz.

A ‘decree’ or ‘order,’ in contrast, is “a concise opus, often confined to a page, encapsulating the judge’s pronouncement based on these arguments,” Ijaz explicates. 

The Court’s proclamation on the 20th of July was its judgement, while its declaration on the 16th of August was its decree or order. This ultimate order essentially embodies the decision that had already been reached by the Cayman Island Court in its judgement on the 20th of July, 2023.

“The decree doesn’t alter the court’s tenets. It’s a jurisdictional assertion that the minority shareholders had no privilege to launch or prolong proceedings in Karachi, including the stay order against K Electric’s directors,” Ijaz unpicks.

“It allows minority shareholders to proceed against the government of Pakistan, SECP, and the Privatization Commission for regulatory matters. But this exemption doesn’t encompass shareholding disputes,” adds Ijaz.

Given the complexity, Profit went and got a third opinion on the matter as well. 

“The granting of injunctive relief is indicative of the court’s acknowledgement of two separate jurisdictions,” clarifies  Sarjeel Mowahid, a partner at a prominent law firm. 

“One jurisdiction is where shareholder disputes are exclusively governed by the court stipulated under the Shareholder Agreement (SHA),” Mowahid further elaborated. ‘However, the exclusion of shareholder disputes does not prohibit shareholders from maintaining proceedings against any governmental authority,” Mowahid adds

Amidst these responses, Chishti’s perspective gains prominence. If the verdict favours Chishti, one might wonder why Ashary considers any part of it a victory for the minority stakeholders. The answer for this conundrum is in the sixth paragraph of the order.

Temporal suspension: Implications of a pending hearing

“The sixth paragraph elucidates that the ruling will remain in abeyance until a subsequent hearing takes place,” Ijaz elucidates. 

This naturally begs the question: why necessitate another hearing when the court has already passed two judgements on the matter? The solution to this puzzle is tucked away in the fifth paragraph of the order.

“The court bears the responsibility of ascertaining the entitlement of damages and costs for the majority shareholder — in this instance, AsiaPak, who also happens to be the applicant. Ijaz puts succinctly, “This entire order, at least from my interpretation, will remain dormant until a subsequent hearing has been convened to deliberate these issues and applications,” Ijaz adds. 

Only after this impending hearing — or in the event of any other court order — will this order genuinely spring into action.

The respondents — the minority shareholders — will then find themselves duty-bound to comply with all these proclamations. They will be obliged to retract proceedings in Karachi and will be barred from instigating any analogous proceedings in any court other than those in the Cayman Islands or English courts.