Tengku Shahnas Binti Tengku Adnan v Jahasrat Holdings Sdn Bhd (BA-22NCC-185-10/2024)

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NASIR AHMAD @ NAZRI AHMAD BIN CHANAN DIN …PLAINTIFFS

JAHASRAT HOLDINGS SDN BHD [Company No.: 198401018428]

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JAHASRAT POULTRY PROCESSING SDN BHD [Company No.: 200601035956] ...DEFENDANTS GROUNDS OF JUDGMENT

This judgment concerns an investment scheme, in which the Plaintiffs subscribed to Redeemable Convertible Preference Shares (“RCPS”) issued by the First Defendant, with dividends promised at strikingly high rates and redemption rights upon maturity. When the redemption was demanded by the Plaintiffs, the Defendants did not respond. As a result, the Plaintiffs now seek to invoke not only the RCPS Agreements but also a Corporate Guarantee allegedly executed by the directors. The Defendants, however, mount a vigorous defence by denying the very existence of the agreements, alleging forgery, contending automatic conversion into ordinary shares and insisting upon the shield of separate corporate personality.

The First Defendant issued RCPS to raise funds, part of which were channeled to and used as working capital by the Seventh Defendant, a wholly-owned subsidiary of the First Defendant. The Plaintiffs were among the subscribers to the RCPS, with total investments of RM5,250,000.00, pursuant to individual agreements entitled “Redeemable Convertible Preference Shares Subscription Agreement” (RCPS Agreements).

The RCPS Agreements provided, among other things, for an annual dividend rate of 24%, with special rates of 26% and 27% for the Third and Eleventh Plaintiffs respectively, quarterly dividend payments and a right of redemption of the RCPS on the maturity date.

By a Notice of Redemption and Termination dated 16 February 2024, the Plaintiffs, through their former solicitors, demanded redemption of the RCPS and payment of the outstanding dividends from the First Defendant. The notice of redemption was not complied with by the First Defendant.

The Second to Sixth Defendants, as directors of the First Defendant, are alleged to have executed a Corporate Guarantee, jointly and severally pledging payment of the redemption sums and outstanding dividends to the Plaintiffs in the event the First Defendant defaulted.

The Defendants position, maintained consistently in their Defence and Submissions are as follows:

a complete denial of the very existence of the RCPS

(ii) that the signatures of the Second and Fourth Defendants on the respective documents were forged;

(iii) in the alternative, that the RCPS have automatically converted into ordinary shares; and

(iv) that, in any event, the Second to Seventh Defendants cannot be made liable for the debts of the First Defendant, each company having a separate legal personality. ISSUES FOR DETERMINATION

The following issues arise for determination:

whether there is a valid and binding RCPS Agreement between the Plaintiffs and the First Defendant;

whether documents marked as “ID” may be allowed the evidential weight;

whether the Defendants allegation of forgery of signatures is made out, given the absence of expert evidence;

whether the RCPS held by the Plaintiffs have automatically converted to ordinary shares and whether this issue is properly before the Court;

whether the First Defendant has failed to pay the redemption sums and outstanding dividends due under the RCPS

whether the Guarantee dated 20 July 2023 exists, is valid and binds the Second to Sixth Defendants; and

whether the Seventh Defendant is jointly and severally liable on the basis that the corporate veil ought to be pierced. ANALYSIS AND COURTS FINDINGS

The burden of proof at the first stage rests on the Plaintiffs to prove, on a balance of probabilities, that the RCPS Agreements exist and valid. The Defendant relied upon Section 101 of the Evidence Act 1950 and the case of Letchumanan Chettiar Alagappan (as Executor to SL Alameloo Achi (Deceased)) v Secure Plantation Sdn Bhd [2017] 5 CLJ 418, in their submissions.

The Defendants argue and categorical deny any contractual liability, stressing the absence of mutual consent or negotiation as required under Section 2(e) of the Contracts Act 1950. They contend it is unreasonable to bind parties to documents they never saw or agreed to and invoke Section 2(g) to assert that any unenforceable agreement is void. I do not accept this line of the Defendants argument, that the Plaintiffs have failed to prove mutual consent. Consent, like any other fact, may be proved by conduct and by inference from the surrounding circumstances and it need not be proved solely by direct testimony of negotiation. The share registration and the payment of dividends at rates corresponding to those stipulated in the RCPS Agreements are compelling evidence and objective of consent that speak for themselves.

