JUDGMENT

Abdul Malek Ahmad JCA:

The appellant, who was the plaintiff in the court below, had applied by originating motion dated 5 October 1994 for an order that the charges dated 8 May 1984 executed by his attorney in favour of the defendant, who is the respondent before us, in respect of twenty five lots of land registered as PT 109 (H.S.(D)) K.B. 645/83, PT 110 (H.S.(D)) K.B. 646/83, and from PT 113 (H.S.(D)) K.B. 649/83 to PT 135 (H.S.(D)) K.B. 671/83, all in Section 12, Kota Bharu, Kelantan (hereinafter "the properties") be declared null and void and of no effect and that the memorandum of charge registered under Charge No: Jilid 39, Folio 36, Bil Perserahan No. 109/83 and Charge No: Jilid 39, Folio 37, Bil Perserahan No. 1092/84 with the Director of Land and Mines, Kota Bharu, Kelantan be cancelled.

He had also applied for an order that the Property Sale Agreement and the Property Purchase Agreement executed by the parties dated 6 May 1984 be declared null and void and of no effect and that consequent to both these prayers, the respondent be ordered to return the titles of the properties, free of all encumbrances, to him.

Under the Property Purchase Agreement, the respondent had purchased the properties for RM520,000 but after having so purchased, under the Property Sale Agreement they were resold to the appellant for RM629,000 resulting in a profit of RM109,200. These two agreements were entered into on 6 May 1984. Two days later, the appellant's attorney executed the charges on the properties in favour of the respondent as security for the loan of RM629,200 purportedly granted under the Islamic Banking Concept of Al Bai Bithaman Ajil (hereinafter "ABBA').

In support of the motion, the appellant raised two issues. The first was that the respondent was at all material times prohibited from accepting charges in respect of usury transactions. In consequence, the acceptance of the charges by the respondent in this instance was ultra vires its Articles of Association. However, this issue was abandoned at the outset of the hearing.

The second issue was that the execution of the Property Purchase Agreement, Property Sale Agreement and the charge documents amounted to a colourable exercise to defeat the very purpose and intention of the Malay Reservations Enactment 1930 of Kelantan (hereinafter "the Enactment") and the National Land Code (hereinafter 'the Code").

On this issue, learned counsel for the appellant argued that the execution of the Property Purchase Agreement had contravened the provisions of ss. 7(i) and 12 of the Enactment and accordingly the court ought to declare that the dealing is null and void and that the creation of the charges by the appellant would be of no effect and should be set aside.

Section 7(i) of the Enactment provides:

7.(i) No right or interest of any Malay in reservation land and no right or interest in such land acquired by virtue of Section 13A by any person not being a Malay shall be transferred to or transmitted to or vest in any person not being a Malay provided that leases of reservation land shall be valid to the extent specified in sub-sections (ii) to (v) below, save as provided in this Enactment.

Reference is made in that provision to s. 13A of the Enactment and it is therefore necessary to set it out here:

13A. (i) His Highness the Ruler in Council may approve

(a) the alienation of any State Land included in a Malay Reservation,

(b) the transfer or transmission of the right or interest of any Malay in reservation land, and

(c) the transfer or transmission of any reservation land acquired by virtue of this section, by any person not being a Malay,

to any other person not being a Malay, subject to the imposition of such restriction in interest and such conditions in the document of title and such terms of rent as he may think fit: and the Approved Application, Memorandum of Transfer or Application for Registration, as the case may be, under the Land Enactment may be registered if pre