Pertubuhan Keselamatan Sosial (PERKESO) v LANGKASUKA LAND SDN BHD (KA-24FC-10-02/2025)

This written judgment concerns two distinct applications brought pursuant to Sections 256 and 257 of the National Land Code 1965 (“NLC”), wherein the Plaintiff, as Chargee, seeks Orders for Sale in respect of the charged properties. The applications, filed vide KA-24FC-10-02/2025 (“Suit 10”) and KA-24FC-11-02/2025 (“Suit 11”), were heard together by consent, as they arise from substantially identical factual circumstances and involve common questions of law.

The Defendant, as Chargor, resists both applications on grounds which may be broadly categorised as

alleged non-compliance with statutory notice requirements under Section 254 of the NLC, and

(ii) equitable considerations said to render the exercise of the Chargee’s power of sale unconscionable. Brief Facts of the Case

There are 2 foreclosure applications. Suit 10 seeks an order for sale over the property identified as Hakmilik HS(D) 1840, PT 710 (“PT 710”), which is secured by the charge registered under Presentation No. 7149/2024.

Meanwhile, the second application, Suit 11 seeks the same relief over the adjacent property, Hakmilik HS(D) 1839, PT 709 (“PT 709”), which is secured by the separate charge registered under Presentation No. 7150/2024 (collectively referred as “the Charged Properties”).

The Plaintiff asserts that the Defendant has defaulted on the payment due under the terms of the Put and Call Option Agreement dated 05.01.2021 (“the Put and Call Option Agreement”), the First Supplemental Agreement dated 31.05.2022 (“the First Supplemental Agreement”) and the Second Supplemental Agreement 13.12.2023 (“the Second Supplemental Agreement”) (collectively referred as “the Agreements”).

The Put and Call Option Agreement and the First Supplemental Agreement were primarily executed between the Plaintiff and Widad Business Group Sdn Bhd (“WBG”).

Meanwhile, the Second Supplemental Agreement specifically names the Defendant/Chargor and a Guarantor, Tan Sri Muhammad Ikmal Opat bin Abdullah (“Tan Sri Ikmal”) as the other parties alongside the Plaintiff and WBG.

The Agreements and the charges over the Charged Properties were executed by the Defendant/Chargor as security for WBG’s obligations. As stated in the affidavits in support of both Suit 10 and Suit 11, the following are the key terms of the Second Supplemental Agreement: “5. Charge over Charged Land Clause 5.1: Simultaneously with the execution of this Second Supplemental Agreement, WBG hereby agrees, at the cost and expenses of the Chargor, to procure that the Chargor execute a National Land Code (Revised 2020) (Act 828) charge over the Charged Land in favour of PERKESO a security for the full settlement of all amounts outstanding and payable by WBG and/or the Guarantor to PERKESO under this Second Supplemental Agreement. Clause 5.2: In the event of non-fulfilment of conditions precedent set out in Clause 3 above an/or upon the occurrence of any of the events set out in Clause 5.1(b) of the Put and Call Option Agreement (as amended and supplemented) or where WBG and/or the Guarantor fails for any reason whatsoever to pay the entire or such portion of the Put Option Price and such other amounts outstanding and payable by WBG and/or the Guarantor to PERKESO, PERKESO shall have the right to foreclose the Charged Land to recover the Put Option Price (as hereinafter defined) and all the amounts outstanding and payable to PERKESO under this Second Supplemental Agreement.

6.4 New Clause 4A – Caveat and Charge over Charged Land Clause 6.4.1: A new Clause 4A shall be inserted in the Put and Call Option Agreement and shall be read as follows: Clause 4A.1: Simultaneously with the execution of the Second Supplemental Agreement, WBG and/or the Guarantor hereby agrees, at the cost and expense of WBG and/or the Guarantor, to procure the Chargor to execute a National Land Code (Revised 2020) (Act 828) charge over the Charged Land in favour of PERKESO until the full settlement of all amounts outstanding and payable by WBG and/or the Guarantor to PERKESO under the Second Supplemental Agreement. Clause 4A.3: In the event of non-fulfilment of conditions set out in Clause 3 of the Second Supplemental Agreement and/or upon the occurrence of any of the venets set out in Clause 5.1(b) or where WBG and/or the Guarantor fails for any reason whatsoever to pay the entire or such portion of the Put Option Price and such other amounts outstanding and payable by WBG and/or the Guarantor to PERKESO, PERKESO shall have the right to foreclose the Charged Land and pursue such other action to recover all the amounts outstanding and payable to PERKESO under the Second Supplemental Agreement.” [Emphasis added]

