Khalid to settle US$18 million Bank Islam debt for far less

Selangor Menteri Besar Tan Sri Khalid Ibrahim has counter sued Bank Islam over an Islamic loan facility amounting to almost RM67 million. – The Malaysian Insider pic, February 13, 2014.In a surprising move, Bank Islam Malaysia, which has been doggedly pursuing Selangor Menteri Besar Tan Sri Abdul Khalid Ibrahim in court for a US$18.52 million (RM66.67 million) debt, is now willing to settle for much less.

The Malaysian Insider has learnt that the Federal Court stood down an ancillary hearing between the parties in chambers yesterday after receiving word of ongoing settlement talks.

The possible settlement caught many by surprise, including bigwigs in PKR and lawyers for Khalid. One his lawyers for the matter said he heard of a deal in the works.

"I've heard of a settlement and am trying to get the details," he said.

A senior PKR leader confirmed that Khalid confided in him that a deal was being hammered out for the debt incurred for the then Kumpulan Guthrie Bhd chief executive officer's purchase of 20% of the company's shares.

Bank Islam Malaysia took the matter to court in 2007, a year before Khalid was named Selangor menteri besar. He was then the PKR treasurer.

Bank Islam Malaysia is a 100%-owned unit of BIMB Holdings Bhd (BHB), whose majority shareholder is the national pilgrims’ management fund Lembaga Urusan Tabung Haji (LUTH) with a 54% stake. The other shareholders are the government-linked Employees Provident Fund, Permodalan Nasional Bhd and Amanah Saham Bumiputera.

The Court of Appeal had ruled in March 2010 that Khalid need not pay RM66.67 million to Bank Islam when it set aside the summary judgment obtained by the bank against him for failure to settle an Islamic loan facility.

On August 21, 2009, the Kuala Lumpur High Court granted the bank's application to enter summary judgment against Khalid and ordered him to pay RM66.67 million.

But appeal court judges Datuk Zainun Ali, Datuk Jeffrey Tan Kok Wha and Datuk Syed Ahmad Helmy Syed Ahmad had unanimously allowed Khalid's appeal with costs.

They also sent the case back to the High Court as they ruled that the issues in the case must get a full trial.

In setting aside the summary judgment, Zainun had said the court was of the view that under Islamic banking principles, an opinion from Islamic jurists on the precepts of Islam on the legality of the transaction was required.

There were two suits filed related to the matter, one by Khalid against the bank and the second was the bank's counter-suit against the menteri besar.

Khalid, in his suit, is seeking declaratory relief and general damages, claiming that there was a wrongful sale of his shares under the Al-Bai Bithaman Ajil (BBA) facility.

As the then chief executive officer of Guthrie Bhd, he claimed that there existed a collateral contract between him and the bank with the said loan agreement dated April 30, 2001.

He wanted the court to declare that the BBA facility, in isolation and without the collateral contract, is null and void and that Bank Islam had breached the collateral contract and the BBA facility.

In its counterclaim suit, Bank Islam Malaysia claimed that Khalid had breached its contract in the BBA loan agreement following his failure to repay the loan.