High Court voids ‘Ali Baba’ scheme, throws out RM538,000 claim
The Malaysian High Court voided a construction contract, ruling that it was an illegal 'Ali Baba' scheme designed to circumvent government procurement policies. The court refused to enforce the payment claim, stating that the law will not aid in the enforcement of illegal agreements.
Why it matters
The ruling reinforces strict judicial standards against 'Ali Baba' practices, where Bumiputera licenses are rented out to non-eligible contractors.
Share Judge says loss must lie where it falls, as the court will not enforce an illegal contract. The High Court has allowed Alor Setar Development Corporation Sdn Bhd’s appeal and set aside judgment for RM538,000 entered in favour of EE Engineering Sdn Bhd. (File pic) PETALING JAYA : The High Court in Alor Setar has overturned a sessions court ruling requiring a Bumiputera contractor to pay its subcontractor RM538,000, after holding that their contract involved an unlawful “Ali Baba” arrangement. Justice Johan Lee also ruled that the agreement between Alor Setar Development Corporation Sdn Bhd (ASDC) and EE Engineering (Malaysia) Sdn Bhd for the construction of a school was contrary to public policy, and therefore void under Section 24 of the Contracts Act 1950.
The article provides a clear summary of a legal judgment and the judge's reasoning.
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