Ifci Limited v Bishopgate Capital Limited (WA-22NCC-705-12/2019)

BISHOPGATE CAPITAL LIMITED

ARCHIPELAGO INSURANCE LIMITED (COMPANY NO: LL09355) DEFENDANTS GROUNDS OF JUDGMENT

The Plaintiff claims that the 1st Defendant breached the terms of the Promissory Note Transaction Agreement dated 20-11-2017 and that the 2nd Defendant failed to pay the sums that are due under the Credit Default Risk Insurance Policy dated 20-11-2017.

The 1st Defendant entered into a Promissory Note Transaction Agreement dated 20-11-2017 (PN) with Calfin Capital Private Limited (Calfin) and Gouttephone Technology Private Limited (GTPL). Calfin purchased the PN bearing number BGLPN001 to the value of USD 10 million from the 1st Defendant and assigned its benefit to GTPL.

The salient terms of the PN are as follows: - 3 3.1 The 1st Defendant promised to pay GTPL the sum of USD 10 million on the maturity date of the PN with interest at the rate of 6.5% per annum in arrears.

3.2 The maturity date of the PN was on 19-11-2018.

3.3 The obligation to pay the sum of USD 10 million with the aforesaid interest is unconditional and represents and irrevocable undertaking to GTPL or any other bona fide holder of the PN on the maturity date upon the presentation for payment of the PN at the registered office address of the issuer.

3.4 If the 1st Defendant fails to pay the sums promised under the terms of the PN then the said Defendant shall bear all reasonable costs for collection and even solicitors fees.

3.5 The rights under the terms of the PN are assignable to any endorsee of the said PN.

The 1st Defendant had also purchased a Credit Default Risk Insurance Policy dated 20-11-2017 with a policy reference number AG1320170020 (AIL Policy).

The material terms of the Credit Default Risk Insurance Policy are as follows: - (note obligee refers to the Plaintiff and obligor refers to the 1st Defendant)

I also note that the cover note to the said policy also provides: -

This Court also notes that the 2nd Defendant’s endorsement to the Insurance number 0002/20217 dated 26-12-2017.

The Plaintiff granted a short-term loan to the sum of USD 8.5 million to GTPL as seen in the Letters of Intent dated 2-1-2018, 11-1-2018, and 9-3-2018. A Short Team Loan Agreement dated 19-1-2018 was also executed by the Plaintiff with

As security for the said loan, GTPL assigned all of its rights and benefits under the PN to the Plaintiff.

The 1st Defendant issued a letter dated 15-1-2018 that was addressed to whosoever may be interested in the said PN and stated as follows: -

10.1 The redemption of the PN requires the holder of the said instrument to send the original note to the 1st Defendant seven days before the maturity date specified on the PN.

10.2 The registered address of the 1st Defendant is Bishopgate Capital Limited, Brumby Centre, Lot 42, Jalan Muhibbah, 8700 Labuan, FT Malaysia.

10.3 The Note holder shall confirm in writing that they are and will remain to be the Note holder on the maturity date and request payment.

10.4 Payment shall be made immediately after the maturity date of the Note into the bank account notified by the holder.

GTPL had applied for financial assistance from the Plaintiff via an application dated 9-10-2017. This was approved by the Plaintiff as seen in the letter to GTPL dated 23-11-2017. A short-term loan of the amount to the sum of USD 8.5 million was approved by the Plaintiff to GTPL as shown in the letters dated 23-11-2017, and 11-1-2018 and the Short-Term Loan Agreement dated 19- 1-2018.

The material terms of the Short-Term Loan Agreement are as follows: -

GTPL then issued a Notice of Assignment of the PN to the 1st Defendant dated 11-1-2018. The said notice was also endorsed by Calfin. The said Notice of Assignment was also accepted and acknowledged by the 1st Defendant. The said Notice of Assignment includes the benefit of the Credit Default Policy by the 2nd Defendant. The 1st Defendant had also issued a letter dated 10-4-2018 to the Plaintiff confirming the assignment of the PN. The said assignment was also endorsed to the said Insurance Policy by the 2nd Defendant via its endorsement bearing number 0003/2018 dated 12-1-2018 in favour of the Plaintiff.

The 2nd Defendant has then issued a letter dated 6-2-2018 to the Plaintiff stating the following: - “As per the insurance policy, in the event of a default on maturity date leading to a valid claim within terms and conditions under this Insurance policy and the claim notice given promptly to insurers with full supporting documents and evidence requested by us, we will settle the loss in no later than 30 calendar days of receipt of a written claim.”

I also note that the 1st Defendant did issue a letter to GTPL confirming that the insurance premiums payable for the insurance with the 2nd Defendant have been paid and discharged. GTPL also executed an Assignment of the PN in favor of the Plaintiff on 11-1-2018 and again on 4-4-2018.

The Plaintiff has also produced evidence that the said Short-Term Loan was fully drawn down at the request of GTPL sometime in April 2018. This can be seen in the letter dated 17-4-2018 issued by the Plaintiff to GTPL and the Statement of the Bank Accounts of the Plaintiff confirmed by HDFC Bank’s letter dated 10-10-

In the letter dated 17-4-2018, the Plaintiff confirms:-

GTPL did not comply with the terms of the Short-Term Loan. The Plaintiff issued a notice of default to GTPL via a letter dated 18-10-2018.

The Plaintiff had also notified the 1st Defendant of their intention to redeem the PN and that the Plaintiff shall remain the PN holder at the maturity date on 19- 11-2018. This can be seen in the letter dated 6-11-2018. Emails were also exchanged between the Plaintiff’s representative and Mr Yatin Trivedy on behalf of the 1st Defendant on the procedure for the redemption of the PM on 10-11-2018. The original copy of the PN was sent to the 1st Defendant as per the requirements of the said instrument.

The 1st Defendant did not pay the sums as required under the terms of the PN to the Plaintiff on 19-11-2018.

The Plaintiff then issued an email dated 20-11-2018 to Ian Lim of the 2nd Defendant and the reinsurers informing the counterpart of the following:-

(I) Early intimation that the Plaintiff intends to exercise its claim for the failure of the 1st Defendant to pay the sums due under the PN according to clauses 5.7, 5.8 and 5.10 of the Credit Default Risk Insurance Policy.

(ii) An original copy of the PN was lodged with the 1st Defendant under the process required by the 1st Defendant. Payment for the sums due under the PN was not paid by the 1st Defendant to the Plaintiff.

(iii) The Plaintiff lodges its claim with the 2nd Defendant for payment under the Insured Note.

A letter dated 22-11-2018 was also issued by the Plaintiff to the 2nd Defendant lodging its claim for payment under the said Insured Note for failure of the 1st Defendant to pay the sums due under the PN. Copies of the following documents were also attached to the said letter:-

(I) Copy of the Plaintiff’s letter dated 10-11-2018 issued to the 1st Defendant.

Copy of the 1st Defendant’s letter dated 15-1-2018

Copy of the Proof of Delivery of the said letters

Plaintiff’s email to the 2nd Defendant dated 20-11-2018

(V) Copy of the Statement of Accounts of the sums due to the Plaintiff

Copy of the Endorsement 0002/2017 dated 26-12-2017

The 2nd Defendant acknowledged receipt of the letters dated 20-11-2018 and 22-11-2018 from the Plaintiff as seen in its response dated 28-11-2018. In the same letter, the 2nd Defendant stated:-

(I) the statement of account showing the outstanding loans by GTPL has been provided but the transaction documents showing the default status have not been provided.

That the 2nd Defendant will be investigating the claim with the 1st Defendant and request for all information and transaction documents leading to the default by GTPL necessitating the invocation of the PN.

The Plaintiff had informed the 2nd Defendant earlier via letter dated 14-2-2018 that the PN was given as a security for the loan extended to GTPL which if it fails to pay, the Plaintiff will invoke the PN for repayments for the facility provided to GTPL.

The Plaintiff issued its response to the 1st Defendant via letter dated 29-11-

In its letter, the Plaintiff stated: -

(I) That the Plaintiff had sanctioned and disbursed a Short-Term Loan of USD 8.5 million to GTPL.

A Short-Term Loan Agreement was executed between GTPL and the Plaintiff dated 19-1-2018.

Events of default have since arisen due to the non-compliance by GTPL. A letter of demand was issued on 18-10-2018 to GTPL.

The Plaintiff had also issued the required notices to the 1st Defendant to redeem the PN as seen in the letters dated 6-11-2018 and 10-11-2018.

(V) That the Plaintiff has since issued its claim to the 2nd Defendant via letter 22- 11-2018.

A statement of accounts was also attached to the said letter notifying the amounts that are due by GTPL for the said Short-term loan. A similar letter was also issued by the Plaintiff to the 2nd Defendant dated 2-1-

2019.

I also note that copies of the relevant letters and agreements were also forwarded to the 2nd Defendant.

The 2nd Defendant issued its response to the Plaintiff denying liability for the said insurance in its letter dated 17-1-2019. In the said letter, the 2nd Defendant states:-

25.1 That the insurance policy was cancelled by the 2nd Defendant due to the failure of the 1st Defendant to pay the sum of USD 5,250,000.00. The 2nd Defendant claims that the said sums were due as per the Tax Invoice dated 19-6-2018 issued by it to the 1st Defendant and that this sum must be paid as per the “subjectivities” heading of the policy and that the due date is on 26-6-2018. As the 1st Defendant failed to pay the said sums, the said policy is therefore allegedly null and void.

25.2 That the policy is null and void due to the fraud committed by one of the ex-directors of the 1st Defendant under the clause entitled “warranty in event of fraud” contained in the said policy.

25.3 As this is a protracted default claim, a judgment of a Court of competent jurisdiction is required before the sums are payable. There is no judgment obtained against GTPL and the 1st Defendant. 23 25.4 The PN was provided as a security for the short-term loan granted to GTPL. This has materially altered the terms and conditions of the PN without the prior written consent of the 2nd Defendant and under clause 3.2 the policy is no longer valid.

25.5 The terms and conditions of the policy were not fully complied with and therefore the 2nd Defendant is not liable to the Plaintiff.

This Court also notes the contents of the letter issued by the 2nd Defendant to the Plaintiff dated 7-2-2019 which states: “We will continue to monitor this matter closely with regards to the recovery action… To seek closure on this matter, we will use our best endeavours directly or indirectly through FBI US and Malaysian police to assist (the 1st Defendant) so that they can monetise or liquidate their assets to meet their liabilities under their PN”

The above was responded to by the Plaintiff in its letter dated 8-2-2019.

The Plaintiff claims that on or about 11-2-2019, the 2nd Defendant had approached the Plaintiff to negotiate a settlement in respect of the claim. The Plaintiff suggests that the said settlement agreement is not only with the 1st Defendant but also includes the 2nd Defendant. The Plaintiff refers to the contents of the settlement agreement as well as the emails exchanged between parties.

The Plaintiff contends that the said discussions were undertaken between its representative and the representative of the 2nd Defendant. The 2nd Defendant denies that it was privy to such discussions and states that it had only acted as a mediator on behalf of the 1st Defendant.

An Amicable Settlement Agreement dated 22-3-2019 was executed by the Plaintiff. The Plaintiff claims that the Amicable Settlement was executed with the 1st and 2nd Defendant. Whereas the 2nd Defendant claims that it was only acting as mediator and intermediary for the 1st Defendant. The 1st Defendant had only paid the first tranche of the settlement amount and the remaining sums were not paid by the 1st Defendant.

This Court notes that the said Settlement Agreement was executed by representatives of the Plaintiff and the 2nd Defendant. The representatives of the 25 1st Defendant did not execute the said instrument. This Court also refers to the emails exchanged and the Plaintiff’s letter dated 12-2-2019. Material terms of the Settlement are as follows: -

1% of the settlement sum – Rupee 6, 250,000.00 to be paid before 31- 3-2019.

99% of the settlement sum – Rupee 618, 750,0000.00 on or before 31 May 2019.