In both Suit 10 and Suit 11, the total outstanding amount was stated as RM111,710,022.98 as at 09.12.2024 (“the Total Outstanding Amount”).

The Plaintiff prays for an order for sale of the Charged Properties in both suits, to be effected by the Defendant/Chargor. The Plaintiff/Chargee premises that the land must be sold through a public auction under the directions of the Senior Assistant Registrar to settle the total liabilities.

The followings are the breakdown of the Total Outstanding Amount: a) Put Option Price: RM106,408,374.19 as of 09.12.2024; b) Late Payment interests calculated at 9.25% per annum: i) RM1,638,941.13 accruing from 10.01.2024; ii) RM3,209,014.19 accruing from 12.08.2024 c) Incurred costs and expenses amounted to RM439,870.68 to be borne by the Plaintiff on behalf of the Defendant and/or WBG; and d) Interest on Incurred Cost of RM13,822.79 as late payment interest (9.25% per annum) (Land Tax, Legal Fees, and Valuation Fees) The Plaintiff’s Case 12. The reasons for the claim in both Suit 10 and Suit 11 stem from the fundamental default by the Defendant/Chargor in fulfilling its financial obligations related to the Charged Properties.

The primary reason pleaded by the Plaintiff, for initiating the foreclosure under Sections 256 and 257 of the NLC is that the Defendant/Chargor has breached the terms and conditions in the Agreements.

This breach is specifically defined as the failure to repay the Total Outstanding Amount according to the payment method stipulated in the Agreements. The Defendant’s Case 15. The Defendant asserts that the Plaintiff has demonstrably failed to satisfy the mandatory statutory prerequisites essential for this application, most critically regarding the proper service of the statutory notice (Form 16D).

The Defendant maintains that the Plaintiff has only demonstrated that the statutory notice was dispatched via registered post for forwarding, but has not provided definitive evidence of actual receipt or irrefutable proof of posting to the Defendant's designated address, thereby casting significant doubt on the validity of the service.

The defence contends that this failure to adhere to a fundamental statutory condition precedent renders the foreclosure application procedurally unsound and warrants its dismissal as a matter of law.

Furthermore, the Defendant invokes the court's equitable jurisdiction, arguing that the court should deny the order for sale in light of unique, extraordinary, and compelling circumstances, particularly the economic downturn intensified by the global pandemic.

The Defendant submits that proceeding with a forced sale would constitute an act of unconscionable hardship, inflicting severe, debilitating, and potentially irreversible damage to the extensive Langkasuka Project, resulting in losses far outweighing the Plaintiff's claim. Issues to be determined by the Court 20. The central issue for determination is whether the Plaintiff is entitled to an Order for Sale against the Defendant (“Order for Sale”), having regard to the key argument whether the Defendant has established a valid cause to the contrary within Section 256(3) of the NLC.

The legal issues raised by the Defendant to establish this cause to the contrary fall within three established categories:

compliance with conditions precedent;

(ii) grounds relating to law or equity; and

(ii) the defeasibility of the charge.

Also, it involves the questionue whether the statutory notice in Form 16D was properly and perfectly served on the Defendant, thereby satisfying the requirements of Section 254 of the NLC.

The first set of issues concerns statutory compliance and procedural defects, if any, focusing specifically on the prerequisite steps necessary before applying for foreclosure. The main issue raised by the Defendant/Chargor is whether the Plaintiff/Chargee has adequately established its fulfilment of these mandatory condition precedents.

