(iii) That the sequence of the ASA and APA are erroneous. [14] However, the plaintiff takes the position that the said SAC Rulings are not applicable as the SAC Rulings were issued in 2010, whereas the documents herein were signed in 2009. However, I 22 am of the considered opinion that this is only applicable to stipulation (ii), that there shall be no stipulated condition in the contract to repurchase the asset. The other requirements arise from the year 2000 Meeting and would cover the Bai Al Innah facilities herein. Issue (i) the ASA and APA contained prescribed condition to repurchase the asset [15] Having considered the evidence, I agree with the defendant that the APA dated 23.7.2012 for the Immigration Depo at Kemayan, Pahang for RM13,486,512.65 (pg 479-508 CBD/B2) is not in compliance with the SAC Rulings, in that in Recital C, it contains a ‘repurchase clause’, and it reads: “On consideration of the Bank having agreed to grant the Customer the Facility, the Customer hereby agrees to sell and the Bank hereby agrees to repurchase the assets as described in the Second Schedule hereto (hereinafter referred as the “Identified Asset”) free from encumbrances at the Purchase Price as described in Section 3 of the First Schedule hereto an in accordance with the terms and conditions as stipulated herein and in the Asset Sale Agreement.” [16] Premised on the SAC Ruling, then this facility, for the construction of the Immigration Depo at Kemayan, is rendered void. Therefore, pursuant to section 66 of the Contracts Act 1950, 23 the defendant having received the loans under the facilities agreement is to return the monies to the plaintiff. Issue (ii) whether the ASA and APA do not identify the subject matter of the Agreements [17] The next issue raised by the defendant is that the ASA and the APA do not identify the subject matter of the Agreements. The defendant relied on the case of FLH LCT Services Sn Bhd v Malaysian Debt Ventures Bhd [2016] 1 MLJ 248; [2016] 1 CLJ 243, where the Court of Appeal held as follows: “[25] In our view the essence of bai al-inah transaction or contract in the matter before us as entered into by the parties herein must necessarily be grounded upon the basic premise that it must involve the sale and buy back transactions of an asset of a seller. The existence of the asset in the transactions is an imperative without which such contract is no a bai al-inah, but something else outside the Syariah System.” [18] The Court of Appeal then look at the relevant security documents, such as the APA, ASA and the MFA and held that: “[30] We have tooth-combed the first LO, its schedule and appendix. We could find no mention of any asset in the first LO to be transacted in the MFA, ASA and APA. We have similarly tooth-combed the second LO. There is 24 equally no mention of any asset in the Second LO to be transacted in the relevant MFA, ASA and APA.. … [33] On the factul matrix of the case enumerated above, it is apparent that at the time the security documents (MFA, ASA and APA) were executed on 31 July 2009, the underlying asset in the Bai al-inah contract does not appear to exist. At the risk of being repetitive, in te MFA and both the ASA and the APA, the descriptions of the asset were merely referred to ‘as set out in letter(s) of offer (if any)’. As said earlier, the first and second LO did not mention any asset whatsoever. Hence it begs the question what actually was being transacted on 31 July 2009 between the seller and purchaser in the MFA, ASA and APA. There are uncertainties in the underlying feature of the said bai al-inah contract/financing ie, the existence of the asset in the transactions. Following through, hence the akad to sell and akad to purchase the asset are not certain and distinct in the absence of the same, a fundamental requirement under the bai al-inah contract.” [19] Applying the above principle, I have looked at the evidence and find that the assets have been identified in the ‘Lafaz aqad jualan’ and ‘lafaz aqad belian’. An example can be seen from “Lafaz Aqad Jualan” for Facility A (at page 127A/B11) and the asset is described as “Sijil Rakyat Holdings Sdn Bhd bernombor 7443- 7449 bernilai RM1,732,500.00”. The same asset is referred to in the “Lafaz Aqad Belian” at page 128/B11. The other assets can 25 also be seen from the ‘Lafaz