Substance Over Form: An Analysis Of The Federal Court Decision In Maple Amalgamated Sdn Bhd & Anor v Bank Pertanian Malaysia Berhad

Published date03 August 2021
Subject MatterFinance and Banking, Corporate/Commercial Law, Litigation, Mediation & Arbitration, Financial Services, Corporate and Company Law, Contracts and Commercial Law, Trials & Appeals & Compensation, Islamic Finance
Law FirmAzmi & Associates
AuthorMs Natalia Izra Dato' Nasaruddin, Tengku Nazmi Tengku Anuar and Irfan Suhail Mohamed

Modern Islamic finance has seen a significant increase in utilisation since its inception in the 1960s, and its continuing development demands that the legal framework within which Islamic finance in Malaysia is to thrive must keep pace. The Federal Court case of Maple Amalgamated Sdn Bhd & Anor v Bank Pertanian Malaysia Berhad ("Maple Amalgamated") represents the latest in a long line of developments which will inevitably play a key role in shaping the legal framework of Islamic finance in Malaysia.

The decision in Maple Amalgamated is the much-anticipated resolution of a protracted dispute between the company Maple Amalgamated Sdn Bhd and one other ("the Appellants") and Bank Pertanian Malaysia Berhad ("the Respondent") in a suit arising, amongst others, over the impugned legality of Asset Sale and Asset Purchase Agreements ("Asset Sale and Purchase Agreements") entered into as part of a Bai' Bithaman Ajil ("BBA") financing facility when such Asset Sale and Purchase Agreements appear to contravene Section 214A of the National Land Code 1965 ("S.214A").

Such BBA financing facilities as can be seen in Maple Amalgamated generally involve the bank purchasing a particular asset owned by the customer for the value of the financing to be provided. Subsequently, the bank will then sell the same asset back to the customer at a price greater than the value obtained by the customer which is to be paid on a deferred and instalment basis. The agreements by which this exercise is carried out are known as asset purchase and asset sale agreements respectively.

In Maple Amalgamated, the Appellants sought to impugn the legality of the Asset Sale and Purchase Agreements on the grounds that the land which was the subject matter of the Asset Sale and Purchase Agreements was estate land and, pursuant to S.214A, any transfer, conveyance or disposal of estate land would require the consent of the Estate Land Board, something which had not been obtained by the parties. The matter was commenced in the High Court where the Court ruled in favour of the Respondent.1 A similar ruling was also handed down by the Court of Appeal2 whereupon the Appellant sought leave to appeal from the Federal Court.

In granting leave to appeal, the sole question of law which the Federal Court agreed to hear was this:

"Whether an unconditional agreement for the sale and purchase of an estate land by way of asset purchase agreement and asset sale agreement ('Asset Sale & Purchase Agreements') pursuant...

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