It is important that this Court note what was said by Ian Lim Teck Soon on behalf of the 2nd Defendant in the email dated 11-2-2019:- “On behalf of Bishopgate, Archipelago is mediating an amicable settlement of a friendly basis of Bishopgate. Bishopgate is proposing this settlement in best endeavours to meet the obligations of their PN to IFCI and Archipelago where our mutual interests are alligned. It encompasses the following:-

(A) In Bishopgate’s proposal for a friendly settlement that will include IFCI and Archipelago to meet their obligations and this is on a Tri-Partite basis of Bishopgate. …” The said proposal was issued by Ian Lim Teck Soon from the 2nd Defendant.

Parties subsequently met on 9-9-2019 at the Plaintiff’s premises in India. The representatives of the 2nd Defendant, Calfin, GTPL and the Plaintiff attended. After deliberating on the issues presented at the meeting parties agreed:-

(I) The 1st Defendant shall make necessary arrangements to earmark USD

5.25 million to the Plaintiff before 30-9-2019. This commitment must be put in writing by 13-9-2019.

The 1st Defendant shall submit a proposal to the Plaintiff as to the payment of the amount due to the Plaintiff. This must be undertaken after the sum of USD 5.25 million is identified and earmarked as per item (I).

The 1st Defendant requested that they be permitted to deduct an amount of about 5% from USD 5.25 million towards legal expenses.

The 1st Defendant requested the issuance of letters from the Plaintiff to GTPL to enable the company to undertake its business plans. This is subject to the payment of USD 5.25 million to the Plaintiff.

(V) That the above arrangements are subject to approvals to be obtained internally by the Plaintiff.

The 1st Defendant again did not attend the said meeting. As said earlier, only the representatives of the 2nd Defendant, Calfin and GTPL attended.

The 1st Defendant did not comply with any of the items stated in the said proposals identified earlier.

The Plaintiff had issued a letter to the 2nd Defendant dated 25-2-2019 seeking payment of the Settlement sum as agreed. This was followed up with the subsequent letters dated 28-2-2019, 22-3-2019, 11-7-2019, 3-6-2019, 15-5-2019, 9-8-2019, 20-8-2019, 14-10-2019, 22-10-2019, 29-10-2019 and 15-11-2019 as well as the email dated 13-9-2019. The balance of the settlement sums due on 31-5-2019 was not paid by the Defendants. GTPL confirmed via letter dated 5-11- 2019 stating that it did not have the funds to pay the short-term loan.

The 2nd Defendant replied via letter dated 21-11-2019 that it was not liable for the settlement sum as it was not party to the said agreement and that it only acted as an intermediary or mediator on behalf of the 1st Defendant.

The Plaintiff then issued a demand through its solicitors, Messrs Skrine, to the 1st Defendant and the 2nd Defendant as seen in the letters both dated 12-12-

C. Pleaded Case of the Litigants

The Plaintiff's claims against the Defendants are as follows: -

39.1 As against the 1st Defendant, the sum of INR 618, 750,000.00 is the balance Settlement Sum due and owing under the Settlement Agreement.

39.2 As against the 2nd Defendant, the sum of INR 572, 457, 085.00 is the Insurance Claim due and owing under the AIL Policy. 29 39.3 In the alternative against the 2nd Defendant, the sum of INR 618, 750,000.00 is the balance Settlement Sum due and owing under the Settlement Agreement. D. Defences pleaded by the Defendants 1st Defendant’s Defence

The claim against the 1st Defendant should be heard only by the Courts of England and Wales and not by the Malaysian Courts.

The 1st Defendant had relied on the representations made by Calfin when it issued the PN and the Promissory Note Transaction Agreement dated 28-2-2018. Calfin agreed to purchase all of the PN issued by the 1st Defendant with an aggregate value of USD 290 million. As Calfin has failed to comply with the said representations the 1st Defendant reserves its right to institute a claim against Calfin.

The Plaintiff is only entitled to present the PN if GTPL committed a breach of its obligations under the terms of the Short-Term Loan Agreement. There is no alleged breach by GTPL.

The said Short Term Loan Agreement was allegedly entered into by the Plaintiff and GTPL under fraudulent circumstances. The 1st Defendant claims that the loan was undertaken under suspicious circumstances and as a result, a First Information Report was filed with the Indian Central Investigation Bureau and a report submitted with the Indian Central Vigilance Commission.

The 1st Defendant suggests that the loan was undertaken under suspicious circumstances as GTPL, which only had a minimal paid-up capital of USD 2,

657.00 could be provided with a loan of USD 8.5 million secured by the PN issued by the 1st Defendant.

The 1st Defendant also claims that the senior officers of the Plaintiff had exerted undue pressure, procuring, recommending and sanctioning the Short-Term Loan despite GTPL being ineligible for the said loan and lack of collateral.

The 1st Defendant also claims that the pre-conditions of the Short-Term Loan were not complied with by GTPL. This includes failure to obtain permissions and approvals from the Reserve Bank of India for the issuance and endorsements of the PN as well as payment thereunder by the 1st Defendant. This also extends to the endorsements and insurance coverage by the 2nd Defendant under the said policy.

The 1st Defendant was allegedly not notified of the default or breach by GTPL. No evidence of such breach by GTPL was provided to the 1st Defendant or its solicitors.

The 1st Defendant did acknowledge the assignment of the PN to the Plaintiff but the right to redeem the PN is only as good as GTPL’s rights and interest in the same.

The previous director of the 1st Defendant, Mehamood Hosein had committed fraud against the company and wrongfully appropriated the sum of USD 5.8 million. This is the subject matter of the KL High Court Civil Suit No: WA- 22NCVC-514-08/2018 by the 1st Defendant against the said Mehamood Hosein. Police reports have also been lodged against the said director.

This misappropriation of the sums by Mehamood Hosein had caused the 1st Defendant's inability to comply with the terms of the insurance policy.

The 1st Defendant admits that the parties did enter into the Settlement Agreement dated 22-3-2019. The 2nd Defendant, however, only acted as its agent or intermediary to assist and mediate the resolution of the dispute with the Plaintiff.

The said Settlement Agreement was subsequently superseded by the new settlement dated 9-9-2019. The 1st Defendant claims parties had agreed to the terms of the new settlement agreement and it had paid the sum of INR 6, 250,000 on or about 3-1-2020 based on the new settlement agreement dated 9-9-2019. 2nd Defendant’s Defence

The 2nd Defendant claims that the Plaintiff’s action ought to be stayed and referred to arbitration as the parties had agreed that this matter should be arbitrated.

The 2nd Defendant suggests that the time frame to institute the claim is limited to 6 months from the date of the rejection of the claim and that the arbitration claim should be commenced within the said time frame.

55.

The 2nd Defendant states: - 1 no post-maturity interest, penalty interest and or penalty fee for late payment are insured by the AIL policy.

55.2 the AIL policy requires full compliance and fulfillment of the terms and conditions/endorsements of the said policy.

55.3 the AIL policy is subject to a pre-condition that the 1st Defendant provides a cash collateral of USD 5.25 million to the 2nd Defendant.

55.4 any fraud, misstatement or concealment in respect of the insurance coverage under the AIL policy or in respect of any claim made under the AIL policy renders it to be null and void. 34 55.5 the benefits under the AIL policy shall be voidable at the option of the 2nd Defendant since there is fraud and failure to comply with the terms and conditions of the AIL policy.

The 2nd Defendant need not pay the sums claimed by the Plaintiff under the terms of the AIL policy as seen in the 2nd Defendant’s letter dated 17-1-2019. The AIL policy has been validly repudiated and declined by the 2nd Defendant. All conditions required under the terms of the AIL policy was not complied with and as such the 2nd Defendant is not liable to make payment.

The 2nd Defendant also claims that the AIL policy has been cancelled and is validly voided by it due to the non-compliance of the terms by the 1st Defendant and the alleged fraud. The said policy was cancelled for the following reasons: -

57.1 Mr Vinod Menon, representing Calfin, agreed to provide the 1st Defendant with a personal cheque in favour of Mr Samer Moien Yousef Hammad for AED 19, 267, 500.00 (USD 5.25 million).

57.2 The Security Cheque dated 3-1-2018 was held by the 2nd Defendant as custodian.

57.3 The said cheque was allegedly sent to Samer on 30-3-2018.

57.4 The sums to be received as security of USD 5.25 million were supposed to have been banked into the account of the 1st Defendant and eventually paid to the 2nd Defendant as security for the AIL policy.

57.5 However the said sums were paid into the account of Boston Asia Capital LLC (BAC), a company owned by Mehamood Hosein. He was a former director of the 1st Defendant and should have been held in trust. Unfortunately, the said sums were not paid to the 1st Defendant or the 2nd Defendant.

57.6 The said sums were wrongfully retained by Mehamood Hosein or BAC and were not paid to the 2nd Defendant. Police reports have since been lodged with the relevant authorities. As stated by the 1st Defendant, a civil claim has also been filed. This constitutes fraud and renders the AIL Policy void. 36 57.7 The 2nd Defendant also claims that the loans disbursed to GTPL were made under suspicious circumstances and were undertaken fraudulently. The 2nd Defendant has no direct or personal knowledge as to whether GTPL is in default of the Loan.

The AIL Policy is not binding on the 2nd Defendant and is void due to non-compliance with the terms and conditions of the said policy. The 2nd Defendant has since terminated or cancelled the said AIL Policy.

Any claim under the policy must be undertaken by way of arbitration within 6 months of any rejection by the 2nd Defendant. Failure to commence arbitration will discharge the 2nd Defendant for any liability for any claims filed.

The Settlement Agreement dated 22-3-2019 is not applicable against the 2nd Defendant as it is not privy to the said agreement.

Furthermore, the said Settlement Agreement was superseded by the subsequent agreement dated 9-9-2019.

The following witnesses were produced by the Plaintiff and the Defendants:- Plaintiff’s witnesses

Sapna Jain

(ii) Santhi Chilumuri Defendants’ witnesses 1st Defendant-Yatin Anantrai Trivedy 2nd Defendant-Ian Lim Teck Soon

This case was heard partly by my predecessor, Justice Liza Chan. I have taken time to read the notes of the proceedings of the trial heard on 12-7-2023, 13-7-2023, 3-10-2023, 4-10-2023 and 12-10-2023. Those were the dates when the evidence was recorded before Justice Liza Chan. The remainder of the trial was heard by me. F. Issues to be Determined by this Court

I find that the following are the issues that must be determined by this Court:-

Issue of Jurisdiction whether the claim should have been brought by way of arbitration or in a different proceeding before foreign Courts as claimed in the Defendants’ defence?

Whether the Plaintiff provided a Short-Term Loan to GTPL?

Whether the conditions stipulated under the terms of the Short-Term Loan were complied with and whether this had any impact on the validity of the Short-Term Loan and the liability of the Defendants?

Whether the said Short-Term Loan was disbursed by the Plaintiff to

Whether the time allowed for the institution of the claim for the rejection by the 2nd Defendant has passed and whether the said requirement as provided in the AIL policy is void according to section 29 of the Contracts Act as interpreted by the Court of Appeal in Dancom Telecommunication (M) Sdn Bhd v Uniasia General Insurance Bhd [2008] 5 CLJ 551?

Whether the PN issued by the 1st Defendant was validly assigned to the Plaintiff?

Whether the benefit of the AIL Policy was validly assigned to the Plaintiff?

Whether the 2nd Defendant did endorse the AIL Policy in favour of the Plaintiff?

What are the conditions that must be complied with before the 1st Defendant is required to pay the sums claimed under the PN?

What are the conditions that must be complied with before the 2nd Defendant is required to pay the sums as claimed by the Plaintiff?

Whether the said AIL policy has been terminated/cancelled or declared to be void either under the terms of the said policy or by the decision of the 2nd Defendant?

Whether there is any evidence of fraud or bribery against any of the officers of the Plaintiff that caused the disbursements of the loan to GTPL?

If so, did the said fraud or bribery render the AIL policy invalid?

Whether the internal dispute between the shareholders and former directors of the 1st Defendant renders the PN unenforceable?

Whether there was any material change to the PN that caused the AIL policy to be no longer applicable?

Whether the Settlement Agreement dated 23-3-2019 is valid against the 1st Defendant or overtaken by the alleged new terms as contained in the notes of the meeting held on 9-9-2019?

