Tajudin ordered to pay RM589m

By Ellina Badri, The Edge

Former MALAYSIAN AIRLINE SYSTEM BHD [registerQuotes(“MAS”, “MAS_span”);] (MAS) chairman Tan Sri Tajudin Ramli has been ordered by the High Court here to settle a total of RM589.14 million plus interest to Pengurusan Danaharta Nasional Bhd (Danaharta) in a civil case that began in 2006.

The case has its roots back in 1994 when Tajudin, the former protege of ex-finance minister Tun Daim Zainuddin, took loans totalling RM1.79 billion from several banks towards acquiring a 32% stake in MAS.

Tajudin defaulted on the loans, which turned non-performing after he failed to service it between 1994 and 1998, and the debts were eventually taken over by the national asset management company.

Tajudin had claimed that he had bought the MAS stake from the government at the behest of then prime minister Tun Mahathir Mohamad and Daim under the administration’s privatisation initiatives. The privatisation of MAS largely failed as losses were a perennial problem.

In the early 2001, the government bought back the MAS shares that were held via Naluri Bhd, which was under Tajudin’s control, at RM8 per share for a total of RM1.79 billion. The decision created an uproar as the national carrier’s share price was only RM2.75 per share on the open market.

Danaharta was set up by the government in 1998 following the Asian financial crisis to buy NPLs from financial institutions and maximise their recovery value.

In a statement, Prokhas Sdn Bhd said the High Court here had yesterday awarded summary judgment in Danaharta’s favour and two of its subsidiaries against Tajuddin for RM589.14 million as at December 2005, together with interest at the rate of 2% above the BLR of MALAYAN BANKING BHD [registerQuotes(“MAYBANK”, “MAYBANK_span”);] until the date of full realisation.

Prokhas, which is under Minister of Finance, Inc, has been entrusted with managing Danaharta companies’ residual recovery assets since Jan 1, 2006.

It said Tajuddin’s lawyer had indicated their intention to file an appeal to the Court of Appeal. Prokhas’ statement yesterday was released together with the written judgment of Judicial Commissioner K Anantham, who made the order against Tajudin.

Prokhas said prior to the latest development, the KL High Court had also approved Danaharta’s application on the striking out of Tajuddin’s counterclaim of damages against the three Danaharta companies and 23 other defendants, as well as its appeals against the amendment and joinder of the 14 additional defendants to the counterclaim made by Tajuddin.

In June 2006, Tajudin had counterclaimed for a total of RM13.46 billion in relief from the government, Danaharta, TELEKOM MALAYSIA BHD [registerQuotes(“TM”, “TM_span”);], Telekom Enterprise Sdn Bhd, TRI and other parties. Tajudin was the former chairman of TRI and Celcom, and was ousted after TM took control of TRI pursuant to the merger between Celcom and TM’s subsidiary, TM Cellular Sdn Bhd in 2002.

In the judgment, Anantham also ordered Tajuddin to pay the plaintiffs –  Danaharta, Danaharta Urus Sdn Bhd and Danaharta Managers Sdn Bhd – costs of RM350.

Right from its taking over the debts, Danaharta had pursued collection of the debt owing by Tajudin but had failed to receive payment from him. The two parties subsequently reached a settlement agreement on Oct 8, 2001 that included a RM468.18 million “hair cut”.

Tajudin had pledged 130.44 million shares, then representing a 17.27% stake in TECHNOLOGY [registerQuotes(“TECHNOLOGY”, “TECHNOLOGY_span”);] Resources Industries Bhd (TRI) shares, 309.65 million shares or a 44.84% stake in Naluri Corp Bhd; and 45.2 million or an 80% stake in Promet (Langkawi) Resorts Sdn Bhd.

The judicial commissioner found that under that agreement, the amount originally owing to Danahart totalled RM1.4 billion. Tajudin was to have paid but failed to settle the reduced debt of RM942 million in four installments over three years, with interest payable quarterly, in the interim.

Tajuddin defaulted on his first quarterly interest payment, leading Danaharta to issue a demand letter in Feb 2001, after which he filed for a permanent injunction to restrain Danaharta from enforcing the settlement agreement and selling his shares.

In April 2002, Danaharta terminated the agreement and demanded Tajuddin pay RM1.61 billion. It subsequently raised RM717.39 million from the sale of his pledged shares in TRI. It also disposed of his 45% stake in Naluri.

On May 11, 2006, Danaharta commenced its action to recover the amount outstanding as of Dec 31, 2005 of RM589.14 million.

Contrary to Tajudin’s counsels’ contention, the judicial commissioner was of the view that Danaharta was not negligent in disposing of the pledged securities, but had instead acted in a professional manner.

“The sale proceeds of RM717.39 million in respect of the TRI shares were far in excess of the defendant’s (Tajudin) valuation. The sale proceeds derived from the sale of the Naluri shares were marginally lower only than the valuation of the defendant. The difference is too minimal to attribute any negligence upon the plaintiffs,” he said.