The second major issue involves equitable grounds and economic prejudice, requiring the court to determine whether granting the Order for Sale would be contrary to a rule of law or equity. Decision and Findings of the Court 25. After perusing the facts adduced by the parties through affidavits and the exhibits, and the submissions by the learned counsels for all parties, I allow the Plaintiff’s application for Order for Sale for both Suit 10 and Suit 11. Herein are my reasons. Cause to the Contrary 26. It is trite that the demonstration of a cause to the contrary is the singular, exhaustive statutory defence that the Defendant/Chargor must successfully establish to oppose the Plaintiff/Chargee's application for an Order for Sale under Section 256(3) of the NLC.

This defence is severely restricted to three distinct categories, as defined by the Supreme Court in Low Lee Lian v Ban Hin Lee Bank Bhd [1997] 1 MLJ 77 as follows: a) When a chargor is able to bring his case within any of the exception to the indefeasibility doctrine under section 340 of the NLC; b) When the chargor can demonstrate that the charge had failed to meet the conditions precedent for the making of an application for an order for sale; or c) When a chargor can demonstrate that the grant of an order for sale would be contrary to some rule of law or equity.

I concur with Awg Armadajaya Awg Mahmud JC in Small Medium Enterprise Development Bank Malaysia Bhd v Revideo Precision Engineering Sdn Bhd [2021] 1 LNS 161 where the restrictive ambit of 'cause to the contrary' under Section 256(3) NLC was elucidated. It is to be noted that the burden rests entirely upon the chargor, to demonstrate the existence of cause to the contrary in order to resist the Chargee's application for an Order for Sale.

Accordingly, the Defendant/Chargor bears the burden of establishing, on a balance of probabilities, the existence of a valid and legally recognised cause to the contrary within the meaning of Section 256(3) of the NLC. This burden is not merely to raise a doubt or assert a claim, but to provide compelling evidence that falls squarely within one of the three permissible categories outlined in Low Lee Lian (supra).

Hence, the Defendant/Chargor must adduce clear and cogent evidence to displace the Plaintiff/Chargee's prima facie right to an order for sale. Failure to comply with proper service of statutory notice (Form 16D)

The Defendant/Chargor argues that the Plaintiff's application was flawed because the service of the statutory notice (Form 16D) was not perfect, and the Plaintiff has failed to meet the mandatory requirement of Section 254 of the NLC.

The Defendant implicitly contends that insufficient proof of receipt invalidated the proceedings and relied on the case of Jacob v Oversea-Chinese Banking Corporation and others) [1974] CLJU 98 for this.

The Plaintiff/Chargee argues that this claim is baseless and amounts merely to a bare denial. First, the Plaintiff insists that Form 16D was correct and accurate and was served perfectly in accordance with the NLC.

The Plaintiff asserts that the statutory Form 16D notice was duly served via prepaid registered post to the Defendant's address as officially required in the Charge document. In accordance with Section 431(2) of the NLC, such a notice, when properly addressed and posted, is legally presumed to have been served at the time of ordinary postal delivery.

Having considered the totality of the evidence, I am satisfied that the Plaintiff/Chargee has duly complied with the statutory requirements governing service. My conviction is further substantiated by the irrefutable evidence that the Plaintiff's legal representatives, Messrs. Shahrizat Rashid & Lee, dispatched the Form 16D, accompanied by a cover letter dated 09.12.2024, to the Defendant/Chargor via prepaid registered post, as evidenced by the registered post slip (See Exhibit MABAM-20 of, Encl.2) submitted in the Plaintiff’s Reply Affidavit.

The address used for service was WBG Penthouse, Widad Semantan (WISE) No. 3, Jalan Semantan, Damansara Heights 50490 Kuala Lumpur, the same address stated as the address for the Defendant/Chargor in the charge document and for the service of the Originating Summons.