Based on the evidence before this court, taken collectively, the facts establish a compelling prima facie case for the existence of the RCPS Agreements based on the following findings:

the official Companies Commission of Malaysia (“SSM”) search of the First Defendant, confirms that the Plaintiffs are registered as shareholders of the First Defendant, each of them holding a number of shares numerically equivalent to the sum invested under his or her respective RCPS Agreement, as set out in the schedule reproduced in the Plaintiff’s

(ii) the admission of the Second Defendant, under cross-examination, that the First Defendant had paid dividends, or part thereof, to the Plaintiffs; and

(iii) the absence of any credible explanation from the Defendants as to why or the basis in which the First Defendant came to receive investments running into millions of Ringgits from eleven separate individuals who were, then registered as shareholders in the company without any governing documents.

In addition, the Defendants maintain that the Plaintiffs’ investments were made solely on the basis of the Information Memorandum (IM), not on any binding RCPS Agreement and witness testimony confirmed reliance only on the IM. They stress that the RCPS Agreement was never produced in evidence, merely marked as an ID, rendering the Plaintiffs’ claims speculative. The IM itself restricted communications to formal written channels, making WhatsApp messages inadmissible and the Plaintiffs’ reliance on such informal exchanges was improper. The Defendants further argue that the Plaintiffs failed in their due diligence, having invested before receiving a complete agreement and that all dealings were conducted through an agent, Fad Izham, who was never authorized as their agent. In consequence, without proof of a valid RCPS Agreement or lawful agency, the Defendants contend that they are under no obligation to redeem the shares or pay dividends and that the Plaintiffs’ reliance on WhatsApp screenshots and assumptions falls short of discharging the burden of proof.

In my opinion, I concur with the Plaintiff’s reliance on the following case of CIMB Bank Bhd v Maybank Trustees Bhd & Other Appeals [2014] 3 CLJ 1 for the proposition that the IM is not, on its face, a contractual document, but a marketing tool issued to provide information and assist potential investors on the company portfolio. In my view, the non-contractual nature of the IM does not negate the existence of a binding contract between the parties, namely the RCPS Agreements. The IM and the RCPS Agreements serve distinct purposes, the former is informational, the latter contractual. The absence of contractual force in the IM is neutral to the question of whether the RCPS Agreements were validly concluded and cannot, as the Defendants contend, be invoked to invalidate the RCPS Agreements for want of compliance with the IM’s notice provisions.

As to the Defendants contention, that dealings were conducted through a third party or agent, one Fad Izham, I find this does not detract from the existence of the RCPS Agreements. First, the RCPS Agreements themselves name only the First Defendant and the respective Plaintiff as parties, no third party or agent appears as a signatory or contracting party, a point correctly made out by the Plaintiffs. Second, the existence of a person facilitating introductions or marketing communications is not inconsistent with the RCPS Agreements being directly between the Plaintiffs and the First Defendant. In my opinion an agent may market a product without becoming a party to the resulting contract.

Thirdly, the Defendants sought to rely on the absence of any document appointing Fad Izham as their agent and on SP-2’s inability to link Fad Izham to the Defendants, I find that the crucial evidential burden of clarifying that relationship or of calling that individual as a witness, more naturally rested on the Defendants, who had knowledge of and connection to their own company’s distribution arrangements and not on the Plaintiffs. I accordingly reject the submission that the Plaintiffs ought to have called Fad Izham or sought the discovery of documents said to be in the Defendants own knowledge.

Having carefully evaluated the evidence and the course of conduct between the parties, this Court finds that the Defendants cannot be permitted to selectively affirm portions of their business dealings while simultaneously denying the existence of the very document that underpins them. The unchallenged evidence establishes that the Defendants actively accepted the registration of the shares in their names and proceeded to pay a portion of the dividends due thereunder. By doing so, the Defendants unequivocally acted upon and took the benefit of the underlying agreement.

It is a settled principle of law, as reinforced by the decision in Mohd Pancha bin Abdullah & Anor v Tham Kut Cheong & Anor [2011] 7 MLJ 382, that a party cannot be allowed to 'approbate and reprobate', or blow hot and cold upon the same transaction. The Defendants cannot adopt the agreement when it yields a commercial benefit, only to repudiate its existence the moment its terms cease to be advantageous to them. For these reasons, I find that the RCPS Agreements exist, are valid and are binding on the Plaintiffs and the First Defendant.

