Syed Mokhtar-controlled Pelangi Prestasi fails to reinstate suit against SFI

Syed Mokhtar-controlled Pelangi Prestasi fails to reinstate suit against SFI
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PUTRAJAYA (Jan 18): Pelangi Prestasi Sdn Bhd, a firm controlled by tycoon Tan Sri Syed Mokhtar AlBukhary, failed to reinstate its suit against Sabah Forest Industries Sdn Bhd (SFI) for purported violation of a sales and purchase agreement (SPA) in 2018 — to buy land as well as to be given SFI’s timber concession licences, following a scheme of arrangement on SFI.

This follows a three-member Federal Court bench having upheld the Court of Appeal decision last year, which allowed SFI’s application to strike out Pelangi Prestasi’s suit and also lift an injunction order imposed on SFI following its expiration.

Chief Justice Tun Tengku Maimun Tuan Mat, who led the three-member bench, unanimously ruled that the apex court concurred with the Court of Appeal decision and said it does not warrant appellate intervention to grant leave (permission) to hear Pelangi Prestasi’s suit on its merits.

The bench, which also included newly appointed Chief Judge of Malaya Datuk Mohamad Zabidin Mohd Diah and Federal Court judge Datuk Nalini Pathmanathan, ordered Pelangi Prestasi to pay RM30,000 costs to SFI.

Pelangi Prestasi wants suit reinstated

Pelangi Prestasi, through its counsel Steven Thiru, wanted the suit to be reinstated following the Court of Appeal decision last year and wanted the apex court to grant leave to answer six questions of law posed by the company.

Thiru said the appellate court had erred in allowing the striking out of the suit, as Pelangi Prestasi had entered into an SPA in April 2018 to allow an injection of RM1.2 billion into SFI — a distressed company — to reduce its debt and upon signing, Pelangi Prestasi had paid a deposit of RM120 million.

He added that Pelangi Prestasi had met the requirements within the stipulated time, but after the Sabah High Court granted an extension to the scheme of arrangement to SFI, it terminated the SPA resulting in the suit being filed in 2019 and an injunction obtained from the High Court.

This led Nalini to raise the question as to why Pelangi Prestasi did not go back to the Sabah High Court first instead of filing the suit here.

Thiru replied that the restraining order (extension of the scheme) is akin to preventing the suit from being filed, and the company had a right to file the suit and obtain leave from this apex court.

Suit abuse of court process

Meanwhile, SFI counsel Saheran Suhendran told the court that the case is not about the SPA per se but preventing SFI from selling its assets in order to rehabilitate the company.

The counsel further showed 15 companies which may bid in the re-tender of SFI’s assets in a bid for the company to reduce its debts.

He said Nalini was right in pointing out that Pelangi Prestasi should have raised the matter at the Sabah court and not file the suit in KL.

“The Court of Appeal recognised this and considered the suit as an abuse of the court process and acted within its powers and discretion as courts have the jurisdiction to strike out the suit. Hence, this matter is not about the SPA but the filing of the suit is an abuse of the court process,” Suhendran added.

The lawyer further added that with the filing of the suit and the injunction imposed, it prevented SFI from re-tendering the sale of its assets in a move to save the company.

The move by Pelangi Prestasi, he said, is not to preserve the scheme of arrangement.

Another SFI counsel, Robert Low, said he agreed that Pelangi Prestasi should have sought the matter at the Sabah court and sued there, and not through the back-door application in filing the suit.

Striking out allowed

On Jan 6, 2022, a three-member Court of Appeal bench led by Datuk Vazeer Alam Mydin Meera allowed SFI’s appeal to strike out the suit filed by Pelangi Prestasi and lift the injunction, which had then already expired.

The appellate court also asked SFI to go back to the Sabah High Court, for it to assess the damages as a result of the injunction imposed on SFI since the injunction was granted by the High Court following the filing of the suit since October 2019, when the High Court dismissed SFI’s striking out application.

The High Court had on Oct 22, 2019, dismissed SFI's application to strike out the suit following the then Sabah government having — after the 14th general election (GE14) in May 2018 — terminated the SPA with Pelangi Prestasi's bid to buy land as well as to be given SFI's timber concession licences.

In April 2018, Pelangi Prestasi signed an agreement to acquire a 98% stake in SFI from India-based pulp and paper manufacturer Ballarpur Industries Ltd for about RM1.2 billion. Under the deal, Pelangi Prestasi would assume control of SFI, including all its assets, land titles and timber licences.

SFI, which was facing financial problems, was put under receivership and management of tax and accountancy firm Grant Thornton before the agreement was signed.

Pelangi Prestasi subsequently went to court over a decision made by the then Parti Warisan-led government — after GE14 — not to issue fresh timber licences to SFI and instead imposed an entirely new set of preconditions for granting the licences.

A month before the signing of the agreement in 2018, the previous Barisan Nasional state government agreed to approve new timber licences for Pelangi Prestasi if it fulfilled the prerequisites in the agreement.

Pelangi Prestasi, in its suit, claimed that it had paid the salaries of SFI employees in full since March 2018, including shortfalls in the period of January to March 2018.

The salaries, it said, were paid even up until March 2018, amounting to RM23.1 million, and hence it had fulfilled part of the prerequisites set by the Sabah government.

Besides this suit, Pelangi Prestasi as reported by The Edge in October 2021 filed another suit against SFI and three others over the termination of its sales and purchase agreement to acquire SFI, and is seeking a return of RM120 million it had deposited in SFI for the takeover, and profits gained.

It is understood the RM120 million suit is still ongoing.

Read also:
Sabah Forest Industries thwarts suit by Syed Mokhtar-owned firm
Syed Mokhtar’s firm allowed to proceed with suit over SFI takeover

Surin Murugiah