The Plaintiff cites cases like RHB Bank Bhd v Nujade Garden Sdn Bhd [2021] 1 LNS 2542 and United Overseas Bank (Malaysia) Bhd v Bashir Holdings Sdn Bhd [2020] MLJU 1336 in establishing that a chargor's mere denial of receipt is insufficient to constitute a cause to the contrary and does not defeat the chargee's right to apply for sale, especially when the address used is undisputed.

The Plaintiff confirms that proof of the registered post slip (See Exhibit MABAM-20) was submitted in the Reply Affidavit. It shows that the notice was sent on 11.12.2024, nearly two months before the Originating Summons was filed on 05.02.2025. This demonstrates that the Defendant had ample notice of it.

I am more than convinced with the judgment in United Overseas (supra), where Dato’ Ahmad Bin Bache J maintained that a bare assertion of non-receipt, unsupported by proof of using the wrong address or failure to update the address, is insufficient to defeat the chargee’s statutory rights: “[28] As the Defendant did not adduce any documentary evidence to support an averment that the demands and the 16D Notice were served on the wrong address or that it has changed its principal place of business etc., this Court agreed with the Plaintiff that his bare assertion of non receipt of the 16D Notice does not amount to “cause to the contrary” and does not defeat the Plaintiff’s right to apply for an Order for Sale.” [Emphasis added]

The legal presumption of service established by Section 431(2) of the NLC does not impose a mandatory requirement for the Chargee to provide evidence of actual physical receipt or posting of the notice (like an AR Registered Card) before the service is accepted as legally accomplished (See Hong Leong Bank Bhd v Teh Kok Kian [2024] CLJU 1157).

Above all, I am entirely with the Plaintiff/Chargee that the cases cited by the Defendant/Chargor, namely Jacob (supra), Syarikat Kewangan Melayu Raya v Malayan Banking Bhd [1986] CLJU 98 and United Malayan Banking Corp Bhd v Chong Bun Sun [1994] 2 MLJ 221 are readily distinguishable.

While acknowledging the legal principles established in those precedents, I find that the specific facts of the present case demonstrate that those principles have already been satisfied, thereby rendering those authorities inapplicable and irrelevant to the matter at hand.

In summary, while the principle that the Chargor must be duly notified is undisputed, the evidence before this Court establishes that such notice was indeed afforded, rendering the Defendant’s objection untenable.

This court is convinced that detailed steps had been taken by the Plaintiff/Chargee to ensure the Defendant was sufficiently notified of the default long before the Originating Summons was filed. Thus, the argument that the Defendant lacked notice is baseless.

This includes the fact that the Plaintiff had served the reminder notices on 04.04.2024, 21.06.2024 and 28.06.2024 (See Exhibit MABAM-13 of Encl.2) before ultimately sent a Notice of Demand dated 22.07.2024 (See Exhibit MABAM-14 of Encl.2).

Hence, based on the abovementioned reasons, the Defendant/Chargor's argument regarding the failure to comply with proper service of the Form 16D is without merit and is therefore dismissed. Economic Prejudice and Pending Resolution as a Bar to Foreclosure 45. The Defendant further invokes equity, asserting that a sale at this stage would cause irreparable harm to the Langkasuka Project. The core of the Defendant's argument rests on the assertion that the Charged Properties were integral to the expansive Langkasuka Project. They contended that a forced sale at this juncture would be unduly oppressive, resulting in a suppressed valuation and inflicting irreparable harm capable of derailing the entire project. To bolster this claim, the Defendant cited Murugappa Chettiar v Letchumanan Chettiar [1938] 1 LNS 143 and Kheng Soon Finance Bhd v MK Retnam Holdings Sdn Bhd & Ors, [1983] CLJU 36 emphasizing the potential for economic prejudice.

Furthermore, the Defendant sought a postponement of the Order for Sale, citing a pending investment deal between WBG and Vemi Capital, valued at USD265,000,000.00. The Defendant premises that these funds would be directly channelled to satisfy the Plaintiff's Total Outstanding Amount.

The Plaintiff/Chargee counters that the Defendant's arguments were legally irrelevant. They assert that the status and purpose of the properties, along with the financial straits of the Defendant/Borrower (WBG), held no bearing on the foreclosure application. The Plaintiff underscores that foreclosure is an action in rem, a statutory remedy against the land itself and not an action in personam against the debtor.

