Sabah Forest Industries obtains stay at COA to prevent state govt from acquiring its lands

• According to SFI, the land acquisitions by the Sabah government and its conduct post-acquisitions are contrary to public purpose.

KOTA KINABALU (Nov 11): The Court of Appeal (COA) on Friday (Nov 8) granted a stay of proceedings relating to the Sabah government’s planned compulsory acquisition of Sabah Forest Industries Sdn Bhd’s (SFI) land, following an appeal by the company’s receiver and manager (R&M). 

A three-member bench, led by Datuk Supang Lian, granted the stay, and for the case to remain status quo of the lands to be maintained, pending the determination of the judicial review application that was commenced by the R&M from Grant Thornton. 

Besides Supang, the other judges who sat in the online proceeding were COA judge Datuk Hashim Hamzah, and High Court judge Datuk Faizah Jamaludin.

The outcome was confirmed following a press release by Grant Thornton, and also to The Edge by its lead counsel A G Kalidas, who appeared with Jeyan Marimuttu, S Vanugopal, and Vanessa Marimuttu.

The respondents consist of the Collector of Land Revenue (Kota Kinabalu), Assistant Collector of Land Revenue (Sipitang), Registrar of Titles, Chief Minister of Sabah, and the State Government of Sabah. The respondents were represented by lead counsel Datuk Firoz Hussein Ahmad Jamaluddin, and assisted by Wilson Chang. 

Between December 2021 and August 2022, the Sabah government commenced proceedings to acquire a total of 15 pieces of country-lease-titled lands belonging to SFI, purportedly for public purpose.

According to SFI, the land acquisitions by the Sabah government and its conduct post-acquisitions are contrary to public purpose.

Instead, SFI contends that massive commercial operations of tree logging and harvesting of the lands were carried out by the state government and/or its servants or agents.

Further, SFI’s timber concessions were allegedly given to a private company, Pelangi Prestasi Sdn Bhd, owned by Tan Sri Syed Mokhtar Al-Bukhary, according to an official statement made by the Sabah Chief Minister Datuk Seri Hajiji Noor during the State Legislative Assembly sitting on March 29, 2023, as cited by SFI.

The stay order effectively means that the Sabah government must immediately halt all logging operations, cease occupation of the lands, and stop enforcing any eviction notices which were sent to SFI and its workers earlier.

SFI has not been paid any compensation for the lands, or for the massive volumes of commercial logs extracted and exported from its lands.

Back in 2018, Syed Mokhtar, through his vehicle Pelangi Prestasi, entered into a sale & purchase agreement with SFI to acquire SFI lands and assets for RM1.2 billion, which was subsequently terminated in 2021.

Thereafter, the Sabah government commenced the acquisition of the lands and offered only RM256 million as alleged compensation to the R&M, and the offer was rejected.

On Nov 24 last year, the Kota Kinabalu High Court granted leave for SFI to commence the judicial review proceedings, as SFI had passed the threshold required under the law to challenge the state government’s compulsory acquisition of 15 parcels of its lands.

Pelangi Prestasi failed to reinstate suit against SFI

Prior to this, it was reported that Pelangi Prestasi had in April 2018, signed an agreement to acquire a 98% stake in SFI 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 instead, imposed an entirely new set of preconditions for granting the licences.

A month before the signing of the agreement in 2018, the previous Barisan Nasional state government agreed to approve new timber licences for Pelangi Prestasi, if it fulfilled the prerequisites in the agreement.

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

The salaries, it said, were paid even up until March 2018, amounting to RM23.1 million, and hence, it had fulfilled part of the prerequisites set by the Sabah government.

SFI tried to strike out the suit by Pelangi Prestasi, but the Kuala Lumpur High Court dismissed the company’s application on Oct 22, 2019.

On Jan 6, 2022, a three-member Court of Appeal bench, led by Datuk Vazeer Alam Mydin Meera, allowed SFI’s appeal to strike out the suit filed by Pelangi Prestasi and lift the injunction, which had then already expired.

The appellate court also asked SFI to go back to the Sabah High Court, for it to assess the damages as a result of the injunction imposed on SFI, since the injunction was granted by the High Court following the filing of the suit since October 2019, when the High Court dismissed SFI’s striking out application.

On Jan 18 last year, Pelangi Prestasi failed to reinstate the suit when it failed to obtain leave from the Federal Court to appeal the Court of Appeal’s decision the previous year.

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