Port Klang Authority (PKA) - caught between demands by turnkey contractor Kuala Dimensi Sdn Bhd (KDSB) for payment and its own legal suit against KDSB for alleged overcharging - is now faced with a third front involving demands for payment by two different parties.

According to Financial Daily , the Inland Revenue Board (IRB) last Wednesday had directed PKA in a letter to stop payment to KDSB and instead remit RM328.4 million allegedly owed by KDSB to the IRB in backdated taxes.

In the report that appeared on the Financial Daily's front page today, an IRB spokesperson said PKA cannot refuse to abide by its directive, which is provided for under section 68 (1) of the Income Tax Act (ITA) 1967.

azlan Subsequent to informing KDSB's trustees of the stop-payment order by the government and its intention to abide by the directive, however, OSK Trustees Bhd in turn told PKA and IRB that PKA must pay up RM350 million to bondholders by June 30 (tomorrow), since the money is owed to the bondholders, not KDSB.

Bondholders can either individuals or companies who have invested and bought the PKFZ bond from the market.

The daily said further that the trustees, citing a legal opinion, warned that if PKA retains the sum and pays it to IRB, it would constitute an event of default.

OSK may appoint, it added, receivers and managers to enforce Absolute Legal Assignment (ALA) against PKA for the benefit of bondholders.

tiong king sing 061009 KDSB - which is owned by tycoon-cum-politician Bintulu MP Tiong King Sing ( right ) - was the main contractor for the controversial billion-ringgit Port Klang Free Zone (PKFZ) for which it issued bonds amounting to RM4.6 billion.

Malaysiakini had earlier reported that PKA's board of directors are meeting today, a day before the deadline for a first payment, to decide on whether or not it will make the payment to KDSB.

The Financial Daily said that holders of papers issued by two special-purpose vehicles (SPV) - Transshipment Megahub Bhd (TMB) and Valid Ventures Bhd (VVB) - are owed RM230 million and RM120 million, respectively.

Another RM373 million owed to two other SPVs - Special Port Vehicle Bhd and Free Zone Capital Bhd - is due on July 31.

On the amount owed to TMB and VVB, OSK was said to have told PKA and IRB that the amount RM350 million is the property of the SPVs - not KDSB - and is absolutely assigned and payable by PKA.

“There is therefore no question of PKA complying with IRB’s request which is premised on the misapprehension that the payment amount is payable by PKA to KDSB,” said OSK in a letter on Monday.

port klang free zone 070607 customs Citing a legal assignment dated Sep 13, 2004, OSK said KDSB had - with the consent of PKA - assigned the repayment to TMB:

“We put you on notice that PKA will be in breach of its undertaking to pay the repayment amounts to TMB and VVB, in the event PKA does not pay ... on the respective due dates.”

If PKA reneges, furthermore, there would be negative impact on bondholders who had invested on the basis of PKA’s undertaking and on the government’s credibility.

“We also put you on notice that any payment made by PKA to IRB from the repayment amounts will not discharge PKA’s liability to TMB and VVB, and PKA will still be liable to TMB and VVB for the repayment amounts.”

Gov't escape route for PKA

new america one malaysia khairy jamaluddin tony puah forum 040609 01 In a press conference in the Parliament lobby today, Petaling Jaya Utara member of parliament Tony Pua ( right ) said PKA is duty-bound to fulfill the guarantee made by former transport minister Chan Kong Choy for the PKFZ project by paying KDSB’s backdated taxes as well as the amount due to its bondholders.

However, the government can save PKA from being compelled to go down this route by making its stand clear that PKA does not owe KDSB money.

Citing the Financial Daily report, Pua said the government should not pay any money to KDSB until the legal issues between them have been resolved.