The Plaintiff dismisses the pending Vemi Capital deal as a mere tactic to gain time. They highlight that the Memorandum of Understanding (MOU) with Vemi Capital, signed in November 2024, had not been disclosed to the Plaintiff. More critically, the deadline for the initial tranche payment, 31.01.2025, had passed without any funds being received by the Plaintiff.

The Plaintiff emphasizes that the MOU provides no firm guarantee of actual payment. The submission regarding the MoU with Vemi Capital is categorized as a bare assertion without merit. The MoU is a mere memorandum of understanding and not a guarantee that the Defendant or WBG will secure the funds needed to settle the debt.

Crucially, the Plaintiff/Chargee confirms that even after the purported deadline for the first tranche payment, 31.1.2025, they still have not received any payment from the Defendant or WBG, weeks or months later.

The court ultimately side with the Plaintiff/Chargee, finding that the Defendant/Chargor has failed to demonstrate any valid cause to the contrary.

The court rejects the argument that the commercial impact of the sale, the alleged low valuation, or the importance of the land to the Langkasuka Project constitutes a cause to the contrary. This adheres strictly to the legal principle that foreclosure proceedings are an action in rem and courts should generally not intervene in the Chargee’s statutory right merely due to economic hardship or extraneous disputes between the Borrower and the Chargee.

The Court also find that the Defendant's arguments regarding the effect of the sale on the Projek Langkasuka and the financial status of WBG are irrelevant to the foreclosure proceedings. Herein are the reasons.

First, the application for an Order for Sale is an action in rem (an action against the charged property itself), and not an action in personam (an action against the borrower for the debt owed). Consequently, factors such as the impact on the Projek Langkasuka, the approved development plans for the lands (villas/serviced apartments), or the financial status and stock value of the parent company (WBG) are immaterial to the Plaintiff’s statutory right to enforce its registered security. Any complaints related to commercial losses or alleged breaches of the underlying financing agreement must be ventilated in a separate civil claim (action in personam) and cannot be used to defeat the Plaintiff's statutory right to the Order for Sale.

Secondly, the court is not persuaded by the pending Vemi Capital deal as a factor sufficient to warrant a delay or refusal of the Order for Sale. The definitive failure by the Defendant/WBG to meet the payment deadline stipulated under the arrangement, combined with the non-receipt of funds by the Plaintiff, solidifies the Plaintiff's position that the arrangement was not a concrete resolution but a delay tactic.

Thirdly, and the most crucial of all, the lack of actual payment confirms the underlying breach, which the Defendant/Chargor does not dispute in terms of the quantum owed. The court would conclude that the purpose of raising the alleged pending resolution was merely a tactic to buy time and delay the Plaintiff's statutory rights. The balance of convenience would therefore favour granting the order to the Chargee, who has already granted multiple opportunities and extensions to the debtor.

The cases cited by the Defendant, such as Murugappa (supra) and Kheng Soon Finance (supra), were deemed inapplicable as they pre-date the modern, restrictive application of the Low Lee Lian (supra) principle.

By finding that the Defendant's opposition related to economic consequences and speculative future repayment do not fall within the narrow scope of the third category of cause to the contrary, I uphold the Plaintiff's right to enforce the valid registered Charge. Conclusion 60. Having considered to the totality of the evidence and submissions, I find no sustainable cause to the contrary under Section 256(3) of the NLC capable of defeating the Plaintiff’s statutory right to an Order for Sale. The Plaintiff/Chargee has demonstrably complied with all procedural and substantive requirements, and the equitable defences raised by the Defendant/Chargor are without legal or factual merit.