The RCPS Agreements and the Guarantee were marked as “ID” at trial, the Defendants counsel having objected to their admission on the ground that the signatures thereon were disputed. The Defendants submit by relying on Chu Choon Moi v Ngan Sew Tin [1986] 1 MLJ 34 and Shamelah Nancy a/p David (trading as Jaysham Consultant Services) v Saminathan a/l Tharmalingam [2017] MLJU 711, that documents accepted as evidence by the court, in those cases were marked as full exhibits, whereas the documents here remain marked “ID” and that this Court ought accordingly to take a “strict approach” and decline to give them any weight.

The Plaintiffs reply on this point, in my opinion, correctly states that the mere fact that a document is marked “ID” does not, of itself, render it inadmissible or devoid of weight. [Jayandran Subramaniam v Rajaprakash Raghavan & Ors [2026] 2 CLJ 803, at [27]–[28]. As the Court of Appeal explained in that case, documents marked “ID” are not classified as Part A or Part B documents under Order 34 rule 2 of the Rules of Court 2012 and the party relying on them must instead show that they fall within a recognised exception to the rule against hearsay and the documents remain subject to the provisions and safeguards of the Evidence Act 1950.

Section 73A (2) of the Evidence Act 1950 expressly empowers the Court to rule on the admissibility of such documents at any stage of the proceedings, including at the submissions stage, having regard to all the circumstances of the case. Huls Transmission Sdn Bhd v Telekom Malaysia Berhad [2025] CLJU 316, at [21], Bank of Tokyo-Mitsubishi (Malaysia) Bhd v Sim Lim Holdings Bhd & Ors [2001] 2 CLJ 474, Dato’ Sri Mohd Najib Hj Abd Razak v Public Prosecutor [2021] MLJU

2485.

The Defendants objection at trial to the admissibility of the RCPS Agreements and the Guarantee was founded squarely and solely on the allegation that the signatures thereon were forged. For the reasons elaborated below, I find that this allegation of forgery has not been well established. I note that the terms and existence of these documents are corroborated by unimpeachable public records, specifically the SSM search results, the IM and witness testimonies during trial. Therefore, this Court is entitled to and does, take these corroborative materials into account in assessing the overall weight of the evidence, a point rightly emphasized by the Plaintiffs.

Furthermore, the Defendants reliance on Chu Choon Moi and Shamelah Nancy is misplaced. Those authorities concern the distinct question of the proof of due execution, rather than establishing any rule of automatic inadmissibility for documents marked for identification ID. The Defendants attempt to distinguish the present case solely on the basis of exhibit markings impermissibly elevates form over substance, which this Court declines to do. For these reasons, I admit and accord evidential weight to the RCPS Agreements and the Guarantee. C. Alleged Forgery of Signatures

It is trite law that the burden of proving forgery rests upon the party who asserts it. In the present case, the Defendants, having pleaded forgery in respect of the signatures of the Second and Fourth Defendants, elected not to call any handwriting or forensic document expert to substantiate this grave allegation, notwithstanding that it touches upon both the RCPS Agreements and the Guarantee.

I observe that the Defendants seek to invert the burden by contending that it lies upon the Plaintiffs to prove due execution, before the Defendants, are required to answer the allegation of forgery. In my opinion, the burden of proof remains firmly upon the party alleging forgery and a bare denial of one’s own signature does not suffice to shift that burden to the party relying on the document.

A mere assertion, unsupported by expert testimony or independent corroboration, amounts to no more than an unsubstantiated allegation. The failure of the Defendants to call available expert evidence, without explanation, further justifies the drawing of an adverse inference under section 114(g) of the Evidence Act 1950. In the circumstances, I find that the plea of forgery is wholly unproven and cannot be sustained.

I further note the inconsistency in the Defendants own evidence, as to why no objection to the Guarantee was raised when it was circulated within the WhatsApp group of which the Second, Fourth and Fifth Defendants were members. During trial, Defendants witness stated that he does not always check messages in the group and at the same time it was also suggested that no response was given because matters of importance are, by practice, only communicated in writing and not by WhatsApp messages. These shifting explanations undermine, rather than support, the credibility of the forgery allegation. For these reasons, the Defendants have failed to discharge their burden of proving forgery and this allegation is dismissed. D. Conversion of RCPS to Ordinary Shares

The Defendants alternative position is that Clause 4.7 effected an automatic conversion of the RCPS into ordinary shares once the First Defendant failed to redeem them, thereby extinguishing the Plaintiffs preference rights. They argue that the Plaintiffs ceased to be creditors and became ordinary shareholders, whose entitlement to returns depends solely on the company’s profitability. Therefore, since the company had suffered losses, no dividends or capital returns are payable.

