PUTRAJAYA (Nov 11): A three-member Court of Appeal (COA) bench has on Tuesday granted an unconditional stay to Pelangi Prestasi Sdn Bhd — a company owned by Tan Sri Syed Mokhtar Bukhary — over a High Court decision on Oct 28 that required the company to pay RM85.76 million damages to Sabah Forest Industries Sdn Bhd (SFI), Grant Thornton Consulting Sdn Bhd, and Datuk C Narendrakumar.
COA judge Datuk Mohamed Zaini Mazlan, who led the bench, granted the unconditional stay sought by Pelangi Prestasi counsels Steven Thiru and Alex De Silva, who had argued that they were appealing last month’s decision and had also filed a certificate of urgency for the appeal to be heard.
Furthermore, Steven said that their client is concerned with recovering the sum, should its appeal be granted, as SFI is insolvent and is in huge debt, and Pelangi Prestasi was worried that the damages sum would be utilised to pay off SFI’s debts.
Zaini, who sat with judges Datuk Hayatul Akmal Abdul Aziz and K Muniandy, also awarded RM30,000 costs.
Steven and De Silva had argued that SFI is insolvent and has been wound-up, and that its debts are in excess of RM1 billion. Therefore, their client feared that if they were to pay the damages, SFI would take the sum to pay its debts, as they have secured and unsecured creditors.
“The sum of RM85.75 million damages has now reached in excess of RM100 million following interests, and this is a huge sum.
“Pelangi Prestasi has filed a notice of appeal and has sought an early date for the hearing of the appeal. Hence, there are special circumstances for this stay to be granted,” they said.
Furthermore, Steven and De Silva claimed that the respondents had previously paid RM120 million to invest and acquire SFI, and a portion of the sum which was supposed to pay the workers had been wrongly used.
“Hence, there is concern that this may occur, and they (SFI) do not have a capacity to repay,” they said.
Lawyers Sanjay Mohan and AG Kalidas, who appeared for the respondents, asked that the damages sum be paid, or at least RM70 million be placed in a stakeholders account to ensure the sum is not disturbed.
Kalidas further said that the damages was only awarded when a 2019 injunction imposed by Pelangi Prestasi to prevent SFI from dealing with or selling their assets to any other buyer, had been set aside and Pelangi Prestasi’s suit had been struck out.
He added the injunction given by the High Court was too broad, where SFI was not allowed to negotiate for sale and needed to keep its timber licence alive.
“Since the company needs to extend the timber licence, there should be an amount to be reimbursed,” Kalidas said.
High Court awards RM85.755 mil in damages
Pelangi Prestasi had moved to acquire SFI in 2018 by signing an agreement to acquire a 98% stake in the company 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 of its assets, land titles, and timber licences.
SFI, which was facing financial problems, was put under receivership and the 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 the 14th general election (GE14) — not to issue fresh timber licences to SFI, and imposed an entirely new set of preconditions for granting the licences and for SFI to find a buyer.
In 2022, the COA had struck out Pelangi Prestasi’s 2019 suit against SFI, and the injunction had been set aside.
On Jan 18, 2023, the Federal Court had also dismissed Pelangi Prestasi’s leave to appeal to have the suit reinstated, and on Feb 20, 2023, a notice of application was made for the assessment of damages.
The trial of assessment of damages over the imposed injunction was held in July and August this year, where the parties agreed it would be dealt by way of affidavits and written submissions.
On Oct 28 this year, High Court judge Datuk Su Tiang Joo had awarded a sum of RM85.755 million in damages to SFI, Grant Thornton, and Narendrakumar.
In his decision to award damages, Su had said that there was evidence of another buyer for SFI and it could have approached or negotiated terms for it, but there had been hindrance from the injunction imposed by Pelangi Prestasi.
The judge said the assessment period for damages would commence from July 2019, where the damages were claimed in the sum of RM85.755 million.
“I agree with the defendants that it is unreasonable of Pelangi Prestasi to trivialise the challenges faced by the defendants in securing supporting documents, when Sabah Forest Industries had produced evidence to prove that the orders of the injunction has prevented them from entering the administrative building in Sipitang from July 9, 2024, as well the widespread looting, pilferages, theft, and break in.
“The defendants succeeded in their claim for damages in the form of expenses incurred if not for the orders of injunction in the sum of RM85.755 million,” Su said, adding that the court awarded RM100,000 in costs to be paid by Pelangi Prestasi.
He had ordered that the sum be entered with interest from September 2021.