Whether the 2nd Defendant is privy to the said Settlement Agreement dated 23-3-2019?

Whether the Defences raised by the Defendants concerning the Short-Term Loan are mere red herrings?

What are the obligations of the Defendants? G. Decision of this Court – Reasoning Summary

After considering the notes of proceedings, the evidence tendered by parties and the submissions filed, I find that the Plaintiff has proven its claim against the Defendants and they must be required to pay the sums claimed by the Plaintiff.

I find that the Plaintiff has shown that the 1st Defendant is liable for the sums that are due based on what has been agreed upon in the said PN. The 1st Defendant has failed to prove that it is not liable to the Plaintiff for the sums claimed and that the said PN must be complied with by the said 1st Defendant.

I also find that the 2nd Defendant is also liable for the sums claimed by the Plaintiff. I find that the Plaintiff has proven its claim against the 2nd Defendant and that the issues raised as their defence to the claim are without merit. The same applied to the defences raised by the 1st Defendant. My detailed reasons are contained in the following paragraphs. Issue 1 – Jurisdiction - Issue of Jurisdiction whether the claim should have been brought by way of arbitration or in a different proceeding as claimed in the Defendants defence?

On this issue, firstly I agree that the terms of the PN does state the following:- “3. This Agreement shall be construed in accordance with the Laws of Massachusetts, Boston, USA and any dispute arising out of or in connection with this Agreement shall be resolved amicably, however, should the parties fail to resolve such dispute, it shall be finally referred to the Courts of Massachusetts, Boston, USA…”

There is also an agreement to have any dispute that arises as a result of any claims relating to the Insurance Policy to be referred to arbitration. I reproduce the relevant clause that appears in the AIL policy cover:- “Any dispute, controversy or claim arising out of or in relation out of or relating to the breach, termination or invalidity thereof shall be settled by arbitration in accordance with the Rules of Arbitration of the Kuala Lumpur Regional Center for

Normally, if the parties had sought these proceedings to be stayed according to an application filed under Section 10 of the Arbitration Act or based on the issue of Forum Conveniens, this Court may more than likely have agreed to the said application.

However, the Defendants chose not to contest the jurisdiction of this Court and did enter appearance unconditionally and did file their defences against the Plaintiff’s claim.

In this case, it is clear to this Court that this Court has jurisdiction to hear and determine the dispute between the litigants. Section 23 of the Courts of Judicature Act states:- “(1) Subject to the limitations contained in Article 128 of the Constitution the High Court shall have jurisdiction to try all civil proceedings where -

the cause of action arose;

the defendant or one of several defendants resides or has his place of business;

the facts on which the proceedings are based exist or are alleged to have occurred; or

any land the ownership of which is disputed is situated, within the local jurisdiction of the Court and notwithstanding anything contained in this section in any case where all parties consent in writing within the local jurisdiction of the other High Court.

Without prejudice to the generality of subsection (1), the High Court shall have such jurisdiction as was vested in it immediately prior to Malaysia Day and such other jurisdiction as may be vested in it by any written law in force within its local jurisdiction.”

The Second Defendant is a company registered in Malaysia, in particular Labuan and has a place of business in Kuala Lumpur. Therefore, the High Court of Malaya has jurisdiction to hear the dispute. The mere fact that the 1st Defendant is a foreign company does not mean that this Court does not have jurisdiction to hear this claim. See American Express Bank Ltd v Mohamad Toufic Al-Ozeir & Anor [1995] 1 CLJ 273.

I also find that the Defendants have also failed to apply Order 12 rule 10 of the Rules of Court to challenge the jurisdiction of this Court or even apply to stay these proceedings in favour of arbitration as provided under Section 10 of the Arbitration Act. As I have found earlier, the said Defendants have chosen to accept the jurisdiction of this Court by filing their defences and by actively participating in these proceedings. Having failed to take the required steps, the Defendants cannot now challenge the jurisdiction of this Court. I refer to Order 12 rule 10 (2) and rule 10 (3) of the Rules of Court and Press Metal Sarawak Sdn Bhd v Etiqa Takaful Bhd [2016] MLJU 404.

I therefore reject the said defences raised by the Defendants and find that the said Defendants are now estopped from challenging the jurisdiction of this Court. It is too late in the day and they have actively participated in the proceedings before this Court for them to now claim that these claims should have been determined either in the United States or by way of arbitration. Issue 2 - Whether the Plaintiff had provided a Short-Term Loan to GTPL? Issue 3 - Whether the conditions stipulated under the terms of the Short-Term Loan were complied with and whether this had any impact on the validity of the Short-Term Loan and the liability of the Defendants? Issue 4 - Was the said Short-Term Loan was disbursed by the Plaintiff to

For ease of convenience, the above 3 issues shall be dealt with collectively as they overlap.

The evidence produced by the Plaintiff through its witnesses shows that the Short-Term Loan was provided by the Plaintiff to GTPL and has since been disbursed. This can be seen in the Statement of Account produced by the Plaintiff and this is subsequently accepted by the witnesses for the 1st and 2nd Defendants.

On the issue of the condition precedent that is required under the terms of the Short-Term Loan to GTPL, I find that the non-compliance of any such requirement does not have any impact on the obligations of the 1st and 2nd Defendants under the terms of PN and the AIL policy.

Firstly, the obligation by the 1st Defendant to pay the PN is not dependent on the loan granted to GTPL by the Plaintiff. The 1st Defendant’s obligation is dependent on whether the terms of the PN were complied with. I reproduce the relevant parts of the PN:- “WE (the 1st Defendant) confirm that the Promissory Note represents our unconditional and irrevocable undertaking to pay to yourselves (or any other bona fide holder of the PN), in cleared United States Dollars, all interest due in arrears on the agreed annual interest payment date, and to pay the principal amount due on the Maturity Date, without any set-off or counterclaim and free and clear of any deductions or taxes imposed, levied, collected, withheld by the government or any jurisdiction or any political subdivision or authority thereof or therein. Such Payment shall be made on Maturity Date upon presentation for payment of the PN at the registered office address of the issuer. … The rights in this side-letter are freely assignable to any endorsee of the PN. We herewith undertake to acknowledge any such assignee in writing without due delay and free of any costs for the respective assignee or yourselves.”

Therefore, once the original copy of the PN is served on the 1st Defendant and the term of the PN fully matures, the 1st Defendant is contractually required to pay the sums that have been promised to be paid to the holder of the said instrument.

I must note that in this case, although the PN is subject to the laws of Massachusetts, Boston, USA, the litigants, in particular counsels for the Defendants have failed to prove what would be the legal position of the said PN under the said chosen law. Under such circumstances, it is a legal presumption that where the contents of foreign laws are not proved or not sufficiently proved, the foreign law is presumed identical or similar to Malaysian law/lex fori. See N.V. De Bataafsche Petroleum Maatschappij and Ors v. The War damage Commission [1956] 1 LNS 72; [1956] MLJ 155. Therefore, I will apply the said presumption due to the failure to produce any expert opinion pursuant to section 45 of the Evidence Act by the litigants in this case.

I find a Promissory Note is essentially a Bill of Exchange as defined under Section 3 of the Malaysian Bills of Exchange Act 1949. I reproduce section 3 of the said Act: - “(1) A bill of exchange is an unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to, or to the order of, a specified person, or to bearer.

An instrument which does not comply with these conditions, or which orders any act to be done in addition to the payment of money, is not a bill of exchange.

An order to pay out of a particular fund is not unconditional within the meaning of this section; but an unqualified order to pay, coupled with (a) an indication of a particular fund out of which the drawee is to reimburse himself or a particular account to be debited with the amount, or (b) a statement of the transaction which gives rise to the bill, is unconditional.”

I also refer to the decision of Abdul Malik Ishak J in Leong Yew Chin v Hock Hua Bank Bhd [2008] CLJU 94: - "WHAT ARE BILLS OF EXCHANGE? [21] They are instruments by means of which a series of debts may be discharged without the use of transactions conducted domestically and in international trade. [22] A cheque, for instance, can be said to be a special form of a bill of exchange which is drawn on a banker payable on demand and is normally intended for the immediate discharge of a single debt. Whereas a promissory note is a continuing security for a debt. Both bills of exchange and cheques are orders to pay. Promissory notes, on the other hand, are promises to pay. [23] Thus, bills of exchange, cheques and promissory notes are forms of negotiable instruments that has acquired some measure of popular usage. Over the years, new instruments appear at the scene and they too possess the characteristics of negotiable instruments. Three common characteristics are found in negotiable instruments be they bills of exchange, cheques or other forms of negotiable securities:

that the instrument is freely transferable;

that the transferee of a negotiable instrument is entitled to sue on the instrument, as a matter of course, in his own name; and

that if the instrument comes into the hand of a bona fide transferee for value, then the transferee is said to have a better title than that of the transferor. [24] The English law constitutes part of the common law. In England, the law concerning bills of exchange, cheques and promissory notes has been codified and it is now embodied in the Bills of Exchange Act 1882. Our Malaysian Bills of Exchange Act 1949 is in pari materia with the English Bills of Exchange Act 1882. Even the English Cheques Act 1957 are incorporated into our Malaysian Bills of Exchange Act 1949. A good example would be this. That ss. 1 to 4 of the English Cheques Act 1957 are to be found in ss. 82 to 85 of the Malaysian Bills of Exchange Act 1949. section 101(2) of the Malaysian Bills of Exchange Act 1949 preserves the continued applicability of the English common law. It must be borne in mind that the English mercantile law constitutes part and parcel of the English common law and that too has been preserved in our Malaysian Bills of Exchange Act 1949. [25] No precise form of words is essential to the validity of a bill of exchange. Thus, the order to pay need not be in any particular form. Any expression amounting to an order (Morice v. Lee [1725] 8 Mod 262) or direction is sufficient. It is not necessary to use the word 'pay' because any synonymous or equivalent expression like 'credit in cash' would suffice. In Ellison v. Collingridge [1850] 9 CB 570, the phrase, 'I promise to pay or cause to be paid' is said to be a good note. It is said to be an alternative expression importing the same thing (Lovell v. Hill [1833] 6 C & P 238). The person who gives the order to pay and who signs the bill of exchange is called the 'drawer' while the person to whom the bill of exchange is addressed is called the 'drawee'. The person named in the instrument to whom or to whose order the payment is made to is known as the 'payee'."

The argument put forth by both Defendants and their issue pertaining to the validity of the loan and whether there was such a loan with GTPL by the Plaintiff arises, in my opinion, on the wrong understanding of the law. I believe that both the 1st and 2nd Defendants’ solicitors believe that there is a need for a valid consideration to move from the Plaintiff to either the 1st Defendant or to GTPL before the said PN is enforceable by the Plaintiff.

