From kehakiman's website regarding CNLT (Far East) Bhd, a company formerly listed on Bursa:
11. The Employees’ complaint of fraudulent trading straddled 8 allegations of fact that allegedly occurred between 2006 and 2008. They were as follows:
(a) CNLT, primarily through its managing director, the Appellant, prepared or issued fictitious invoices in 2007 to an entity known as MTI (Far East) Sdn Bhd amounting to RM4,271,745.06 with a view to inflating or overstating its revenue, such that CNLT would appear to be a ‘going concern’, or at the very least, not as insolvent as it actually was;
(b) Overstating the value of the plant and machinery of CNLT;
(c) Siphoning of CNLT’s funds by way of payment of rental to Golden Privilege Sdn Bhd when there was no such tenancy agreement. This company was controlled by the Appellant and the 7th defendant;
(d) CNLT’s assets in the sum of USD1,250,000 were dissipated or channelled to CNLT’s largest shareholder, JCT Limited, the 8th defendant after CNLT had been listed as a PN17 company;
(e) CNLT, through inter alia, the Appellant caused 3 cheques in the sum of RM160,000.00 to be issued on 11 September 2007. These cheques were encashed on 12 September 2007;
(f) Failure to cause CNLT to remit contribution to Employees Provident Fund (“EPF”) and Social Security Organization (SOCSO), both employer and employee despite deducting the requisite employee contribution since August 2007. Neither was income tax paid, despite the requisite deductions having been made;
(g) The Appellant’s action in dissipating assets out of the reach of provisional liquidators in May 2008; and
(h) Payments were made out to preferred unsecured creditors, as well as some shareholders in the sum of not less than RM2,841,696.00 without validation at the time the restraining order dated 26.10.2007 was in force.
12. It was the Employees’ case that by reason of the foregoing matters the business of CNLT was carried on from 2006 onwards until it was wound up in January 2009 with intent to defraud creditors of the company, or for a fraudulent purpose. For the purpose of the application of section 304 of the Act in this suit the creditors contemplated here were the Employees.
13. By this action, the Employees sought inter alia the following orders:
(a) a declaration that the business of CNLT had been carried on by the defendants with intent to defraud creditors of CNLT, in particular the Employees pursuant to section 304 of the Act;
(b) a declaration that the defendants shall be jointly and/or severally liable and personally responsible, without any limitation of liability for all of the debts or other liabilities of CNLT; and
(c) an order that the defendants, jointly and/or severally do pay the outstanding debt due and owing to the Employees by CNLT.
Very heavy accusations, and what did the judge decide?
18. At the end of the trial, the learned trial judge held that the Employees had proved 7 out of 8 allegations. It was held that allegation (c), the siphoning of CNLT’s funds by way of payment of rental to Golden Privelege Sdn Bhd, was not made out. The learned trial judge found that payments to JCT limited were void as they were against the law prohibiting undue preference.
19. The learned trial judge accordingly held that the business of CNLT was carried on by the Appellant with intent to defraud the creditors of CNLT including the Employees pursuant to section 304 of the Act. A declaration was made to that effect by the court. There was however no such declaration granted in respect of the other directors of CNLT. The court also held that the Appellant was personally liable to the Employees, to pay the Employees the sum of RM2,910,201.78 as claimed with interest.
Most of the proven allegations happened more than ten years ago.
A forensic report was made, with many observations similar to the above. The company however denied all in an announcement to Bursa. Since the judge held that seven allegations have been proved, the truthfulness of the contents of that announcement should be reviewed.
The above court case was a private affair by the employees who were disadvantaged. It seems they are winning their case, good for them, it must have been a quite costly and lengthy affair.
But what have the authorities done so far, for instance in regards to the minority investors who have been disadvantaged? From what I could find, not much.
Bursa reprimanded the company (I don't think anybody will be bothered by that) and delisted it (basically disadvantaging the minority investors by depriving them an opportunity to trade their shares). No action whatsoever was taken against any individual.
SSM obtained a conviction: "The Kuala Lumpur Sessions court today convicted Dato’ Prem Krishna Sahgal (‘Dato’ Prem’) for committing an offence under section 364 (2) of the Companies Act 1965. Dato’ Prem was sentenced to pay a fine of RM40,000.00 in default 6 months imprisonment."
It continues "SSM hopes the above decision will send out a clear message". I doubt that, I find the punishment very light, especially given the small chance of getting caught.
Where is the enforcement for any of the other (very serious) allegations, why have Bursa and/or SC still not taken any action in this matter?
Justice delayed is justice denied.