The Court of Appeal has set aside a summary judgment entered against Selangor Menteri Besar Khalid Ibrahim that would have required him to repay a loan of more than RM66 million to Bank Islam.

Justice Zainun Ali, who led a three-member panel, instead ordered the case - which involves Khalid's purchase of Guthrie Bhd shares when he was the chief executive officer - to go for a full trial.

"The court is of the view that under Islamic banking principles, opinion should be gained from Islamic jurists over the precepts of Islam over the legality of the transaction," she said.

"Hence, the matter should have gone through a full trial. Given this, the court dismiss the order of the High Court decision dated Aug 21, 2009."

Zainun said the court agrees that views of Islamic jurists should be sought based on the case of Bank Islam vs Lim Kok Hoe .

The other judges who sat with Zainun were Justices Tan Kok Hwa and Justice Syed Ahmad Helmy Syed Ahmad.

NONE The High Court, which had yesterday fixed four days beginning March 15 to hear Khalid's suit against Bank Islam, will now have to consolidate the hearing to include Bank Islam's counter claim against Khalid.

"I am satisfied with the fair decision of the court and I have been advised by my lawyers that I have a good case against the bank," said Khalid in an immediate reaction.

He had taken a loan of about US$100 million in 2001 for the purchase of 32 million Guthrie shares through the Al Bai Bithamin Ajil Facility (BBA) offered by Bank Islam.

On Aug 21, Bank Islam managed to obtain a summary judgment compelling him to repay the loan of more than RM66 million.

However, Khalid managed to get a stay of the order given by High Court judge Justice Rohana Yusof, pending today's appeal.

Khalid was represented by Malik Imtiaz Sarwar, and Matthew Thomas Philip, while Bank Islam was represented by Tommy Thomas.

Question of validity

In his submission, Malik raised questions over the validity of the BBA facility as it is not endorsed by Bank Negara, based on a circular.

malik imtiaz sarwar islam 190806 “Furthermore, there are questions raised by three eminent Islamic scholars that the BBA are contrary to Syariah principles and also against the Shafie school of thought,” he said.

“We are further advised by Dr Aznan Hassan that the BBA facility dated April 30, 2001, was in breach of the Bank Negara circular and Syariah principles,” he said.

The Shafie school of thought is adopted by most Muslims in Malaysia. The other three schools of thought accepted by Islam are Hanafi, Hambali and Maliki.

Malik said there was basis for doubt as to whether the BBA facility was Syariah-compliant, and that the conclusion must follow that the facility “was illegal to the extent that it requires a full trial.”

Khalid  in filing the suit in 2007 had sought:

  • a declaration that there exists a collateral contract between Khalid and the bank on the BBA loan agreement;
  • a declaration that the BBA facility in isolation and without collateral contract is null and void; and
  • a declaration that Bank Islam has breached the collateral contract or the BBA facility.

He also sought general damages, following the breach of the collateral contract and the bank’s wrongful sale of the shares.

A week after Khalid filed the suit, Bank Islam filed its counter-claim based on the RM66 million losses it suffered following the shortfall sell.

Khalid, however, claimed the price of the Guthrie shares which were sold some time before November 2006, could have been sold at a higher price when the share appreciated in early 2007.

He said the bank had sold his shares without his consent and that the sale was done prematurely without his knowledge, resulting in the (RM66 million) shortfall for Bank Islam and also a financial loss to himself.

Had Bank Islam followed instructions, said Khalid, he and the bank would have made a substantial profit as Guthrie shares were appreciating as a result of a merger exercise.