This is a mistaken belief as to the applicable law when dealing with a Bill of Exchange such as a Promissory Note. I refer to Kum Hui Bing v Premium Plaza Sdn Bhd [2018] CLJU 1027 where Badariah Sahamid JCA held: - “…..Thus, a cheque has certain unique characteristics that is distinctive of a bill of exchange. In this respect there are certain exceptions to the common law requirements of contract that is statutorily provided by the Bills of Exchange Act,

In particular, while common law requires that consideration must move from the promisee, there is no such requirement in a valid bill of exchange. [24] This exception to the general rule finds expression in section 27(2) of the Act. Section 27(2) provides that, "where value has at any time been given for a bill the holder is deemed to be a holder for value as regards the acceptor and all parties to the bill who become parties prior to such time ". This means that the consideration in a bill of exchange need not be furnished by the 1st Defendant in the instant case. A person can become a holder for value although he has not given "consideration" as understood in the general law of contract. [25] It is clear therefore that the holder for value must in the first place be a holder. But he himself need not have given value, because the phrase "at any time" clearly suggests that someone before him may have given value. [26] In the case of Diamond v. Graham [1968] 2 AER 909, the English Court of Appeal had occasion to interpret section 27(2) of the English Bills of Exchange Act, 1882 (which is in pari materia with our section 27(2) of the Act ) in the following terms: "There was nothing in s. 27(2) of the Bills of Exchange Act, 1882, which required the value for the bill should have been given directly to the holder (in this case by D), as long as value had been given for the cheque, consideration had been given by D to H for the bill, as a result of which D acquired possession of the bill and thus became "holder" of it within s. 2 of the Act." [27] In addition, section 30(1) of the Act provides that, "every party whose signature appears on a bill is prima facie deemed to have become a party thereto for value ". Thus the 1st Defendant whose signature appears on the cheque as a drawer is prima facie deemed to have become a party thereto for value. [28] In the case of Ong Guan Hua v. Chong [1963] 29 MLJ 6, the Court of Appeal had distinguished the position in a bill of exchange from a contract in the following terms: "In an action based on a contract it is for the Plaintiff to prove consideration, in an action on a negotiable instrument consideration is presumed and it is for the maker of the endorser of the instrument if he wishes to defend the action to prove that there was no consideration. Where at any stage of its history there has been some consideration for a bill and there is no question of illegality of consideration then it can be sued on and if the original drawer is sued it is for him to prove that at no time has there been consideration." [29] Thus it is clear that the common law principles that apply to a contract do not apply to a cheque as a bill of exchange. The Act had expressly provided for "deeming "provisions in respect of the requirement of consideration in a cheque. [30] The 1st Defendant had submitted that the cheque issued by the 1st Defendant to the Plaintiff is for a third party's (the 2nd Defendant) debt or liability and not the debt or liability of the 1st Plaintiff, thus there was no valuable consideration pursuant to section 27(1)(b) of the Act. [31]Section 27(1) of the Act provides as follows: "Valuable consideration for a bill may be constituted by-

any consideration sufficient to support a simple contract;

an antecedent debt or liability. Such a debt or liability is deemed valuable consideration whether the bill is payable on demand or at a future time". [32] There is no express requirement that the antecedent debt of liability must necessarily be that of the drawer. It could alternatively be a debt or liability of a third party provided, "there is some relationship between the receipt of the bill and the antecedent debt or liability." In the case of Oliver v. Davis and Woodcock [1949] 2 KB 727, the plaintiff had lent 350 pounds to Davis, who gave him a post-dated cheque for 400 pounds. Davis was unable to meet the cheque, and he persuaded Miss Woodcock to send the plaintiff her cheque for 400 pounds. Before the cheque was presented for payment Miss Woodcock stopped the cheque. The plaintiff took action against Miss Woodcock on the dishonoured cheque. The primary issue that arose was whether there was consideration for the cheque. [33] The English Court of Appeal had interpreted section 27(1) of the Act. Sir Evershed M.R. said at p. 735: "I think for myself, that the proper construction of the words in para (b), "an antecedent debt or liability" is that they refer to an antecedent debt or liability of the promisor or drawer of the bill and are intended to get over what would otherwise have been prima facie the result at common law by which the giving of a cheque for an amount for which the drawer was already indebted imported no consideration since the obligation was past... It is at any rate plain that if the antecedent debt or liability of a third party is to be relied on as supplying" valuable consideration" for a bill, there must at least be some relationship between the receipt of the bill and the antecedent debt or liability."

I also refer to Amdac (M) Sdn Bhd v Kilat Kaca Sdn Bhd [2019] CLJU 729 where Ahmad Fairuz Zainol Abidin JC (as he then was) held: - “[57] The Note is an unconditional promise in writing made by one person to another signed by the maker, engaging to pay, on demand or at a fixed or determinable future time, a sum certain in money, to, or to the order of, a specified person or to bearer. (See section 88 of Act 204 ). [58] In Leong Yew Chin v. Hock Hua Bank Bhd [2008] 8 CLJ 790; [2008] 3 MLJ 340 Abdul Malik Ishak explained promissory notes as follows: "WHAT ARE BILLS OF EXCHANGE? [21] They are instruments by means of which a series of debts may be discharged without the use of transactions conducted domestically and in international trade. [22] A cheque, for instance, can be said to be a special form of a bill of exchange which is drawn on a banker payable on demand and is normally intended for the immediate discharge of a single debt. Whereas a promissory note is a continuing security for a debt. Both bills of exchange and cheques are orders to pay. Promissory notes, on the other hand, are promises to pay. [23] Thus, bills of exchange, cheques and promissory notes are forms of negotiable instruments that has acquired some measure of popular usage. Over the years, new instruments appear at the scene and they too possess the characteristics of negotiable instruments. Three common characteristics are found in negotiable instruments be they bills of exchange, cheques or other forms of negotiable securities:

that the instrument is freely transferable;

that the transferee of a negotiable instrument is entitled to sue on the instrument, as a matter of course, in his own name; and

that if the instrument comes into the hand of a bona fide transferee for value, then the transferee is said to have a better title than that of the transferor. [24] The English law constitutes part of the common law. In England, the law concerning bills of exchange, cheques and promissory notes has been codified and it is now embodied in the Bills of Exchange Act 1882. Our Malaysian Bills of Exchange Act 1949 is in pari materia with the English Bills of Exchange Act 1882. Even the English Cheques Act 1957 are incorporated into our Malaysian Bills of Exchange Act 1949. A good example would be this. That ss. 1 to 4 of the English Cheques Act 1957 are to be found in ss. 82 to 85 of the Malaysian Bills of Exchange Act 1949. section 101(2) of the Malaysian Bills of Exchange Act 1949 preserves the continued applicability of the English common law. It must be borne in mind that the English mercantile law constitutes part and parcel of the English common law and that too has been preserved in our Malaysian Bills of Exchange Act 1949. [25] No precise form of words is essential to the validity of a bill of exchange. Thus, the order to pay need not be in any particular form. Any expression amounting to an order (Morice v. Lee [1725] 8 Mod 262) or direction is sufficient. It is not necessary to use the word 'pay' because any synonymous or equivalent expression like 'credit in cash' would suffice. In Ellison v. Collingridge [1850] 9 CB 570, the phrase, 'I promise to pay or cause to be paid' is said to be a good note. It is said to be an alternative expression importing the same thing (Lovell v. Hill [1833] 6 C & P 238). The person who gives the order to pay and who signs the bill of exchange is called the 'drawer' while the person to whom the bill of exchange is addressed is called the 'drawee'. The person named in the instrument to whom or to whose order the payment is made to is known as the 'payee'."

As such I find that the issue of the GTPL loan and whether it is disbursed is merely a red herring. The important issue is whether the terms of the PN were complied with and whether the sums as promised therein were paid by the Defendants.

Therefore, even if this Court were to entertain and accept the Defendant's contention that the loan was not disbursed or invalid, which is hereby rejected in toto, this does not in any way curtail the 1st Defendant’s obligation to pay the sums agreed to be paid based on what was agreed to in the Promissory Note. In this case, the Promissory Note came into existence based on the exchange of consideration between the 1st Defendant and the previous holders of the PN i.e. Calfin. As stated in the Promissory Note Transaction Agreement, Calfin did purchase the PN from BCGL who has subsequently assigned the rights thereto to GTPL. The purchase of the PN by Calfin was also stated to be undertaken at market rate.

It is also irrefutable that the said PN was assigned to the Plaintiff by GTPL and consented to by the 1st Defendant. This can be seen in the letter dated 11-1- 2018 by GTPL and the consent to the said assignment executed by Yatin Trivedy dated 11-1-2018. The same was again confirmed in the document dated 4-4-

2018.

Therefore, the Plaintiff, being the holder of value of the PN on the date of the maturity date, having complied with the requirements of the redemption of the said PN, is entitled to be paid the sums promised by the 1st Defendant. The validity of the loan granted by the Plaintiff to GTPL and whether the said loan was disbursed is of no relevance at this stage to the liability of the 1st Defendant to the sums that must be paid based on the terms of the PN.

Also refer to section 88, section 91, section 92 and section 93 of the Bills of Exchange Act which are provided herein: -

Section 88 of the Bills of Exchange Act

A promissory note is an unconditional promise in writing made by one person to another signed by the maker, engaging to pay, on demand or at a fixed or determinable future time, a sum certain in money, to, or to the order of, a specified person or to bearer.

An instrument in the form of a note payable to maker's order is not a note within the meaning of this section unless and until it is indorsed by the maker.

A note is not invalid by reason only that it contains also a pledge of collateral security with authority to sell or dispose thereof.

A note which is, or on the face of it purports to be, both made and payable within Malaysia is an inland note. Any other note is a foreign note.

(ii) Section 91 of the Bills of Exchange Act

Where a note payable on demand has been indorsed, it must be presented for payment within a reasonable time of the indorsement. If it be not so presented, the indorser is discharged.

In determining what is a reasonable time, regard shall be had to the nature of the instrument, the usage of trade, and the facts of the particular case.

Where a note payable on demand is negotiated, it is not deemed to be overdue, for the purpose of affecting the holder with defects of title of which he had no notice, by reason that it appears that a reasonable time for presenting it for payment has elapsed since its issue.

(iii) Section 92 of the Bills of Exchange Act

Where a promissory note is in the body of it made payable at a particular place, it must be presented for payment at that place in order to render the maker liable. In any other case, presentment for payment is not necessary in order to render the maker liable.

Presentment for payment is necessary in order to render the indorser of a note liable.

Where a note is in the body of it made payable at a particular place, presentment at that place is necessary in order to render an indorser liable; but when a place of payment is indicated by way of memorandum only, presentment at that place is sufficient to render the indorser liable, but a presentment to the maker elsewhere, if sufficient in other respects shall also suffice.

(iv) Section 93 of the Bills of Exchange Act The maker of a promissory note by making it-

engages that he will pay it according to its tenor,

is precluded from denying to a holder in due course the existence of the payee and his then capacity to indorse.

To further reinforce my findings, I also refer to the decision of Mohamed Zaini Mazlan J in Ravindran Sivasubramaniam v Ramesh Rajaratnam [2018] CLJU 850 where he held:- “[45] The personal loan agreement has fulfilled all the criteria of a promissory note as set out under S. 88(1) Bills of Exchange Act 1949, in that:-

it is an unconditional promise in writing

made by one person to another and signed by the person giving it, and

it requires the addressee to pay on demand, or at a fixed or determinable future time, a sum of certain money to a specified person.”

Even if I am wrong on the above, to err on the side of caution, I make the finding that the said Short-Term Loan was indeed disbursed by the Plaintiff to GTPL. The evidence produced by the Plaintiff, i.e. the statement of accounts, shows that the said sums were disbursed to GTPL and as security for the said loan the PN and all accompanying rights were assigned to the Plaintiff. This also includes the AIL policy issued by the 2nd Defendant.

On the issue of the failure to comply with the pre-conditions for the drawdown of the said loan, I find that the Plaintiff’s witnesses have explained that these conditions were waived by the bank. I refer to RHB Bank Bhd v Instant Achievement Sdn Bhd & Ors [2022] MLJU 3133 where it was held: - “[35] It is my considered view that in any event, any non-compliance of the condition precedent would not in any manner dispel the Defendants from the obligation to repay the monies disbursed under the Term Loans.”

When I consider the notes of evidence, substantial time was spent by Counsels for the Defendants in cross-examining the witnesses for the Plaintiff, in particular Sapna Jain. The 2nd Defendant’s Counsel attempted to paint a picture that the Plaintiff was allegedly lackadaisical and did not insist on the pre-conditions that were required before the GTPL loan was drawn down. Counsel emphasizes the alleged failure to comply with Schedule III of the Short-Term Loan Agreement. This includes among others the approvals from Reserve Bank of India, preparation of the D& B reports, the lack of sufficient funds in the Debt Service Reserve Account and the change of the applicable to the PN.

The witnesses for the Plaintiff explained that these were waived by the bank. This can be seen in the supplementary witness statement of Santhi Chilumuri. She explained that the Plaintiff is entitled to waive any of the said pre-conditions as contained in clause 1.2 of the Short-Term loan Agreement. The pre-disbursement conditions were rights vested in the Plaintiff. The Plaintiff has the right and the right to waive any conditions that it deems fit. Therefore, such issues would not affect the validity of the loan and does not absolve the Defendants of their obligations to the Plaintiff.

