The Kelantan state government has lost its appeal to stop the federal government from intervening in its breach of contract suit against Petroliam Nasional Bhd (Petronas) over oil royalty.

A three-man panel of Court of Appeal chaired by Low Hop Bing held that that the presence of the federal government in the civil suit was necessary to ensure that all disputed matters in the case were completely adjudicated upon.

He said the panel was satisfied that there were issues that arose out of the relief claimed by the Kelantan state government and that it was “just and convenient” that those issues be determined between the federal government, the state government and Petronas.

“We find no merits in the second appeal of the state government,” said Justice Low in affirming the decision of the High Court to allow the federal government to be an intervenor in the suit.

The panel, also comprising Justices Abu Samah Nordin and Alizatul Khair Osman Khairuddin, dismissed the state government’s second appeal and retained the High Court’s order that the civil suit be tried at the New Civil High Court (NCvC), and not in the New Commercial Court (NCC) in which the suit was filed.

Justice Low ruled that the transfer to the NCvC court by the managing judge was consistent with practice direction No 1/2008.

He said the transfer was not a transfer of an action from one court to another court but was a transfer between a division in the same court.

The state government had wanted the suit to be transferred back to the New Commercial Court (NCC).

perak state govt crisis 030309 tommy thomas The court also did not make any ruling on the Kelantan government’s application to stay the proceedings at the High Court, which were scheduled for mention on Monday. The panel ordered the state’s counsel Tommy Thomas ( left ) to file in a formal application.

Thomas said the state government sought the stay order because it wanted to file a leave application to appeal to the Federal Court against today’s decision.   

The state government is suing Petronas for allegedly breaching the contract over cash payments payable to Kelantan over oil revenue.

In its statement of claim, the state government demanded that Petronas pay the outstanding and future cash payments for petroleum produced off the Kelantan coast as set in the petroleum agreement.

‘Not questioning federal government’s rights’

Earlier, Thomas submittted that the federal government did not have an interest in the civil suit because the state government's claim and relief sought was against Petronas.

He said the Petroleum Development Act 1974 set that Petronas receives 90 percent of the cash payments, the federal government and the state government respectively receive five percent each of the cash payment for petroleum obtained onshore and offshore.

azlan Thomas said the Kelantan state government was not questioning the federal government’s right to receive their five percent cash payments from petroleum obtained onshore and offshore.

He said the federal government should not be admitted as intervenor in the civil suit because it (the federal goverment) had a separate contract with Petronas concerning cash payments and that Petronas had not ceased payments to the federal government.

        

Senior federal counsel Azizah Nawawi, appearing for the federal government, argued that the matter in dispute was the rights over petroleum in the continental shelf off the Kelantan coast.

She said the federal government must be made a party to the suit because petroleum in the continental shelf belonged to the federal government.

Petronas was represented by lawyers Cecil Abraham and Rishwant Singh.

- Bernama