The Court addressed the Defendants unpleaded conversion defence by first recognising that the issue was absent from the Statement of Defence and rightly observing that parties are bound by their pleadings. The Defendant’s counsel was expressly prohibited from questioning witnesses on the conversion of RCPS into ordinary shares, as that such questioning on an unpleaded matter would be unfair and prejudicial to the Plaintiffs.

The Court nevertheless permitted the parties to ventilate their arguments in written submissions but ultimately found the defence untenable. It was inconsistent for the Defendants to deny the existence of the RPC Subscription Agreements while simultaneously invoking Clause 4.7 of those very agreements, as the law does not permit a party to approbate and reprobate.

The Provisions of Clause 4.7 According to the RCPS Subscription Agreements, Clause 4.7 states that: “Subject to the Constitution of the Issuer, the Parties hereby agree in the event the Issuer fails, neglects and / or refuses to redeem the RCPS within the period stipulated…. the RCPS shall be automatically be converted into Ordinary Shares at the Conversion Rate provided.

In my opinion, Clause 4.7 was expressed to operate subject to the First Defendant’s Constitution, which contained no mechanism for conversion of RCPS into ordinary shares. I agree with the Plaintiffs that Clause 4.7 operates on three principal grounds. First, the clause expressly states, in order to operate, it is “subject to the Constitution of the Issuer”. However, the First Defendant’s Memorandum and Articles of Association contain no such provision or mechanism permitting the conversion of preference shares into ordinary shares.

Secondly, following which, any purported conversion would therefore be ultra vires to the Constitution and void. Finally, the Defendants are technically estopped from raising the point, having failed to plead it in their Defence, they should be barred by the doctrine against approbation and reprobation from denying the existence of the RCPS Agreements while simultaneously invoking one of their clauses. In my view, the Defendants’ reliance on Clause 4.7 is unsubstantiated and cannot withstand as their argument is technically unsound and lacking of proper legal footing. Ranjan Paramalingam & Anor v Persatuan Penduduk Taman Bangsar Kuala Lumpur [2023] 1 MLJ 459, citing Anjalai Ammal & Anor v Abdul Kareem [1969] 1 MLJ 22. Kelana Megah Development Sdn Bhd v Kerajaan Negeri Johor & Another Appeal [2016] 8 CLJ 804; Tenaga Nasional Bhd v Irham Niaga Sdn Bhd & Anor [2011] 1 MLJ

E. Failure to Pay Redemption Sums and Outstanding Dividends

The dispute over redemption sums and dividends, turns to whether the binding contractual obligations arise under the RCPS Subscription Agreements. The Plaintiffs claim RM5,250,000.00 in redemption sums and RM809,861.47 in outstanding dividends, alleging default after statutory notice. The Defendants deny the agreements altogether, alleging forgery of signatures and asserting they were unaware of dividend terms, which they say were handled by a third-party advisor, Ekuitas Sdn Bhd. They further argue that subsequent business losses or conversion mechanisms excused them from payment.

In addition, the Defendants primary defence, maintained throughout the Defendants submission is the denial of the existence of the RCPS Agreements themselves, which I have rejected above. I find that no credible evidence was adduced to displace the Plaintiffs entitlement. No contemporaneous financial statements, audited accounts or expert financial evidence were adduced by the Defendants to justify non-payment. A bare assertion unsupported by evidence remains no more than an unsubstantiated assertion. Accordingly, I find that the First Defendant has failed to pay the redemption sums and outstanding dividends due to the Plaintiffs under their respective RCPS Agreements. F. The Irrevocable Company Guarantee dated 20 July 2023

The Irrevocable Company Guarantee dated 20 July 2023 (marked as ID-2) is a critical document in this case as it serves as the primary legal basis for the Plaintiffs’ attempt to hold the Second to Sixth Defendants, personally, jointly and severally liable for the company’s debts. They argue that the Guarantee bypasses the principle of separate legal personality by expressly binding the directors to pay RM5,250,000.00 in redemption sums and RM809,861.47 in dividends if the company defaulted, with the final clause stating they were “liable to be sued in our personal and company capacity”.