aqad jualan’ and ‘lafaz aqad belian’ at pages 136 and 137 of B11. The other assets are reflected from the plaintiff’s computer system under “Maklumat Akad Jual Beli” at pages 1992 – 1994 of B12. [20] Therefore unlike the case of Malaysian Debt Venture (supra) where no detail of asset can be found in any of the security documents, in our present case, the specified assets are found in the ‘aqad’ documents. Therefore, I am of the considered opinion that there is certainty with regards to the transacted asset and thus the facilities documents comply with the relevant SAC Rulings. Issue (iii) that the sequence of the ASA and APA are erroneous [21] The SAC Guidelines clearly stipulates the following prerequisites in relation to the sequence of the Asset Purchase and Sale Agreements for a valid Bai Al-Innah contract: “(i) consisting of two clear and separate contracts, namely, a purchase contract and a sale contract” and “(iv) the sequence of the contract is correct, whereby the first sale contract shall be completely executed before the conclusion of the second sale contract” 26 [22] In Public Bank Berhad v. Mohd Isa Mohd Nafidah [2012] MLRHU 1, Mohd Zawawi Salleh J (as His Lordship then was) said at page 4 - 5: “Bai Al-Inah [10] There is no room for doubt that this instant case concerns a transaction based on Bai Al-Inah. Under a typical Bai Al-Inah transaction for residential housing, the purchasers are required to execute two agreements: firstly, the Property Purchase Agreement (“PPA”) and secondly, the Property Sale Agreement (“PSA”). The first agreement (PPA) provides that the purchasers agree to sell the property, which he purchased from the developer, at a price similar to the price he agrees with the developer to that particular Islamic Bank or Islamic Window Bank (“IWB”) and an undertaking that they (the purchasers) are to re-purchase the property from the bank. The second agreement is the Property Sale Agreement. Under this agreement (PSA), the property (which has been vested in the Bank) is sold by the Bank back to the purchaser, at an increased price. The purchasers are required to repay the Bank this price, by way of instalments for a specific duration until the sale price is fully settled. The Bank will get profit, being the difference between the price stipulated in the PPA and the price stated in the PSA (the sale price).” (emphasis added) 27 [23] In Law and Practice of Islamic Banking and Finance (Third Edition) by Nik Norzrul Thani, Mohamed Ridza Abdullah, Megat Hizaini Hassan, the learned Authors wrote: “[7.025] In terms of sequence, the Shariah Advisory Council at Bank Negara Malaysia’s ruling also reflected that the asset purchase agreement takes place prior to the execution of the asset sale agreement if both the asset purchase agreement and the asset sale agreement are executed on the same day. If there are security agreements to be executed, it would take place after the execution of the asset sale agreement. [7.026] In one of the transactions which involved the author as an adviser, a ceremony of contract execution was performed utilizing the true principles of Shari’ah which was witnessed and confirmed by three muftis on the authenticity of the transaction according toShari’ah. As an illustration, the following was the sequence of events: A. First contract ceremony (Asset purchase agreement) First: Execution of the asset purchase agreement by the customer. Second: Execution of the asset purchase agreement by the financier. 28 Third: The customer declares the offer (Ijab) to the financier identifying the asset to be sold with a purchase price stipulated to be paid in cash. Fourth: The financier signifies its acceptance (Qabul) to the offer by agreeing to purchase the asset at the agreed purchase price to be paid in cash. Fifth: Confirmation from Shari’ah advisers on the transactionas witnesses. Sixth: The customer hands over the title of the asset to the financier. Seventh: The financier accepts the title of the asset from the customer and pays to the customer the purchase price of the asset. Eight: The customer accepts the payment from the financier for the asset sold. B. Second contract ceremony (Asset sale agreement) First: Execution of the asset sale agreement by the financier. Second: Execution of the asset sale agreement by the customer. Third: The