KUALA LUMPUR (June 27): Pestech International Bhd said it has been terminated as the sub-contractor for the Gemas-Johor Baru electrified double-track project, by Syarikat Pembenaan Yeoh Tiong Lay Sdn Bhd (SPYTL).

Pestech said its unit Pestech Technology Sdn Bhd (PTech) received the notice of termination for default on May 10 from SPYTL, who took it off the project for “purported and baseless allegations of insolvency event, repudiation by sub-contractor and breach of representations, warranties or undertakings”.

The project, with a fixed sub-contract price of RM339 million, was awarded in October 2018 to an unincorporated consortium formed between PTech and Ansaldo STS Malaysia Sdn Bhd. Under the consortium, the total sub-contract price for PTech’s portion of works is RM75 million.

“PTech strenuously disputes the notice as being unlawful, baseless and amounting to SPYTL’s repudiation of the Sub-Contract with PTech. PTech reserves the right to claim for damages, losses and expenses, following SPYTL’s repudiation,” Pestech said in a bourse filing on Tuesday (June 27).

Following the receipt of the notice, Pestech said the parties had many rounds of discussions to amicably resolve the matter and decide on how best to complete the works, given that the project is of national importance.

But talks broke down and SPYTL attempted to call on the performance bond placed by PTech for the project with Maybank Islamic Bhd, which led to PTech commencing legal action against SPYTL, with an application to restrain the bank from paying the performance bond to SPYTL, as well as to restrain SPYTL from receiving and/or using the funds, on grounds that its demand for the performance bond was “baseless, fraudulent and/or unconscionable”.

On June 13, the High Court granted the ex-parte (on the interest of one party only) application sought by PTech. “Pending the exchange of affidavits and submissions, the next date for decision of the inter-partes (between the parties) is fixed on Aug 23, 2023,” said Pestech.

The group said PTech had completed nearly 70% of the project, with RM140 million in balance sum of the contract to claim, in which its unclaimed works is about RM29 million. Its balance cost to come for the project is about RM45 million to RM55 million.

“The potential loss and expense claim relating to the extension of time of the project is about RM16 million,” it said.

Meanwhile, Pestech said it has obtained an ex-parte injunction from the High Court on Tuesday to restrain SPYTL from trespassing, using and/or otherwise tampering with machinery belonging to one of its units that had been used for the project previously.

Pestech, who confirmed in January this year that its executive chairman Lim Ah Hock and managing director-cum-group chief executive officer Lim Pay Chuan have been charged for allegedly abetting in the misappropriation of RM10.6 million related to PTech, has seen its share price drop about 42% since the start of the year. Both have pleaded not guilty.

The group’s share price closed unchanged at 18 sen on Tuesday, bringing it a market capitalisation of RM178.6 million.