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Chitrakala: MIED fiasco blows up

Contributed by Anonymous on Wednesday, January 13 @ 07:32:22 CST

The Malay Mail,
Former MIC Youth head's unprecedented class action suit set to open can of worms
Wednesday, January 13th, 2010 
KUALA LUMPUR: The nine trustees of MIC's billion-ringgit educational flagship Maju Institute for Education Development (MIED) have been slammed with an unprecedented legal action that could provide an insight into alleged irregularities that has wrecked the credibility of the party. The derivative action under Section 181 of the Companies Act 1965 means the MIED — that operates on government grants and public donations — would be the plaintiff if the court allows the class action to proceed.

The section allows MIED, as an entity, to sue to recover or punish its trustees, directors and officers for losses, fraud, negligence and other failures. Former MIC Youth leader and current MIED member S. Vigneswaran told a news conference in Klang this morning that he has launched the derivative action, thought to be the first such action involving a public company. He said his lawyers filed the  application to obtain leave to allow class action against the trustees at the commercial division of the Kuala Lumpur High Court yesterday. Hearing was fixed for Feb 2. Vigneswaran said he made the application after the trustees failed to respond to a notice to account for massive financial losses, abuse of power and alleged irregularities under the Companies Act. He said the 30 days' notice that is required by law to be given by the person taking the class action to the affected officers expired on Monday. In his supporting affidavit, Vigneswaran alleged breach of trust, financial mismanagement, abuse of power, negligence and breach of statutory duties. This included the alleged issue of personal loans of some RM100 million to individuals, company officials and at least one trustee. Flaws in awarding contracts for the construction of the MIED-run Asian Institute of Medicine, Science and Technology University (AIMST) University in Semeling, Kedah, have also been alleged. MIED sourced millions of ringgit from the Indian community, received about RM300 million from the government and acquired a RM220 million loan from Bank Pembangunan Malaysia to build the AIMST campus on a 228-acre site. The cost of construction ballooned from an initial RM230 million to close to RM500 million. He noted that MIED is not a business entity but a Section 24 company or a trust organisation that is limited by guarantee. "There are many limitations on what MIED can and cannot do, and has a board of trustees, instead of directors, who are elected by the life members," he said. Vigneswaran said MIED and its subsidiaries failed to observe fundamental company reporting procedures by not holding proper meetings, submitting financial accounts or annual reports. MIED has now scheduled a meeting on Monday to hold annual meetings for 2004, 2005 and 2006 — basically to pass accounts for the period. MIED founding member Tan Sri K.S.Nijhar said last night that Monday's meetings would not be affected by the court action. The court action comes in the wake of the resignation of Tan Sri Dr K. Ampikaipakan as AIMST University chairman, trustee and director of MIED. At least two AIMST directors also are expected to quit soon. Lawyer seeking damages for company's losses KUALA LUMPUR: Lawyer-politician S. Vigneswaran is seeking damages on behalf of MIED for losses to the company arising from: ● the trustees giving out loans on interest in contravention of the company’s Memorandum and Articles of Association without a money-lending licence. He contends that such acts are void loan transactions that have and are resulting in the company suffering losses estimated at more than RM90 million. ● the trustees sanctioning loans and withdrawals for the company’s and/or its subsidiaries’ director and/or officers and/or their nominees in contravention of the company’s Memorandum and Articles of Association. This, he claimed, resulted in more than RM10 million in losses to the company. ● the trustees’ breach of fiduciary duties and breach of trust, whereby the company suffered losses from transactions and contracts awarded for the construction of AIMST University, the nation’s first private university. ● the trustees appointing fellow trustee Tan Sri G. Vadivello to a salaried office of the company and in making an unauthorised payment of RM350,000 to him. ● their action in holding office as a trustee for the current year in breach of Section 143 of the Companies Act, and clause 12(b) and clause 17 of the company’s Articles of Association. ● their action to operate the board with an unlawfully constituted composition of the board resulting in the company being exposed to an adverse legal position, Vigneswaran noted that MIC chief Datuk Seri S. Samy Vellu, former MIC treasurer-general Tan Sri M. Mahalingam, former MIC vice-president Tan Sri K.S. Nijhar, Datuk Dr T. Marimuthu, Vadivello and former MIC vice-president Tan Sri K. Kumaran, having retired by virtue of section 129(2) of the Companies Act, have been operating with no resolution passed for the current year to re-appoint them annually since their respective retirements. An AGM should have been convened last year to obtain the sanction of members to allow the six trustees, who were already above the age of 70 in 2008, to continue in office for the year 2009. About Section 181 SECTION 181: ● is a statutory derivative action introduced by Parliament in 2007; ● it allows members of organisations and minority shareholders to act to safeguard their interest and that of the corporation against abuse, mismanagement, fraud and losses, but without incurring a huge personal cost; ● the court decides on the issues brought before it and decides to grant leave or otherwise to proceed with the class action. ● The law requires the person taking the class action to give 30 days’ notice to affected officers for them to respond or take action before an application is made to the court for remedies. MIED'S TRUSTEES The nine trustees are: Datuk Seri S. Samy Vellu, deputy MIC president Datuk G. Palanivel, Vadiveloo, Nijhar, Mahalingam, Kumaran, Dr Ampikaipakan (resigned), Dr Marimuthu and MIC vice-president Datuk S. Veerasingam.



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