financier declares the offer (Ijab) to the customer identifying the asset to be sold with a purchase price stipulated (which comprises the aggregate value of the purchase price in the asset purchase agreement and aprofit) to 29 be paid on a deferred basis as per the terms of the agreement. Fourth: The customer signifies its acceptance (Qabul) to the offer by agreeing to purchase the asset at the agreed purchase price to be paid on a deferred basis. Fifth: Confirmation from Shari’ah advisers on the transaction as witnesses. Sixth: The financier hands over the title of the asset to the customer. Seventh: The customer accepts the title of the asset from the financier.” (emphasis added) [24] Therefore, it is clear that the Asset Purchase Agreement (APA) precedes the Asset Sale Agreement (ASA). [25] However, in their evidence, the plaintiff’s witnesses gave evidence that it was the ASA that was executed first. Under cross examination, PW3 says as follows: “PW3: Ya mula-mula jam 2.47 petang, bank memasuki kontrak, bank jual dulu asset kepada pelanggan dengan harga jualan. YA: Wait, bank jual sijil kepada pelanggan. Okay. Ya. Apabila pelanggan telah setuju membeli, jadi asset berada ditangan pelangganlah. Dia setuju membeli dengan harga jualan yang ditetapkan dalam kontrak. Jadi, akad yang berasingan seterusnya adalah bank membeli semula asset tadi, sijil, daripada pelanggan dengan membayar tunai. (pg 68/NOP) 30 …. Di dalam bank kita banyak produk yang menggunakan bai innah ini. Jadi bai innah ini bergantung kepada kontrak ketika itu, produk apa yang kita enter dengan pelanggan. Jadi saya mengekalkanjawapn saya, berdasarkan produk yang kita tawarkan untuk pembiayaan ini, berdasarkan konsep bai innah, kita menjual terlebih dahulu. Ini adalh keputusan general konsep bai innah. (pg 70/NOP) …. Untuk kontrak ini, saya sahkan kita menjual terlebih dahulu, kemudian kita akan memasuki akad pembelian.” (pg 71/NOP) [26] PW4 gave the following evidence under cross examination: “PD: Dokumen mana yang pertama ditandatangani? Pertama dalam akad Innah, kita akan masuk lafaz akad jualan. Akad Jualan? Ya. Bank akan jual dulu. Then only akad belian? Ya betul. (pg 87/NOP) …. Alright but in terms of sequence of signing the agreements, there is the Asset Sale Agreement and the Asset Purchase Agreement. Which document to sign first? Asset sale or asset purchase? Pada agreement tidak masalah yang penting akad dilakukan mengikut sequence. Lafaz akad itu dilakukan mengikut sequence. Sebab itu kita ada buat borang akad itu, kita boleh 31 lafaz akad jualan dahulu selepas barulah lafaz akad belian. Sebab itu kita pakai borang..” (pg 88/89 NOP) [27] Therefore, I agree with the defendant that under the SAC Guidelines, the parties must sign the purchase contract (APA) first, and then execute the sale contract (ASA). In this case, since the parties have signed the ASA first, and then the APA, these transactions have not complied with the SAC Guidelines and are therefore void. [28] However, it is the submission of the plaintiff that the sequence of the APA and ASA are inconsequential, as the Lafaz Aqad have been done in compliance of the SAC Rulings on Aqad as can be seen from the exhibits. [29] Even though the aqad complies with the SAC Rulings, the APA and the ASA did not comply with the SAC Rulings. I am therefore of the considered opinion that all SAC Rulings must be complied with. Since there was non-compliance with the SAC Rulings on the sequence of signing the APA and the ASA, therefore the contract documents with regards to the Bai Al-inah facilities are void. As such, pursuant to section 66 of the Contracts Act, the defendant, having received the loans under the facilities agreement is to return the monies to the plaintiff. [30] As the defendant’s submission is only focused on the Bai Al–Innah facilities, there is no issue with regards to the 5th and the 6th facilities, which are the Bai Istisna facilities. The plaintiff’s 32 claims premised on the Bai Istisna facilities are allowed with costs. (AZIZAH BINTI HAJI NAWAWI) JUDGE HIGH COURT MALAYA (Appellate and Special Powers Division 2) KUALA LUMPUR Dated: 13th February 2018 For the Plaintiff : Nor Shahadah Saari Messrs Shukor Baljit & Partners Kuala Lumpur. For the Defendant : Mugunthan a/l Vadiveloo Messrs Mugu & Sufyan & Co Kuala Lumpur. Cases referred: