The Malay Mail,
Former MIC Youth head's unprecedented class action suit set to open can of worms
Wednesday, January 13th, 2010
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
The section allows MIED, as an entity, to sue to recover or punish
its trustees, directors and officers for losses, fraud, negligence and
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
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
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
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
"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
● 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
● 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
● 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.
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.