Accordingly, the Plaintiff/Chargee’s applications are allowed. Leave is granted to obtain an Order for Sale in respect of the Charged Properties upon the terms and directions herein set out. The Defendant/Chargor shall deliver vacant possession within fourteen (14) days from the date of the public auction. Costs are awarded to the Plaintiff/Chargee in the sum of RM15,000.00. Besides, I also order the following terms and directions: a) The Charged Properties shall be sold by public auction under the direction of the Senior Assistant Registrar to satisfy the following: i. All sums expended by the Plaintiff/Chargee on a solicitor-client basis; ii. All costs, charges, and expenses of these proceedings and of the sale of the Property and incidental thereto, as shall be taxed by the appropriate officer of this Court and paid to the Plaintiff/Chargee out of the proceeds of sale; and iii. The total amount outstanding under the Charge, being the sum due and owing to the Plaintiff/Chargee under the Charge, in which the Defendant/Chargor has defaulted in the due and punctual payment of the Total Outstanding Amount in accordance with the terms and conditions stipulated in the Agreements, amounting to RM111,710,022.98 as of 09.12.2024, comprising the following: i. The Put Option Price of RM106,408,374.19 as of 09 December 2024, as defined in the Second Supplemental Put and Call Option Agreement; ii. Late payment interest calculated at 9.25% per annum on RM30,220,435.12, totalling RM1,638,941.13 as of 09 December 2024 (accruing from 10.01.2024); iii. Late payment interest calculated at 9.25% per annum on RM106,408,374.19, totalling RM3,209,014.19 as of 09 December 2024 (accruing from 12.08.2024); iv. Other costs and expenses (including but not limited to land tax, legal fees, and valuation fees) incurred by the Plaintiff totalling RM439,870.68; and v. Late payment interest on those costs and expenses totalling RM13,822.79 as of 09 December 2024. b) The date of the public auction shall be fixed not less than one (1) month from the date of this Order; c) The reserve price for the public auction shall be fixed by the Court, consistent with the estimated market value of the Property; d) A licensed auctioneer shall be appointed by the Court to conduct the public auction; e) The Plaintiff/Chargee shall have the liberty to bid at the public auction, and should the Plaintiff/Chargee be the successful bidder, the Plaintiff/Chargee is at liberty to set off the purchase price against the total amount due and owing by the Defendant/Chargor under the Charge; f) No person shall be permitted to bid at the public auction unless the officer of the Court is satisfied that such person possesses, in his own right, an amount equivalent to ten percent (10%) of the reserve price; g) The balance of the purchase price shall be paid by the successful bidder within a period not exceeding one hundred and twenty (120) days from the date of the sale, and no extension of time shall be permitted. h) In the event that the balance of the purchase price is not settled within the stipulated 120-day period, the deposit paid shall be forfeited and dealt with in accordance with Section 267A of the NLC; and i) The relevant authorities are directed to register the purchaser of the Property as the new proprietor of the Property. Dated: 23rd October 2025 -------------------------------------------------------------------- DR. JOHN LEE KIEN HOW @ MOHD JOHAN LEE JUDGE HIGH COURT OF MALAYA ALOR SETAR Solicitor : Toh Xin Yin For The Plaintiff/Chargee Messrs. Shahrizat Rashid & Lee Advocates And Solicitors Solicitor for the Defendant/Chargor : J. Kuldeep Kumar & Athari Bahardin Messrs. J. Kuldeep Kumar & Co Advocates & Solicitors Table of Authorities Cases Hong Leong Bank Bhd v Teh Kok Kian [2024] CLJU 1157 Jacob v Oversea-Chinese Banking Corporation and others) [1974] CLJU 98 Low Lee Lian v Ban Hin Lee Bank Bhd [1997] 1 MLJ 77 RHB Bank Bhd v Nujade Garden Sdn Bhd [2021] 1 LNS 2542 Small Medium Enterprise Development Bank Malaysia Bhd v Revideo Precision Engineering Sdn Bhd [2021] 1 LNS 161 Syarikat Kewangan Melayu Raya v Malayan Banking Bhd [1986] CLJU 98 United Malayan Banking Corp Bhd v Chong Bun Sun [1994] 2 MLJ 221 United Overseas Bank (Malaysia) Bhd v Bashir Holdings Sdn Bhd [2020] MLJU 1336