The Defendants have also failed to provide any evidence that any of these requirements are mandatory under Indian law. There was no expert produced by the Defendants to explain what the requirements of Indian law were and how the failure to comply with any of these conditions renders the said Loan agreement invalid. It is trite that this Court cannot take judicial notice of foreign law and such must be proved by way of expert opinion. Since the Defendants have failed to discharge this obligation, this Court is not in any position to find that the failure to comply with these pre-conditions renders the said Loan Agreement invalid under Indian law.

Therefore, the decision of the Federal Court in National Land Finance Co-operative Society Ltd v Sharidal Sdn Bhd [1983] 2 MLJ 211, Chase Perdana Bhd v Md Afendi bin Hamdan [2009] 6 MLJ 783 and the Privy Council in Surajmull Nargoremull v Triton Insurance Company Ltd [1924] LR 52 1A 126 do not apply to the facts at hand.

I also find that the said clauses relied on by the Defendants show that the said pre-conditions were required for the benefit of the Plaintiff and as shown in the earlier clause, they could be waived at the discretion of the bank. The alleged legislative requirements under Indian law for these pre-conditions were not proven by the Defendants and as such, the Plaintiff’s position that it is entitled to waive these requirements is tenable and valid. See Hawksley v Outram [1983] 3 Ch 359, Gange v Sullivan [1966] 116 CLR 418 and Grandbase Sdn Bhd v Pioneer Concrete Services (M) Sdn Bhd & Anor [2007] 3 MLJ 561.

Therefore, I find that the above issues must be decided in favor of the Plaintiff. The said Short-Term Loan was disbursed in accordance with the terms of the agreement. There is nothing unlawful that prevents the said Short-Term Loan from being binding on GTPL and any security provided thereunder from being enforceable. I further repeat that the pre-conditions concerning the drawdown of the Short-Term Loan have no bearing on the validity of the PN and the AIL policy as well as the liability of the Defendants. The PN was validly assigned to the Plaintiff. Issue 6 - Whether the PN issued by the 1st Defendant was validly assigned to the Plaintiff?

Section 4(3) of the Civil Law Act, 1956 is as follows: - "(3) Any absolute assignment, by writing, under the hand of the assignor, not purporting to be way of charge only, of any debt or other legal chose in action, of which express notice in writing has been given to the debtor, trustee or other person from whom the assignor would have been entitled to receive or claim the debt or chose in action, shall be, and be deemed to have been, effectual in law, subject to all equities which would have been entitled to priority over the right of the assignee under the law as it existed in the State before the coming into force of this Act, to pass and transfer the legal rights to the debt or chose in action, from the date of the notice, and all legal and other remedies for the same, and the power to give a good discharge for the same, without the concurrence of the assignor."

I refer to the decision of the Federal Court in UMW Industries (UMW) Sdn Bhd v Ah Fook [1996] 1 CLJ 379 where Chong Siew Fai FCJ held: - “We have considered s. 4(3) of the Civil Law Act, 1956 referred to by Counsel for both sides. The subsection lays down conditions for effecting absolute legal assignments. It is clear that the conditions are:

that the assignment must be in writing under the hand of the assignor;

that the assignment must be absolute and not by way of charge only; and

that express notice in writing must have been given to the person liable to the assignor under the assigned chose in action. If the assignment fulfills all the above conditions, it would transfer absolutely the chose in action and the right to sue upon it in the assignee's own name. As to the assignment in writing, no particular form is necessary but it must be absolute ie. one that purports to pass the entire interest of the assignor in the chose in action. Thus in Curran v. Newpark Cinemas Ltd. [1951] 1 AER 295 CA Jenkins LJ dealing with s. 136(l) of the Law of Property Act 1925 (English) the equivalent of which in our law is s. 4(3) of the Civil Law Act 1956, said: (Page 299 F-H) It is, no doubt, true that s. 136(l) does not require, any particular form of assignment, or that the notice given to the debtor should necessarily have been given by the assignee. The sub-section does, however, clearly postulate that, whatever its form, there should be a document amounting to an absolute assignment by writing under the hand of the assignor. Given such an assignment, and given the requisite notice to the debtor, the assignment (to put it shortly) is to operate as a legal assignment of the debt in question.”

I also refer to the decision of the Federal Court in Nouvau Mont Dor (M) Sdn Bhd v Faber Development Sdn Bhd [1985] 1 CLJ 56 where Seah FJ held: - “It is plain that in every case of this kind, all the terms of the instrument must be considered; and whatever may be the phraseology adopted in some particular part of it, if, on consideration of the whole instrument, it is clear that the intention was to give a charge only, then the action must be in the name of the assignor. While, on the other hand, if it is clear from the instrument as a whole that the intention was to pass all the rights of the assignor in the debt or chose in action to the assignee, then the case will come within section 25 and the action must be brought in the name of the assignee (Mathew LJ Hughes v. Pump House Hotel Co. Ltd. [1902] 2 KB 190). Having stated the preliminary and before we examine the terms of the document of assignment dated February 18, 1978 we would dispose of a short submission of learned counsel for the appellant. It was contended that since the assignment was entered into following the execution of a loan agreement between the appellant and the Public Bank, the said assignment should not be read in isolation but should be read in conjunction with the said loan agreement. With respect, we do not agree. In our judgment and it seems clear from the authorities above-mentioned, whether or not an assignment is an absolute one (not purporting to be by way of charge only) within the meaning of section 4(3) of the Civil Law Act 1956 is to be gathered only from the four corners of the instrument itself. (emphasis added)” Also, refer to the decision of the Court of Appeal in Residenmas Development Sdn Bhd v Y M Raja Halinuddin Raja Halid [2024] 7 CLJ 899.

Therefore, after considering the Notice of Assignment issued by GTPL to the 1st Defendant, I find that the Assignment of the rights to the PN was absolute and not merely by way of a charge only. The said Assignment was also consented to by the 1st Defendant. This can be seen in the Notice dated 11-1-2018 issued by GTPL and the consent by the 1st Defendant dated 11-1-2018 and 4-4-2018. The assignment was effective from 12-1-2018.

Based on the above, I find that the assignment of the PN was valid and absolute in favour of the Plaintiff. Issue 7 - Whether the benefit of the AIL Policy was validly assigned to the Plaintiff? Issue 8 - Whether the 2nd Defendant did endorse the AIL Policy in favor of the Plaintiff?

I also find that the notice issued by GTPL dated 11-1-2018 also included the benefit of the AIL policy issued by the 2nd Defendant under policy number AG1320170020 that was reinsured by General Insurance Corporation of India.

The Endorsement No. 003.2018 issued by the 2nd Defendant dated 12-1- 2018 also confirmed the said Assignment of rights to the policy and the 2nd Defendant agreed to endorse the Plaintiff as the Lender / Obligee to the said policy.

In other words, the 2nd Defendant consented to the said Assignment and agreed to endorse the Plaintiff to the benefit of the said AIL policy. Issue 9 - What are the conditions that must be complied with before the 1st Defendant is required to pay the sums claimed under the PN?

I dealt with this issue earlier. I reproduce the terms of the PN:- “WE (the 1st Defendant) confirm that the Promissory Note represents our unconditional and irrevocable undertaking to pay to yourselves (or any other bona fide holder of the PN), in cleared United States Dollars, all interest due in arrears on the agreed annual interest payment date, and to pay the principal amount due on the Maturity Date, without any set-off or counterclaim and free and clear of any deductions or taxes imposed, levied, collected, withheld by the government or any jurisdiction or any political subdivision or authority thereof or therein. Such Payment shall be made on Maturity Date upon presentation for payment of the PN at the registered office address of the issuer. … The rights in this side-letter are freely assignable to any endorsee of the PN. We herewith undertake to acknowledge any such assignee in writing without due delay and free of any costs for the respective assignee or yourselves.”

Based on the express terms of the PN, once the original copy of the PN is served on the 1st Defendant and the term of the PN fully matures, the 1st Defendant is contractually required to pay the sums that have been promised to be paid to the holder of the said instrument.

The above requirements were fully complied with by the Plaintiff as seen in the Notice dated 10-11-2018 issued to the 1st Defendant. This was not denied by the 1st Defendant’s witness and I find that the evidence before me shows that the Plaintiff did comply with the requirements for the said PN to be enforceable against the 1st Defendant. Issue 10 - Whether the time allowed for the institution of the claim for the rejection by the 2nd Defendant has passed and whether the said requirement as provided in the AIL policy is void pursuant to section 29 of the Contracts Act as interpreted by the Court of Appeal in Dancom Telecommunication (M) Sdn Bhd v Uniasia General Insurance Bhd [2008] 5 CLJ 551?

Before I deal with the other issues concerning the AIL policy and the other defences raised by the 2nd Defendant to the Plaintiff’s claim, I find it best that I first deal with the issue of whether the 2nd Defendant is entitled to rely on the following clause that allegedly bars the Plaintiff’s claim for the recovery of the sums that are allegedly due under the terms of the AIL policy.

The 2nd Defendant relies on the following clause:- “Limitation of Time of Bringing Arbitration If a claim is made under the Policy and is rejected by the company, the insured or his / her legal personal representative shall commence arbitration proceedings within six (6) months of such rejection, failing which the Company shall be discharged from all liability whatsoever for that claim.”

The 2nd Defendant’s contention lies on the decision of the Court of Appeal in Dancom Telecommunication (M) Sdn Bhd v Uniasia General Insurance Bhd [2008] 5 CLJ 551 where Low Hop Bing JCA held:- “[22] The bringing of an action in an ordinary court of law is readily distinguishable from a reference of a dispute to arbitration. A contract which incorporates an arbitration clause, such as cl. 14, to refer the parties' dispute to arbitration within a specified period as agreed by the parties, is a contract sui generis. The hallmark of arbitration is characterised by the autonomy of the parties. By way of agreement, the parties have an unfettered choice, not only to refer their dispute to arbitration and to choose their own arbitrators or umpires, but also to prescribe the time frame for such reference. Their intention is to sustain the mechanism of alternative dispute resolution by way of arbitration and not court action. Their desire is to place arbitration under their exclusive control. They hope to achieve eg, speed in the hearing and determination of their dispute. Different considerations would then apply to an arbitration clause prescribing a time frame such as that expressly agreed in cl. 14. It is a product of the doctrine of freedom of contract and would attract the application of the specific provisions expressly set out in exceptions 1 and 2 to s. 29, so that the general rule embodied in s. would give way to these two exceptions. …. [26] As a general rule, s. 29 strikes down as void:

any "agreement by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals"; and

any agreement "which limits the time within which he may thus enforce his rights". [27] The two expressions in quotes must be construed in the context in which they appear so as to take colour and precision: noscitur a soccis. They must also be construed conjunctively with the bringing of actions, within six years, under s. 6(1)(a) as set out below: Limitation of actions of contract... 6(1) Save as hereinafter provided the following actions shall not be brought after the expiration of six years from the date on which the cause of action accrued, that is to say:

Actions founded on a contract.... [28] In my view, the expression "ordinary tribunals" generally in s. 29 means the ordinary courts of law, as s. 29 does not render illegal any contract by which parties have agreed to refer their dispute to arbitration under the exceptions 1 and

Actions to be brought under s. 6(1)(a) are actions commenced in ordinary courts of law and not by way of reference to arbitration. Section 6(1)(a) neither affects nor applies to the freedom of the parties to refer a dispute to arbitration by incorporating an arbitration clause in an agreement for the purpose of vesting jurisdiction in an arbitrator(s) to hear and determine a dispute between contracting parties, as has been done in cl. 14. Such an arbitration clause to refer a dispute to arbitration may validly specify a period which abridges or for that matter even enlarges the time bar under s. 6(1)(a). This is because s. 6(1)(a) must be read with s. 29 exception 2 which specifically states that it shall not affect "any law as to references to arbitration". The law as to references to arbitration is to be found in the Arbitration Act 1952 (now the Arbitration Act 2005) which I shall proceed to consider now. … [29] The validity of cl. 14 is given statutory recognition in s. 28 of the Arbitration Act 1952 ("s. 28") which vests the High Court with the power to extend the time for the purpose of referring a dispute to arbitration after the expiry of the prescribed 12 month time frame. Section 28 reads: Where the terms of an agreement to refer future disputes to arbitration provide that any claims to which the agreement applies shall be barred unless notice to appoint an arbitrator is given, or an arbitrator is appointed, or some other step to commence arbitration proceedings is taken, within a time fixed by the agreement and a dispute arises to which the agreement applies, the High Court, if it is of opinion that in the circumstances of the case undue hardship would otherwise be caused, and notwithstanding that the time so fixed has expired, may, on such terms, if any, as the justice of the case may require, but without prejudice to any written law limiting the time for the commencement of arbitration proceedings, extend the time for such period as it thinks proper. [30] It is plain that cl. 14 comes within the ambit of the expression "where the terms of an agreement to refer future disputes to arbitration provide that any claims to which the agreement applies shall be barred" in s. 28. The time frame stipulated in cl. 14 may upon the expiry thereof be extended by the High Court on grounds of undue hardship. [31]Section 28 has been successfully invoked by the insured for the purpose of obtaining an extension of time in High Court in both Malaysia National Insurance Sdn. Bhd, supra, and Majlis Perbandaran Petaling Jaya, supra. However, on appeal, the extension in these two cases had subsequently been set aside by the Federal Court and Court of Appeal, respectively. Be that as it may, the proceedings in these courts for extension of time under s. 28 is clear evidence of the validity of the arbitration clause such as cl. 14.”

