KUALA LUMPUR (Feb 7): The High Court has quashed an application by former 1Malaysia Development Bhd (1MDB) president and chief executive officer Arul Kanda Kandasamy to amend his defence in 1MDB’s US$6.59 billion (RM30.83 billion) lawsuit against him, as well as to file a counterclaim over the termination of his contract extension.

The amendment of his defence was over the losses 1MDB suffered in its investment in 1MDB-Petrosaudi Ltd and its dealings with International Petroleum Investment Company (IPIC).

During Zoom proceedings on Tuesday, High Court Judicial Commissioner Datuk Raja Ahmad Mohzanuddin Shah Raja Mohzan had dismissed Arul Kanda’s application to amend his defence.

1MDB's counsel Brendan Navin Siva told The Edge after proceedings that Arul Kanda’s counterclaim had also been dismissed by the court because the application to amend the defence was also dismissed.

In his proposed amended defence and counterclaim sighted by The Edge, Arul Kanda, who was acquitted in the 1MDB audit tampering trial in March last year, is seeking close to RM57 million in aggravated, exemplary and general damages from 1MDB.

Other than Arul Kanda, former Treasury secretary general Tan Sri Mohd Irwan Serigar Abdullah has also been named as a defendant in the US$6.59 billion suit that 1MDB filed.

The former 1MDB top executive said the Malaysian government had, based on recent public statements, recovered more than its alleged losses of RM53.5 billion from 1MDB's investments and transactions.

“The defendant (Arul Kanda) states 1MDB has recovered a surplus of between RM1.4 billion and RM9.4 billion and hence it (1MDB) has no legal basis to pursue any further claim as it had recovered all of its alleged losses and pursuing a claim against him would amount to an abuse of process and unjust enrichment,” the document read.

Arul Kanda also said in his amended defence that pursuant to a recent announcement by 1MDB and the Malaysian government, the dispute between 1MDB and IPIC and its subsidiary Aabar Investments PJS had been settled and hence there is no further legal basis for 1MDB to continue its claim against him.

“1MDB is stopped from pursuing a claim against me for the alleged losses it incurred in relation to the IPIC/Aabar PJS transaction as 1MDB has compromised its claims against IPIC/Aabar PJS. Any claim by 1MDB against me would now amount to unjust enrichment and it would be an abuse of process for 1MDB to continue the claim when it has settled its dispute with IPIC/Aabar PJS,” he added.

Counterclaim based on termination of employment from 1MDB

Arul Kanda further claimed that around Feb 23, 2018, 1MDB had entered into an employment extension agreement with him, which was approved by 1MDB’s board of directors and Minister of Finance Inc — 1MDB’s sole shareholder.

Among the conditions were to extend his employment to June 30, 2018, and to pay him an ex-gratia bonus of RM5 million — of which RM2.5 million remains unpaid.

In addition, he said 1MDB did not pay his salary for the months of May and June.

“The ex-gratia bonus payment paid to me was a result of my various achievements when employed by 1MDB that resulted in the reduction of its debt by approximately RM20 billion.

“In addition, I was instrumental in ensuring [that 1MDB was] making payment of all interest and principal repayments on time; restarting the stalled TRX project; securing participation of third parties such as Prudential, HSBC and Lendlease for the TRX project; [and] recommencing and completing the stalled construction of eight air force bases in Malaysia,” he added.

Besides that, Arul Kanda said he was the one who secured the RM9.83 billion sale of Edra's equity and the 60% sale of Bandar Malaysia equity for RM7.41 billion.

Following the change in political landscape in May 2018, Arul Kanda claimed that the then finance minister made a dishonest and untrustworthy allegation against him that was published in The Edge on May 24, 2018, and that this formed the backdrop to his termination which he claimed was a wrongful dismissal.

“I further state that 1MDB did not give me adequate opportunity to address the alleged concerns of the former minister of finance and/or 1MDB prior to the termination of my Employment Extension Agreement. The finance minister and 1MDB have no legal basis to terminate my employment without any evidence of wrongdoing,” he added.

Arul Kanda further claimed that the termination of his employment agreement was allegedly made to stop him from receiving his May and June salaries that amounted to RM202,600, and the balance ex-gratia payment of RM2.5 million.

He also claimed that the alleged losses suffered by 1MDB had taken place prior to him joining 1MDB on Jan 5, 2015, and that a police report lodged subsequently had resulted in him being charged with the 1MDB audit tampering case, in which he said he was wrongly accused and had been recently acquitted.

He said he had to undergo the criminal trial, which resulted in his passport being withheld, before the KL High Court acquitted him, with the appeal by the Attorney General's Chambers dismissed by the Court of Appeal on Sept 12, 2023.

Hence, he is seeking damages for the losses he suffered — including loss of salary and ex-gratia payment — and special damages of RM54 million for loss of income, along with general, aggravated and exemplary damages.