Syed Mokhtar-linked firm sues for return of RM120m deposit, profits over SFI takeover

Syed Mokhtar-linked firm sues for return of RM120m deposit, profits over SFI takeover
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KUALA LUMPUR (Oct 1): Tycoon Tan Sri Syed Mokhtar Albukhary-linked company Pelangi Prestasi Sdn Bhd filed a writ in September against Sabah Forest Industries Sdn Bhd (SFI) and three others over the termination of its sales and purchase agreement (SPA) to acquire SFI, and is seeking a return of RM120 million it had deposited in SFI for the takeover, and profits gained.

The writ was filed by Messrs Lim Chee Wee Partnership in the High Court on Sept 20.

Besides SFI, which is under receivership, Pelangi Prestasi also named Datuk CR Narendrakumar, Grant Thornton Consulting Sdn Bhd and Lai Chee Chuen as the other defendants in its suit.

This legal action is in addition to an earlier one Pelangi Prestasi filed in 2019 over the then Sabah government's decision to halt its takeover of SFI, and for imposing a new set of preconditions in granting timber licences in the state.

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 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 the management of Grant Thornton before the agreement was signed.

In the latest legal action filed last month and sighted by theedgemarkets.com, Pelangi Prestasi is seeking a declaration that the termination of the SPA dated April 4, 2018 — between it and SFI on Sept 13 this year — is valid and binding.

It is also seeking the return of RM120 million that Pelangi Prestasi paid to SFI via a CIMB account on Jan 30, 2018 as a deposit held in trust by SFI in Pelangi Prestasi's favour.

Pelangi Prestasi is also seeking the return of another RM23.1 million from the defendants, which it claimed was the sum paid to SFI workers as salaries and other expenses. It is also seeking interests on both sums.

Pelangi Prestasi further wants an account of receipts and payments made from SFI's CIMB account that is controlled and operated by the three other defendants from Jan 30, 2018 until the date of judgement.

It also wants a declaration that the defendants received or retained the RM120 million — including interests — on Jan 30, 2018 on implied, resulting, constructive and “Quistclose trust” in its favour.

A Quistclose trust is a trust created when a creditor lends money to a debtor for a particular purpose.

The firm is further seeking a declaration that the defendants are constructive trustees of the plaintiff or liable to account to the company for the monies it had given and received by SFI.

Case management of the matter was done before Justice Datuk Akhtar Tahir on Friday (Oct 1) for both suits, and further case management has been scheduled for next Monday (Oct 4).

In the first suit, Pelangi Prestasi went to court after the new Sabah government led by Parti Warisan Sabah and Pakatan Harapan (PH) — which came to power following the general election in May 2018 — decided not to grant new timber licences to SFI but instead imposed a new set of preconditions in issuing licences.

A month before the SPA was signed, the previous Barisan Nasional (BN) state government agreed to approve new timber licences to Pelangi Prestasi if it fulfilled the prerequisites of the agreement.

In filing its first suit, Pelangi Prestasi 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 March 2019, amounting to RM23.1 million, and hence it had fulfilled part of the prerequisites set by the Sabah government.

In October 2019, the High Court allowed the suit to proceed to trial after it dismissed the striking out application filed by SFI and China-based Lee & Man Paper Manufacturing Ltd.

Lee & Man Paper was the company appointed by the then Parti Warisan Sabah-led state government to take over SFI.

SFI and Lee & Man Paper are in the midst of appealing their failure to strike out the suit. The appeal is scheduled to be heard next Wednesday (Oct 6).

Read also:
Court to decide on injunction application by Syed Mokhtar-linked firm against Sabah Forest Industries on July 9
Syed Mokhtar’s firm allowed to proceed with suit over SFI takeover
SFI’s appeal against failure to strike out suit against Syed Mokhtar-linked firm to be heard on Oct 6

Tan Choe Choe