KUALA LUMPUR (May 15): The High Court on Thursday struck out an originating summons (OS) by former Malaysian Merchant Marine Bhd (MMM) executive deputy chairman Datuk Ramesh Rajaratnam, who was challenging the constitutionality of several provisions of the Capital Market Services Act 2007 (CMSA).
Judge Datuk Amarjeet Singh Serjit Singh ruled that the filing of the OS was an abuse of the court process.
“Hence, the application is dismissed with costs,” the judge said in his brief grounds in allowing the Securities Commission Malaysia’s (SC) application to strike out.
Ramesh had named the SC and the government as respondents.
The SC was represented by Hashley Tajuddin, while senior federal counsel Shamsul Bolhassan appeared for the government. Lawyer A Srimurugan appeared for Ramesh.
Amarjeet ordered Ramesh to pay costs of RM5,000 each to the SC and the government.
Srimurugan told The Edge that he has been instructed to appeal Amarjeet's decision.
Ramesh had wanted the court to determine whether Section 188(2)(a) of the CMSA, which deals with insider trading, contravenes Articles 5(1), 8(1)(2), 10(1)(a), and 13 of the Federal Constitution.
In his application, Ramesh, an accountant, claimed that the CMSA restricts the rights of an individual who was appointed as a director of a company to buy and trade in the stocks of the said company.
He was also seeking the courts' determination on whether the CMSA restricts the rights and personal liberties of a person to buy and sell stocks if he/she is appointed as a director of a company.
Ramesh had wanted the court to decide on whether the CMSA is constitutional or not, because it fails to differentiate between a company director who has intention to seek opportunity from the company, and a director who just wants to sell his or her stocks.
He also claimed that the CMSA is opposed to the “doctrine of proportionality” — the legal principle that states that a punishment for an offence should be proportional to the gravity of the offence — thus making it null and void and unenforceable.
He also said the CMSA violates his right to freedom of association and to property.
The SC in its application to strike out said that the constitutional challenge under Section 188(2)(a) of the CMSA is without any established factual basis, as it is based on facts that had already been decided by the Criminal Sessions Court and is a subject of Ramesh’s appeal at the High Court.
The commission further claimed that this OS was filed to set aside Ramesh’s conviction and sentence by the Sessions Court, without going through the criminal appeal, and this matter should be decided in the High Court.
The SC claimed that the filing of the OS was a collateral challenge by Ramesh — meant to delay the proceedings in the criminal court — and that he should be barred from raising the issues in this OS based on the principle of res judicata, estoppel, and abuse of the court process.
Res judicata is a Latin term that literally translates to 'a matter judged'. In legal terms, it is a doctrine that prevents a party from relitigating an issue or claim that has already been finally decided by a competent court.
In the principle of estoppel, one party is prevented from raising the same issues that have already been adjudicated.
Convicted of insider trading charges
Ramesh has been convicted of three insider trading charges brought against him by the SC.
He was originally charged with the offences at the Sessions Court, here, in April 2015, and subsequently sentenced to five years' jail and fined RM3 million (in default of three years' imprisonment) for each charge.
Then in May 2021, the High Court acquitted his conviction and sentence on all three charges — a ruling that was reversed in May 2023 by the Court of Appeal (COA), as it ruled that the High Court had erred in acquitting Ramesh without considering the full merits of the case.
In the first charge, Ramesh was accused of disposing of five million MMM shares in January 2010 while possessing material inside information regarding the proposed downgrade by the Malaysian Rating Corp Bhd of its credit rating on MMM's RM120 million Al-Bai' Bithaman Ajil Islamic Debt Securities from A-ID to BB+ID.
In the second and third charges, Ramesh was accused of disposing of 5.2 million MMM shares in February 2010 while possessing material inside information regarding the classification of MMM as a Practice Note 17 company.
The COA, in reversing the High Court's acquittal, also reinstated the earlier conviction and sentence imposed by the Sessions Court on the three charges.
The SC, however, is appealing against the sentence imposed on the first charge. Hence, the COA has ordered the case to be sent back to the High Court for the appeal to be heard before another judge.
The matter is still pending at the High Court.