On the surface, the said argument is attractive. However, I find that there is a fatal flaw to the said argument suggested by the 2nd Defendant. I note that the AIL policy also contains the following clause:- “Legal Proceedings No action at law or in equity shall be brought to recover on this policy prior to the expiration of sixty (60) days after written proof of loss has been filed in accordance with the requirements of this policy, nor shall such action be brought at all unless brought within (1) year from the expiration of the time limit within which the written proof of loss is required by the policy.”

There is a clear inconsistency between the earlier clause relied on by the 2nd Defendant and the above clause that allows the Plaintiff the right to institute legal proceedings as long as it is undertaken within 1 year from the date on which the proof of loss is legitimately lodged with the 2nd Defendant.

In view of the said inconsistency, this Court is tasked to interpret such clauses fairly and sensibly to give effect to both. See Pagan SpA v Tradax Ocean Transportation SA [1987] 3 All ER 565, Alexander v West Bromwich Mortgage Co [2016] EWCA Civ 49, Septo Trading Inc v Tintrade Ltd [2021] EWCA Civ 718 and the decision of the Malaysian Court of Appeal in Sia Siew Hong & Ors v Lim Gim Chian & Anor [1996] 3 CLJ 26.

In Septo Trading Incv v Tintrade Ltd (supra), the dispute resolved the terms of an international fuel oil sale contract. The sale contract was concluded via email exchanged between representatives and the following was recorded to have been agreed to:- “As ascertained at loadport by mutually acceptable first-class independent inspector, or as ascertained by loadport authorities and witnessed by first class independent inspector (as per local practice at time of loading). Such result to be binding on parties save fraud or manifest error. Inspection costs to be shared 50/50 between buyer/seller.”

At the same time, the parties also agreed that the Contract will be subject to The BP 2007 General Terms and Conditions for FOB Sales. Section 1.2.1 of the BP Terms states:- “Provided always the certificates of quantity and quality (or such other equivalent documents as may be issued at the Loading Terminal) of the Product comprising the shipment are issued in accordance with sections 1.2.2 or 1.2.3 below then they shall, except in cases of manifest error or fraud, be conclusive and binding on both parties for invoicing purposes and the Buyer shall be obliged to make payment in full in accordance with Section 30.1 but without prejudice to the rights of either party to make any claim pursuant to Section 26.”

Males LJ in interpreting the two clauses held: - “One should … approach the documents in a cool and objective spirit to see whether there is inconsistency or not … It is a commonplace of documentary construction that an apparently wide and absolute provision is subject to limitation, modification or qualification by other provisions. That does not make the later provisions inconsistent or repugnant. … It is not enough if one term qualifies or modifies the effect of another; to be inconsistent a term must contradict another term or be in conflict with it, such that effect cannot fairly be given to both clauses…. … In my judgment the first task is to see if the clauses can sensibly be read together. If they cannot, there is inconsistency and the special condition is to prevail over the other clause in the printed form. But, if they can be read together, they should be and there is no inconsistency…. … there is a distinction between a printed term which qualifies or supplements a specially agreed term and one which transforms or negates it. In order to decide on which side of this line any particular term falls, the question is whether the two clauses can be read together fairly and sensibly so as to give effect to both. This question must be approached practically, having regard to business common sense, and is not a literal or mechanical exercise. It will be relevant to consider whether the printed term effectively deprives the special term of any effect (some of the cases describe this as the special term being “emasculated”, but in my view it more helpful to say that it is deprived of effect). If so, the two clauses are likely to be inconsistent. It will also be relevant to consider whether the specially agreed term is part of the main purpose of the contract or, which is much the same thing, whether it forms a central feature of the contractual scheme. If so, a printed term which detracts from that scheme is likely to be inconsistent with it. Ultimately, the object is to ascertain the intention of the parties as it appears from the language in its commercial setting.”

Considering both clauses, I find that the 2nd Defendant did agree that the time frame for any legal proceedings to be undertaken by the Plaintiff must not exceed 1 year after any claims were rejected by the 2nd Defendant. The right to arbitrate and the limitation period specified in the earlier clause shall only arise if it was the 1st Defendant, the insured / obligor / its legal representative wishes to initiate proceedings to claim the sums from the 2nd Defendant. The Obligee / the Plaintiff’s right is not restricted to 6 months as that only applies to any possible claim by the 1st Defendant. Therefore, the Plaintiff is not subject to the principle of law laid down in Dancom as referred to earlier.

I am aware that the Plaintiff did not commence an arbitration claim. As the 2nd Defendant has chosen not to apply to stay these proceedings by way of an application under section 10 of the Arbitration Act 2005 and did take active steps in these proceedings, such a right to have the dispute arbitrated would have been waived by the 2nd Defendant. As I have said earlier, that is restricted to any claim by the 1st Defendant. I reproduce the said clause again for ease of reference:- “the insured or his / her legal personal representative shall commence arbitration proceedings within six (6) months of such rejection”

I also note that the claim by the Plaintiff was rejected by the 2nd Defendant on 17-1-2019. The Writ and the Statement of Claim was filed on 18-12-2019 within the said 1 year period. I have considered the validity of the said clause but as I have said this claim was filed within the said time frame. Anyway. I further note that this claim was also filed within the 6-year period provided under the Limitation Act. Therefore, the claim was filed within the time frame provided by law. See New Zealand Insurance Co Ltd v Ong Choon Lin (T/A Syarikat Federal Motor Trading) [1992] 1 MLJ 185, section 29 of the Contracts Act and Section 6 of the Limitation Act.

For the above reasons, I reject the defence of the 2nd Defendant on this issue and rule in favor of the Plaintiff. Issue 10 - What are the conditions that must be complied with before the 2nd Defendant is required to pay the sums as claimed by the Plaintiff?

It must be noted that the obligation of the 2nd Defendant under the written AIL policy is to indemnify the Plaintiff / Obligee for the Insured percentage of its loss caused by the failure of the 1st Defendant to pay the sums that are due under the terms of the PN. This appears in Article 1 of the AIL policy.

Clause 2.1 of the AIL policy also states that the obligation of the 2nd Defendant to pay the sums claimed arises 30 days after the delivery of the Proof of Loss to the 2nd Defendant.

It is also provided in AIL policy that the 2nd Defendant has an obligation to pay the sum claimed as Insured Loss / the sums unpaid by the 1st Defendant under the terms of the PN within 30 days of receipt of a confirmation of debt (for insolvency claims) or a judgment (if applicable) of a court of competent jurisdiction (for Protracted Default).

In this case, the 2nd Defendant denied liability, inter alia, on the grounds that the Plaintiff had failed to comply with the requirement of obtaining a judgment against the 1st Defendant. It claims that the obligation of the 2nd Defendant only arises if the Plaintiff has obtained a judgment or an award from an arbitrator and has forwarded the said judgment to it as part of its claim. This the 2nd Defendant says is mandatory under the terms of the AIL policy before any obligation arises on the part of the 2nd Defendant to indemnify the Plaintiff.

I do not find that there is an obligation to provide any judgment of a court of competent jurisdiction or an award of an arbitration panel before the obligation of the 2nd Defendant arises in this case. The said obligation only applies to any claim by the 1st Defendant and not the Plaintiff. This is as per what was provided in the said clause relied on by the 2nd Defendant.

It must be borne in mind that this is not your typical insurance coverage. This is a credit default risk policy where the 2nd Defendant has agreed that it will indemnify the Plaintiff if the 1st Defendant fails to pay the sums that are due under the terms of the PN. This is only subject to the total limit of liability of the 2nd Defendant of USD 10,000,000.00.

Article 1 of the AIL policy states:- “This policy is to indemnify the Obligee (the Plaintiff) for the Insured Percentage of its Loss up to but not exceeding the Policy Limit due to Non-Payment in respect of pure credit risk which includes non-payment of the Insured Note (PN) by Obligor (the 1st Defendant) due to the following reasons:-

Insolvency; or

Protracted default.”

Protracted Default means the failure by the 1st Defendant to pay the sums due on the maturity date of the PN.

Therefore, the obligation of the 2nd Defendant arises when the terms of the PN were not complied with by the 1st Defendant. It is not dependent on the proof of the liability of GTPL under the terms of the Short-Term Loan. What the Plaintiff needs to prove is that the terms of the PN were complied with by it and that the 1st Defendant failed to pay the sums that were promised on the maturity date of the said PN.

I also note that all necessary documents were also provided by the Plaintiff to the 2nd Defendant on 22-11-2018. The PN was not paid by the 1st Defendant and remains outstanding.

Therefore, the 2nd Defendant’s obligation to indemnify the Plaintiff has been crystalized. The precondition of an insurer’s liability arises when the loss is suffered. I refer to Su Hock Guan v Axa Affin General Insurance Malaysia Berhad [2020] CLJU 1584. In this case, it does not arise when there is a judgment but when the terms of the PN is defaulted on.

As I said earlier, I find that the said clause relied on by the 2nd Defendant only applies to any claims to be filed by the 1st Defendant. The words that were used in the said clause specifically refer to the “Insured” i.e. the 1st Defendant. There is no specific requirement that any such claims must be specifically filed by the Plaintiff. All references in clauses 5.3, 5.4 and 5.10 of the said AIL policy specifically refer to the obligation of the 1st Defendant if it wishes to lodge a claim for losses arising out of the policy. Whereas the obligation of the 2nd Defendant to the Plaintiff is crystal clear, the 2nd Defendant is to indemnify the Plaintiff for any failure of the 1st Defendant to pay the sums that are due under the PN. For ease of reference, I reproduce the said clause:-

