12 July 2023

Legal team secures victory for SME bank in Islamic banking dispute, defeating counterclaim

Our Legal Associates, Sharanya Visualingam and Aida Liyana Zainal Rashid together with our pupil-in-chambers, Siti Sarah Kamaruzzaman had on 31.05.2023, acted for Small Medium Enterprise Development Bank Malaysia Berhad (“the Plaintiff”) in an Islamic Banking matter and succeeded in a Summary Judgment Application and Striking Out of the Defendant’s Counterclaim Application (“the Applications”).

Parties had entered into a Commodity Murabahah Term Financing-i (CMTF-i) Facility totaling a sum of RM27,041,704.59 (“Murabahah Financing Facility”). However, the Defendant had failed to comply with the terms and conditions of the relevant Murabahah Financing Facility Documents and as such the Plaintiff commenced a Suit against the Defendant for amongst others the outstanding sum of RM38,080,312.45 due and owing to the Plaintiff.

The Defendant had submitted that the Applications should not be allowed as there are triable issues and that the Defendant has a valid Counterclaim as against the Plaintiff due to the said issues. The main triable issue submitted by the Defendant was “Whether the Murabahah Facility Agreement was invalid (due to purported non-compliance of Shariah principles) and warrants the High Court to refer the same to the Shariah Advisory Council (“SAC”) for its decision”.

We had submitted that the Murabahah Financing Facility was valid and Shariah compliant and that the Defendant did not expressly raise any novel question on the Shariah principles in the present case for the Honourable Court to refer the same to the SAC. In any event, there are already existing SAC Guidelines and Policy Documents governing Murabahah Financing Facilities.

Having heard submissions from counsels for both parties, the Court allowed both the Applications with costs.

For more insight into this area of law, please contact our Partners in the Litigation Practice Group:

P Jayasingam
Wong Keat Ching
Thavaselvi Pararajasingam
Idza Hajar Ahmad Idzam
Farah Shuhadah Razali

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