The court established that Bai Bithaman Ajil transactions do not violate s 214A of the National Land Code as they do not entail actual property transfers.

Tengku Maimun Tuan Mat CJ:

Introduction

[1] The courts in the common law systems or jurisdictions often remind themselves of the 'common sense warning'; that courts ought not to be too quick to assume illegality or invalidity of contracts when dealing with statutes regulating commercial transactions.

[2] This is because in many cases the mere existence of penal sanctions against the impugned transaction is not itself a sufficient ground to render the entire commercial transaction void for illegality unless the law very clearly (expressly or impliedly) intended it to be so even without an express savings clause.

[3] The most recent pronouncement of this court endorsing the above proposition of law is PJD Regency Sdn Bhd v. Tribunal Tuntutan Pembeli Rumah & Anor And Other Appeals, 2021 MarsdenLR 942 ('PJD Regency').

[4] The essential issue in this appeal is whether the Asset Purchase Agreement and Asset Sale Agreement in the Bai Bithaman Ajil ('BBA') transaction is invalid for being in violation of s 214A National Land Code 1965 which is now the National Land Code (Revised 2020) [Act 828] ('NLC').

Background Facts

[5] The 1st appellant was granted BBA facility by the respondent bank, with the 2nd appellant as the guarantor.

[6] The BBA facility was executed through an Asset Purchase Agreement dated 24 June 2008, where the respondent "purchased" the Land from the 1st appellant for RM48,000,000.00 and then through an Asset Sale Agreement of the same date, the 1st appellant "repurchased" the Land from the respondent at the price of RM81,088,810.32 to be paid on instalment basis. The respondent bank also concluded a Guarantee & Indemnity Agreement dated 24 June 2008 with the 2nd appellant to guarantee the selling price payable under the Asset Sale Agreement. A Supplemental Agreement to amend certain provisions of the Asset Sale Agreement was concluded between the parties on 25 July 2008.

[7] We use the words "purchase" and "repurchase" in this way because BBA agreement is different from a conventional loan agreement. BBA is a sale and purchase transaction of an asset to be paid on a later date (deferred payment) based on a price, which includes profit margin agreed to by both contracting parties. As such the profit in a BBA contract is different from 'interest' arising from a conventional loan transaction.

[8] The 1st appellant as the registered proprietor of an estate land held under title HS(D) 20109, Lot 11445, Mukim Durian Sebatang, Perak ('the Land'), charged the Land to the respondent to secure the payment. The charge over the Land was registered vide Charge Presentation No 44692/2011 ('charge') on 3 October 2011.

[9] Both parties conceded that at all material times, no memorandum of transfer was effected pursuant to any provisions of the NLC or any other law on real property in respect of the Land.

[10] In this judgment, for convenience, the Asset Sale Agreement, the Asset Purchase Agreement, the Supplemental Agreement and the Guarantee & Indemnity Agreement will be referred to collectively as the 'BBA agreement'.

[11] The 1st appellant defaulted on the BBA agreement and the respondent accordingly terminated it. Thereafter, parties were engaged in a series of suits with the respondent essentially seeking to recover the monies it is owed and the appellants denying responsibility to repay the same.

[12] The first of these suits is Civil Suit No: WA-22M-39-030-2017 ('Suit 39') filed by the respondent in the High court in Malaya at Kuala Lumpur against the appellants for a money judgment on the BBA agreement. The respondent successfully obtained judgment against the appellants.

[13] The second suit is Suit No AA-24FC-526-06/2017 ('Suit 526') filed by the respondent in the High court in Malaya at Ipoh seeking an order for sale against the Land. The order for sale was granted and the appellants were unsuccessful in their appeals against the same before the court of Appeal and this court.

[14] The third suit is the one filed by the appell