I could not do better than repeat what was held by Ong Chee Kwan JC (as he then was) in Su Hock Guan (supra):- “[22] Reference was also made to the English case of Versloot Dredging BV & Anor v. Gerling Industrie Versicherung AG & Ors; The DC Merwestone [2016] UKSC where the UK Supreme Court, in the course of allowing a claim on a marine insurance policy said as follows: '[24] The starting point is that in law it is not a precondition of insurer's liability that a claim should be made on him. The insured's right to indemnity arises as soon as the loss is suffered.' [23] His Lordship found further support for the proposition from the following excerpts from the authoritative text of MacGillivray on Insurance Law: '... A useful working definition can be derived from that given by Channell J. in Prudential Insurance Company v. Inland Revenue Commissioners. A contract of insurance is one where one party ( the "insurer") promises in return for a money consideration (the "premium") to pay to the other party ( the "assured") a sum of money or provide him with some corresponding benefit, upon the occurrence of one or more specified events (pg 3)' Once these specified event happens, the insurer on a contingency policy must pay whatever sums are agreed by the policy to be due upon the occurrence of that event. (pg. 5)' [24] Having considered the aforesaid authorities and after reading the article 'When Does an Insured's Cause of Action Against an Insurer Arise: At the Time of the Event/Loss or After the Insurer has Disclaimed Liability? ' by S. Kalyana Kumar published in [2016] 3 MLJ cxxxi, the UK Supreme Court decision in Connect Shipping Inc and anor v. Sveriges Angfartygs Assurans Forening (The Sweidish Club) and ors; The Renos [2019] UKSC 29 and the Supreme Court of New South Wales Court of Appeal decision in Globe Church Incorporated v. Allianz Australia Insurance Ltd [2019] NSWCA 27, I share the same view as the learned Judicial Commissioner that the cause of action in an indemnity insurance policy, unless the contract otherwise provides, necessarily accrues from the date of the loss event and not from the date of repudiation of liability by the insurer. [25] The reason for the general rule that the cause of action accrues from the occurrence of the loss event is stated by Lord Sumption in 'The Renos': '[10] The first point to be made is that as a general rule, the loss under a hull and machinery policy occurs at the time of the casualty and not when the measure of indemnity is ascertained. A claim on an insurance policy is a claim for unliquidated damages. The obligation of the insurer is to hold the assured harmless against an insured loss, from which it follows that where the insurance is against physical damage to property the insurer is in breach of that obligation as soon as the damage occurs: Chandris v. Argo Insurance Co Ltd [1963] 2 Llyod's Rep 65 at 73-74; Firma C-Trade SA v. Newcastle Protection and Indemnity Association, The Fanti [1990] 2 All ER 705. As Megaw J pointed out in the former case, at 74, the result is that 'it is not a condition precedent - it is not a fact which must exist and be pleaded - that the plaintiff has quantified the amount of his claim; or even that all the facts exist at the date of the writ which will enable the proper amount of the claim to be determined.' These are 'matters of evidence, not prerequisites of a cause of action'. The rule that the loss is suffered at the time of the casualty applies notwithstanding that the loss developed thereafter, unless it developed as a result of something that can be regarded as a second casualty, breaking the chain of causation between the first one and the loss.' [emphasis added] [26] At common law, it is said that a promise of indemnity is a promise to hold the indemnified person harmless against a specified loss or expense. Once the loss is suffered or the expense incurred, the indemnifier is said to be in breach of the contract for failing to hold the indemnified person harmless against the relevant loss or expense. [See: Firma C-Trade SA v. Newcastle Protection and Indemnity Association[1991] 2 AC 1, per Lord Goff]. [27] The aforesaid is distinctively different from policies of liability insurance where the general rule is that the cause of action does not accrue until the liability of the insured is established by judgment, arbitration or binding agreement and not upon the occurrence of the event which gives rise to the insured's liability to third party [See: Post Office v. Norwich Union Fire Insurance Society Ltd [1967] 2 QB 363 at 373-4 and 377-8]. [28] The contention before the Court was that there is no breach of a contract of insurance until the insurer has been required to pay and has failed or refused to do so. In other words, the cause of action does not arise at the time of the loss but when the insurer upon demand, refused to make payment, in this case, on 15.6.2012 when the Respondent repudiated the policy. [29] Indeed learned counsel for the Appellant contended that it cannot be the case that the cause of action in a contract of indemnity accrues at the time of the loss or the occurrence of the insure event as the insurer had no knowledge of the same and had not been demanded to make payment or refused the payment thereof. [30] In Globe Church Incorporated v. Allianz Australia Insurance Ltd & Anor (supra ), the Supreme Court of New South Wales Court of Appeal had to deal with precisely this issue. In that case, Globe Church was insured under a policy by Allianz as to 60% and by Ansvar at to 40% of the risk. In September 2009, Globe Church made a claim for damage to property caused by flooding which occurred between June 2007 and March 2008. Ansvar denied liability in April 2011 and Allianz denied liability in September 2011. Globe Church commenced proceedings in November 2016 alleging that the denials of liability were the breach of the policy causing loss and damage to Globe Church. Both Allianz and Ansvar argued that Globe Church's claims under the policy were statute barred because the cause of action for breach of contract accrued immediately upon the happening of the relevant property damage, at which time, the insurer's obligation to indemnify arose and was breached.”

Even if I am wrong on the above, I find that there is no requirement for a judgment to be obtained against the 1st Defendant before the liability of the 2nd Defendant crystalises. In this case, the operative word that appears in the said clause is “(if applicable)” and I do not find that there was any need for any judgment or any form of award to be obtained to show that the sums are due from the 1st Defendant to PN. The required documents have been provided to the 2nd Defendant and these show that the 2nd Defendant did not comply with the terms of the PN. The sums were already due and the Plaintiff has shown the existence of the event justifying indemnification of the Plaintiff’s loss.

For the above reasons, I rule in favour of the Plaintiff and find that all necessary documents have been forwarded to the 2nd Defendant. The 2nd Defendant is required to indemnify the Plaintiff for the losses that arise out of the failure of the 1st Defendant to pay the sums demanded under the PN. Issue 11 - Whether the said AIL policy has been terminated/cancelled or declared to be void either pursuant to the terms of the said policy or by the decision of the 2nd Defendant?

The issue highlighted above will be dealt with in the following paragraphs below. Failure to pay premiums and pay security for the AIL policy by the 1st

I will first deal with the 2nd Defendant’s contention that the policy is not valid as it was automatically terminated or terminated due to the failure by the 1st Defendant to pay the premiums due and to provide the security as required in the cover note to the AIL policy.

I reproduce relevant parts of the said AIL policy:- “5.2 Premium The insured shall pay the Premium in accordance with the terms of this Policy. The Premium rates and basis of calculation specified are fixed and the insurers may not amend the terms or amounts of this Premium due during the life of this Policy, whether due to a deteriorating credit quality of the Obligor or for any other reason. If any amount of the Premium due under this Policy has not been paid to insurers by its due date, insurers have the right to cancel this Policy by notifying the Insured in writing. In the event of cancellation, Premium is due to Insurers on a pro-rata basis for the period that the Insurers are on risk but the full Premium shall be payable to Insurers in the event of a loss or occurrence prior to the date of termination which gives rise to a valid claim under this Policy. It is agreed that the Insurers shall give not less than 15 days proper written notice of cancellation to the Insured. If the amount of the Premium due is paid in full to Insurers before the notice period expires, notice of cancellation shall automatically be revoked. If not, the Policy shall automatically terminate at the end of the notice period. If any provision of this clause is found by any court or administrative body of competent jurisdiction to be invalid or unenforceable, such invalidity or unenforceability will not affect the other provisions of this clause which will remain in full force and effect.”

The above clause prevails over the general terms of the AIL policy as the said policy did have the following clause:- “In the event of any conflict between these general terms and conditions, and any provision contained within any Policy section, the provision contained within the Policy Section shall prevail for the purposes of the cover contained within that section only.”

Therefore, before the AIL policy could be cancelled due to failure to pay the premiums due from the 1st Defendant, the 2nd Defendant must issue a notice to cancel the said AIL policy in writing. The Premium Warranty Endorsement that appears in the General Term and Condition of the Policy is overridden by clause 5.2 of the AIL policy.

In this case, the 2nd Defendant has failed to prove the existence of any notice issued to the 1st Defendant of their decision to terminate. The witness produced by the 2nd Defendant did mention that the company did issue such a notice but a copy of the same was not produced by the said Defendant.

Furthermore, the 1st Defendant’s witness also confirmed that the 2nd Defendant did not send to the company any notice to terminate the said policy for failure to pay the premium. Instead, according to the 1st Defendant’s witness, the said company did pay the premiums that were due to the 2nd Defendant as required under the AIL policy.

In addition to the above, I also find that the 2nd Defendant did issue an additional endorsement to AIL policy to include the Plaintiff as the Obligee / Lender in place of GTPL based on the terms of the assignment. Please see the endorsement dated 12-1-20008 bearing number 0003/2018.

Therefore, if the said premiums were not paid as suggested by the 2nd Defendant, the company should have then informed the Plaintiff that the insurer was not willing to add the Plaintiff to the AIL policy. Instead, the 2nd Defendant should have informed the Plaintiff that the said AIL policy was cancelled. As this was not stated by the 2nd Defendant, I find that the said AIL policy was not terminated by the 2nd Defendant even if the premiums were not paid. Failure to comply with the condition precedent/subjectivities – the cash collateral of USD 5.25 million required from the 1st Defendant

I note that the condition precedent of the said AIL policy as contained in the cover note said that the 1st Defendant is required to pay to the 2nd Defendant the cash collateral of USD 5.25 million. This was not complied with by the 1st Defendant due to an internal dispute between the shareholders and former directors of the 1st Defendant.

However, there is no clause in the said AIL policy that provides for the automatic termination of the AIL policy if the said cash collateral was not paid by the 1st Defendant to the 2nd Defendant.

I accept that the 1st Defendant did not pay the said cash collateral from the outset of the issuance of the AIL policy. However, despite the said non-compliance by the 1st Defendant, the 2nd Defendant continued to endorse the said policy at the time when the said PN was assigned to the Plaintiff by GTPL and agreed to add the Plaintiff as a beneficiary to the said AIL policy. This shows that the 2nd Defendant continued to agree to the validity of the AIL policy despite the failure of the 1st Defendant to pay the said cash collateral. Despite the said failure, the 2nd Defendant agreed to endorse the right of the Plaintiff to the AIL policy based on the assignment of the rights to the PN.

I also do not find any notice issued by the 2nd Defendant to terminate or cancel the said AIL policy due to the failure of the 1st Defendant to pay the said cash collateral. Therefore, I do not find any basis for the 2nd Defendant to argue that the said AIL policy has been cancelled or terminated as suggested by the 2nd Defendant. The conduct of the 2nd Defendant indicates that it had agreed to continue with the validity of the AIL policy despite the failure of the 1st Defendant to pay the said cash collateral. I refer to Ho Shee Jan v Stephens Properties Sdn Bhd [1984] CLJU 155, Masjaya Trading Sdn Bhd V Kedah Cement Sdn Bhd [2004] 4 CLJ 18 and Boustead Trading (1985) Sdn Bhd v Arab-Malaysian Merchant Bank Bhd [1995] 4 CLJ 283. In Boustead Trading (supra), the Federal Court held: - “The time has come for this court to recognise that the doctrine of estoppel is a flexible principle by which justice is done according to the circumstances of the case. It is a doctrine of wide utility and has been resorted to in varying fact patterns to achieve justice. Indeed, the circumstances in which the doctrine may operate are endless.” In the present case, the question is this: Based on the conduct of the parties did they intend that the contracts were to confer on the plaintiff the exclusive right to perform the service in question? In our judgment, based on all the circumstances of the case this question must receive an affirmative answer.”

For the above reasons, I reject the 2nd Defendant’s contention and rule that the said AIL policy is still valid at the date when the notice to indemnify was issued by the Plaintiff to the 2nd Defendant. Issue 12 - Whether there is any evidence of fraud or bribery against any of the officers of the Plaintiff that caused the disbursements of the loan to Issue 13 - If so, did the said fraud or bribery render the AIL policy invalid?

On the issue of fraud or bribery as alleged by the Defendants I find that the Defendants have failed to prove the existence of any fraud or bribery that was committed and caused the issuance of the Short-Term Loan to GTPL by the Plaintiff.

I have considered the First Information Report lodged in India. At its highest the 2nd Defendant has only shown that there was an investigation undertaken by the Central Investigations Bureau, New Delhi on certain officers of the Plaintiff as confirmed by Sapna Jain (PW1). This does not mean that there is any evidence of bribery or wrongdoing. Based on the evidence before I do not find any credible evidence of any wrongdoing and I therefore reject the said contention. Issue 14 - Whether the internal dispute between the shareholders and former directors of the 1st Defendant renders the PN unenforceable?

On the issue of the alleged internal dispute raised by the 1st Defendant, I find that it has no bearing on the Defendants' obligations to comply with the terms of the PN and the obligation of the 2nd Defendant to pay the sums due under the AIL policy.

As I stated earlier, the relationship between parties concerns the obligations of the Defendants under the PN and the AIL policy. The internal dispute and the alleged fraud or any wrongdoing caused by the former director of the 1st Defendant do not negate the Defendants’ obligations.

