This article first appeared in The Edge Financial Daily on February 7, 2020

KUALA LUMPUR: The High Court here yesterday allowed an application to transfer proceedings to another judge in tycoon Tan Sri Syed Mokhtar Albukhary-linked company Pelangi Prestasi Sdn Bhd’s suit against two parties over its proposed takeover of Sabah Forest Industries Sdn Bhd (SFI).

“Justice must be done and must be seen to be done,” said Justice Datuk Ahmad Bache.

Pelangi was represented by Datuk Lim Chee Wee.

It is unclear why SFI had brought the application to transfer proceedings to another court.

The two other parties are Lee & Man Paper Manufacturing Ltd and Grant Thornton Consulting Sdn Bhd.

Lee & Man Paper is a China-based company appointed by the Parti Warisan Sabah-led state government to take over SFI, while Grant Thornton is a tax and accountancy firm that is also involved in the restructuring of companies.

In April 2018, Pelangi signed an agreement to purchase a 98% stake in SFI from India-based pulp and paper manufacturer Ballarpur Industries Ltd for about RM1.2 billion.

Under the deal, Pelangi 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 Grant Thornton before the agreement was signed.

Pelangi subsequently went to court after the newly-elected Sabah government, which took power following the 14th general election in May 2018, decided not to grant new timber licences to SFI but instead impose a new set of preconditions to issue the licences.

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

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

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