The Guarantee was circulated in a WhatsApp group with the directors and investors. The Plaintiffs assert, that the directors silence at the time amounts to acceptance and estops them from now denying its validity. The Defendants dispute that WhatsApp delivery was invalid under Section 10 of the IM, that they were “too busy” to notice the document and that as an ID, it carries no probative value unless formally admitted as an exhibit. They also allege forgery but called no handwriting expert, permitting an adverse inference.

In my opinion, the Guarantee carries decisive legal significance as it represents an express waiver of the Salomon principle, whereby the directors (D2–D6) accepted joint and several liability and agreed to be sued in both their personal and company capacities. Absent this instrument, the Plaintiffs would have no recourse against the individual directors for the RM5,250,000.00 redemption sum and RM809,861.47 in dividends. The Defendants objections as to its “ID” status and their unproven allegations of forgery are outweighed by the objective evidence of its circulation and their subsequent conduct.

The Guarantee was circulated in the “AWARIS JAHASRAT RCPS” WhatsApp group, of which the Second, Fourth and Fifth Defendants were active members. The Defendants offered no contemporaneous objection when a document imposing heavy personal liability was posted. Their subsequent excuses as mentioned that they were “too busy” or suffered “bad coverage” in the factory are wholly unconvincing and insufficient to rebut the objective fact of delivery. In a commercial context, silence in the face of a critical legal document may properly be construed as acceptance of its validity and the Court so finds in this case.

Accordingly, the Court holds that the Guarantee is valid and binding and the Second to Sixth Defendants are personally, jointly and severally liable to make payment of the redemption sums and outstanding dividends due to the Plaintiffs, in the event of the First Defendant’s default.

The Defendants resist the piercing of the corporate veil by invoking the Salomon principle. They argue that the Seventh Defendant, as a subsidiary, remains a separate legal entity and cannot automatically be made liable for the debts of the First Defendant. They further contend that veil-piercing is a drastic remedy reserved for cases of fraud, dishonesty or where the company is used as a mere facade, none of which the Plaintiffs have proven. Finally, they distinguish the single economic unit approach in the case of Hotel Jaya Puri Bhd v National Union of Hotel, Bar & Restaurant Workers [1980] 1 MLJ 109, asserting that it is confined to Industrial Court matters where equity and good conscience prevail and therefore has no application in this commercial suit.

In my opinion. I find that the Seventh Defendant, Jahasrat Poultry Processing Sdn Bhd, is jointly and severally liable for the Plaintiffs claims. It is undisputed that the investment funds raised through the First Defendant were channeled entirely into the Seventh Defendant’s poultry operations and the Second Defendant expressly admitted that the Seventh Defendant “fully benefited” from those investments. The evidence further establishes that the First and Seventh Defendants functioned as a single economic unit.

The Seventh Defendant is wholly owned by the First Defendant, both share common directors and management and the Seventh Defendant served as the operational arm of the investment scheme. While the principle of separate legal personality under Salomon v Salomon is acknowledged, it is not absolute. In my view, consistent with Hotel Jaya Puri Bhd v National Union of Hotel, Bar & Restaurant Workers, my approach to this factual background is that, the corporate veil may be pierced where justice so demands, particularly where there is unity of establishment and commonality of personnel.

In this case, the Seventh Defendant cannot be permitted to benefit from the Plaintiffs capital while evading liability behind a corporate facade. Equity requires that the Seventh Defendant, as the alter ego of the First Defendant, bear responsibility for the redemption sums and outstanding dividends. Accordingly, the Court holds that the Seventh Defendant is jointly and severally liable with the First Defendant for the sums claimed.

For the reasons set out above, the Plaintiffs claim is allowed against all the Defendants and damages to be assessed. Date: 8th July 2026 SGD SHOBA DORAI RAJAH JUDICAL COMMISSIONER SHAH ALAM HIGH COURT Solicitor for the Plaintiffs: Azraai Yunos with Nur Syafikah Faiz [MESSRS AZRAAI, HAZIEQ & ZIKRY (KUALA LUMPUR)] Solicitor for the Defendants: Lejerod Limpuong [MESSRS YAACOB MENTOL, ZAMANI & ASSOCIATES]