I further find that this alleged fraud by the former directors of the 1st Defendant also did not cause the AIL policy to be invalid or void as suggested by the 2nd Defendant. Clause 5.16 of the AIL policy did not come into play. I opine that the said clause is only applicable if it is shown that the 1st Defendant did make any statement, report, or made any application or claim that is fraudulent or contains false information. The fraud by the 1st Defendant’s director did not affect the AIL policy and only created a possible cause of action by the 1st Defendant against the said director.

I also note that the 2nd Defendant also tried to rely on the following clause that states:- “Any fraud, misstatement or concealment in respect of this insurance or any claim shall render this Policy or the respective Policy of Insurance as the case may be, null and void and Benefit due hereunder shall be or become forfeited.”

I opine that again the said clause is of no assistance to the 2nd Defendant. It does not apply where the fraud in question relates to the internal affairs of the 1st Defendant. The said clause is only applicable if the fraud or misstatement relates to the AIL policy or the procurement of the said policy.

In other words, if any fraudulent statements were made by the 1st Defendant concerning the said policy and its coverage. It does not apply to fraud that was allegedly committed by a director against the 1st Defendant. That would be beyond the scope of the said clause.

As I have said earlier, despite the failure by the 1st Defendant to pay the sums of RM 5.25 million, the 2nd Defendant did not terminate the AIL policy. Instead, it chose to continue the said policy and even agreed to endorse the Plaintiff’s right to make such claims under the terms of the AIL policy. Therefore, I find that this issue is a non-starter and I reject the same. Issue 15 - Whether there was any material change to the PN that caused the AIL policy to be no longer applicable?

I note that the 2nd Defendant had also attempted to rely on the following clauses as contained in the AIL policy: “Clause 3.2 The insured warrants that it shall not make any material change to the terms and conditions of the Insured Note without the prior written agreement of the Insurers, such agreement not be unreasonably withheld or delayed.”

The evidence before me shows that the assignment of the AIL policy, its endorsement and the assignment of the PN was undertaken with the consent and approval of the 2nd Defendant.

This can be seen in the notice of assignment issued by GTPL to the 1st Defendant dated 11-1-2018 that was approved and consented by the 1st Defendant and 4-4-2018. I also refer to the letter issued by the 1st Defendant dated 10-4-2018 confirming that it acknowledges the said assignment of the PN by GTPL to the Plaintiff.

I also find that the consent of the 2nd Defendant was also obtained. This is seen in the Endorsement No. 0003/2018 dated 12-1-2018 issued by the 2nd Defendant to the Plaintiff. The 2nd Defendant agreed to amend the AIL policy and include the Plaintiff as the Lender / Obligee and therefore as the party to be indemnified if the PN was not complied with by the 1st Defendant. As such, the 2nd Defendant did consent to the said assignment and has no cause for complaint.

I further find that the 2nd Defendant’s argument that the said AIL policy was rendered invalid as the terms of the PN were changed due to the allegation that the said PN was utilized as a security for the short-term loan granted to GTPL. I find that this argument is also without merit as the terms of the PN did not change merely by the fact that the said instrument was used as a security. The terms remain and the said PN is payable in accordance with the original terms of the said instrument. The PN remains payable to any bona fide holder of the instrument and in this case, this would be the Plaintiff. Furthermore, even after being made aware of the same, the 2nd Defendant did not decide to terminate the AIL policy. I find that this is merely an afterthought designed to defeat the claim by the Plaintiff.

As I have said earlier, the said assignment of the PN to the Plaintiff was consented to by the 2nd Defendant and the 1st Defendant. Therefore, clause 3.2 is not applicable to the facts in hand.

For the above reasons, I reject the said defences raised by the Defendants. Issue 16 - Whether the Settlement Agreement dated 23-3-2019 is valid against the 1st Defendant or overtaken by the alleged new terms as contained in the notes of the meeting held on 9-9-2019? Issue 17 - Whether the 2nd Defendant is privy to the said Settlement Agreement dated 23-3-2019?

I find that the Settlement Agreement dated 23-3-2019 is valid and binding between the Plaintiff and the 1st Defendant. I find that I agree with the position adopted by the Defendants that only the 1st Defendant was privy to the said Settlement Agreement.

This does not mean that the obligation of the 2nd Defendant under the terms of AIL policy is negated. As conceded by the 2nd Defendant, it did act as the mediator to amicably settle the claim by the Plaintiff against the 1st Defendant.

Therefore, the 2nd Defendant would have been aware of the said Settlement Agreement and did agree to the same. This would also not constitute a variation of the terms of the PN and clause 3.5 of the AIL policy would not be applicable. The liability of the 2nd Defendant to indemnify the Plaintiff for the failure to pay the sums that were due under the PN remains and is not overridden by the Settlement Agreement. The liability of the 2nd Defendant crystalizes upon the failure of the 1st Defendant to pay the sums that are due under the PN to the Plaintiff. More so when it participated and mediated the settlement. It cannot now claim that this constitutes a variation that renders the said AIL policy to be inapplicable.

Concerning the alleged New Settlement Agreement, I find that the pre-conditions of the said proposals that were raised at the meeting held on 23-3- 2019 were not complied with by the 1st Defendant. As such, the parties did not come to a new Settlement Agreement as contended by the 1st Defendant. The previous Settlement Agreement is still operative and binding against the 1st Defendant. Issue 18 - Whether the Defences raised by the Defendants concerning the Short-Term Loan are mere red herrings?

I therefore find that the issues raised by the Defendants are based on the (i) legitimacy of the Short-Term Loan, (ii) whether there was any fraudulent or unlawful conduct in the granting of the said loan to GTPL and (iii) the alleged non-disclosure of using the PN as a security for the Short-Term Loan are mere red herrings and do not have any legal impact to the obligations of the Defendants.

As I have identified earlier, the Defendants are liable to comply with their obligations under the PN and the AIL policy. The 1st Defendant must pay the sums that it has promised to pay once the PN matures and if the said company fails, then the 2nd Defendant must indemnify the Plaintiff for the losses caused by the failure of the 1st Defendant. Nothing turns on the Short-Term Loan by the Plaintiff to GTPL.

I also find that the allegation that the 1st Defendant was allegedly not notified of the default or breach by GTPL to be incorrect. The Defendants contend that no evidence of such breach by GTPL was provided to the 1st Defendant or its solicitors. I find that the said arguments are not true as the 2nd Defendant is aware of the said transaction. I refer to the letter dated 28-11-2018 where the 2nd Defendant acknowledges that it is aware that the said PN was provided as a security for the loan to GTPL.

Furthermore, I reiterate that the obligation to pay the sums due under the PN and AIL policy is not dependent on the Short-Term Loan with GTPL. The said AIL policy does not require notice of default by GTPL to be forwarded to the 2nd Defendant. All that is required is that evidence is provided or notice that the 1st Defendant did fail to pay the sums due under PN. Upon notification of the failure to pay the sums due under the PN, the 2nd Defendant is required to indemnify the Plaintiff. The AIL Policy is not an insurance policy to cover the failure of GTPL to pay the sums due under the Short-Term Loan agreement. It is a policy to indemnify any losses that may arise due to the failure of the 1st Defendant to pay the sums that are due on the maturity date of the said PN.

For the above reasons, I find that the denials by the Defendants relying on the above allegations and their failure to comply with their obligations are mere red herrings. I find that the Plaintiff has shown that the Defendants have failed to comply with their obligations under the terms of the PN and the AIL Policy and that judgment should be entered against them as prayed for in the Statement of Claim. Issue 19 – What are the obligations of the Defendants?

My findings are summarized as follows: -

The 1st Defendant did agree to the terms of the assignment of PN to the Plaintiff.

(ii) The 1st Defendant had failed to pay the sums claimed by the Plaintiff according to the terms of the PN. The required notice has been issued to the Defendants.

(iii) The issues raised by the Defendants concerning the Short-Term Loan are unsubstantiated and are mere red herrings.

(iv) The internal issues that arise as a result of the alleged fraud by the former director of the 1st Defendant have no bearing on the liability of the Defendants to the Plaintiff. This also applies to the defence raised by the 2nd Defendant.

The 1st Defendant is bound by the Settlement Agreement dated 3-3-2019.

(vi) The obligation of the 2nd Defendant under the AIL policy is to indemnify the Plaintiff of its losses.

(vii) The 2nd Defendant had agreed to endorse the Plaintiff as the party to be indemnified under the terms of the AIL Policy.

(viii) The said AIL Policy is still subsisting and was not cancelled by the 2nd Defendant.

(ix) The 2nd Defendant has failed to prove the existence of any event that has caused the automatic termination of the AIL policy.

The 2nd Defendant is liable to pay the sums as claimed by the Plaintiff under the terms of the AIL policy.

(xi) The conduct of the 2nd Defendant in endorsing the said PN to the Plaintiff despite the failure of the 1st Defendant to comply with the conditions precedent to the PN shows that these conditions did not cause the invalidation of the said policy and that the said Defendant is estopped from relying on the said defaults. H. Assessment of the Witnesses

I also state herein that I prefer the evidence of the testimony of the Plaintiff’s witness to that of the Defendants. I find that the Plaintiff testimony is consistent with the documentary evidence before this Court. Having perused their witness statements, the notes of evidence as recorded before Liza Chan J and the demeanour of witnesses before me, I do not accept the defence raised by the Defendants and reject the same. I find that the testimony of the witnesses of the Plaintiff was made honestly and are consistent with the contemporaneous documents produced before me.

I find that the evidence of the Defendants’ witnesses and the Defences raised are not substantiated by contemporaneous evidence and are merely afterthoughts created to defend the Plaintiff’s claim. I therefore reject the evidence of the Defendants’ witness and the said defences put forth by the Defendants.

For the Defendants to allege (i) corrupt practice on the part of the Plaintiff’s representatives at the time when the PN was assigned to the Plaintiff and the loan disbursed as well (ii) various alleged non-compliance of the policy despite not cancelling the said policy at the material time, shows that the said Defendants were merely working backwards to justify their decision not to pay the sums that they have promised under the terms of the PN and the insurance policy.

As I said earlier, the defences raised are inconsistent with the 2nd Defendant’s decision to endorse the said AIL policy in favor of the Plaintiff despite knowing that the 1st Defendant did not comply with the condition precedents to the said policy. If this was true, they would have surely rejected the said endorsement and declared the policy void.

Therefore, I find that the totality of the evidence before me, on the balance of probabilities, proves that the sums claimed are due from the Defendants and the appropriate orders must be made in favor of the Plaintiff.

Orders of this Court For the above reasons, I allow the Plaintiff’s claim against the Defendants with costs of RM 100,000.00 to be paid by each Defendant to the Plaintiff subject to the allocator. The costs are awarded based on the seniority of counsel, the complexity of the issues in dispute, the importance of the subject matter of the claim to the clients and the number of days spent at trial.

I make the following orders: -

Judgment against the 1st Defendant to the sum of INR 618, 750,000.00 or the Ringgit Malaysia equivalent at the time of payment with interest on the said sums from 1-6-2019 at the rate of 5% per annum until full realization to be paid to the Plaintiff.

(ii) Judgment against the 2nd Defendant to the sum of INR 572, 457,085.00 or the Ringgit Malaysia equivalent at the time of payment with interest on the said sums from 1-6-2019 at the rate of 5% per annum until full realization to be paid to the Plaintiff.

(iii) Costs of RM 100,0000.00 to be paid by each Defendant to the Plaintiff subject to Allocator. Dated 19th March 2025 Dato’ Indera Mohd Arief Emran bin Arifin Judge High Court of Malaya at Kuala Lumpur NCC5 Counsel: Vijay Raj together with Ratha Govindasamy, Neshel Inabashekaran and Priya Durai (Pdk) for the Plaintiff SKRINE Advovates & Solicitors Yeow Tze Yi for the 1st Defendant Yeow Yap & Co Advocates & Solicitors Trevor De Silva together with Kwan Yi Xuan for 2nd Defendant K H Wong Chin & Cheah Advocates & Solicitors