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This article first appeared in The Edge Financial Daily on July 10, 2019

KUALA LUMPUR: A firm linked to businessman Tan Sri Syed Mokhtar Albukhary has been asked to hold mediation talks over its dispute with Sabah Forest Industries Sdn Bhd (SFI) and SFI’s receiver and manager Grant Thornton Consulting Sdn Bhd.

High Court Justice Datuk Ahmad Bache wants Pelangi Prestasi Sdn Bhd to look into the possibility for the benefit of all parties, including some 1,500 SFI workers who have rendered jobless following the implementation of a restraining order since April.

“I think this would be the best solution for all parties concerned,” Judge Ahmad said yesterday, adding that the court would look for a possible mediator.

Pelangi Prestasi counsel Datuk Lim Chee Wee agreed with the judge. 

“That is the best solution, but we need to involve the Sabah state government. Factories are lying idle,” said Lim, adding that he is prepared to write to the Sabah state attorney-general and federal attorney-general to invite them to the mediation.

In April 2018, Pelangi Prestasi entered into a deal to acquire a 98% stake in SFI from India-based pulp and paper manufacturer Ballarpur Industries Ltd for about RM1.2 billion. Under the sale and purchase agreement (SPA), 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 Grant Thornton before the deal was signed.

Pelangi Prestasi subsequently went to court over a decision made by the Parti Warisan Sabah-controlled state government, after the 14th general election in May 2018, not to issue fresh timber licences to SFI and instead impose an entirely new set of preconditions in order to grant the licences.

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

Pelangi Prestasi, in its suit, claimed that it had paid salaries of SFI employees in full since March 2018, including shortfalls for the period from January to March 2018. The salaries of the workers were paid even up until March this year, amounting to RM23.1 million, and hence it had fulfilled part of the prerequisites set by the Sabah government, the company said.

Prestasi Pelangi accused the present state government of unilaterally imposing entirely new conditions on the company. It alleged it is being sidelined to allow the takeover of SFI by China pulp and paper company Lee & Man Paper Manufacturing Ltd.

Besides the civil suit against SFI, Grant Thomson and Lee & Man Paper, Pelangi Prestasi has also filed for an injunction to stop the implementation of the new set of preconditions to grant timber licences until the disposal of the suit.

It has also filed for a judicial review in the High Court in Kota Kinabalu — naming Sabah Chief Minister Datuk Seri Mohd Shafie Apdal and the state government as respondents — to quash the decision to reject the issuance of fresh timber licences to the company. The company claimed the decision by the Sabah government was illegal and unreasonable, and there was procedural impropriety.

“If the state government’s decision is not stayed, Pelangi [Prestasi] would be gravely prejudiced as the state government would be open to consider other parties with strong financials, pulp and paper track records and access to ready markets, thus causing irreparable injury to Pelangi [Prestasi],” the company said.

Judge Ahmad had asked parties at the civil suit and injunction proceedings yesterday to explain why Pelangi Prestasi was filing the claim in Kuala Lumpur whereas the case originated in Sabah.

Lim responded by pointing out that Pelangi Prestasi and the receiver are both based in Kuala Lumpur.

He added that the High Court of Malaya has the jurisdiction to hear the case and would not run afoul with the restraining order issued by the High Court of Sabah and Sarawak, as it can set aside the restraining order if it found the order was not proper.

Lim, who cited a Court of Appeal decision to support his argument, also pointed out that the restraining order would lapse on Friday.

Counsel Saheran Suhendran, who appeared for SFI and Grant Thornton, however, disagreed with Lim’s contention towards setting aside the restraining order, insisting that it would go against another High Court’s jurisdiction order.

Judge Ahmad then fixed next Thursday to hear further submissions on the matter, and for a decision on the same day. He also fixed the same day to hear further submissions on the injunction sought by Pelangi Prestasi.

Meanwhile, Chief Judge of Sabah and Sarawak Datuk David Wong Dak Wah has fixed Friday to hear applications for Lim to appear for Pelangi Prestasi in its judicial review proceedings in Sabah and for former Federal Court judge Datuk Seri Gopal Sri Ram to appear for SFI.

Peninsular Malaysia lawyers cannot automatically practice in Sabah and Sarawak as they have to obtain leave from the courts there to represent their clients there.

After Pelangi Prestasi obtained leave on June 28 to challenge the Sabah state government’s decision, the High Court in Kota Kinabalu has now fixed Aug 23 to hear the merits of the judicial review case.

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