No evidence of conspiracy by creditors in education firm directors’ bankruptcy: Judge
Source: Straits Times
Article Date: 01 Nov 2024
Author: Joyce Lim
Ex-directors of education firm claimed others plotted to oust them from business.
Two former directors of a private education company, who were declared bankrupt after failing to pay millions owed to creditors, have lost their bid to prove a conspiracy against them.
Mr Balbeer Singh Mangat and his wife Sirgit Gill had accused Mr Jagdish Murli Chanrai, a principal of the Kewalram Chanrai Group, of being the mastermind behind the alleged conspiracy that saw them taking up loans under onerous terms.
Mr Mangat described Kewalram Chanrai Group as a multibillion-dollar family office in Singapore. According to Bloomberg, the group runs businesses in textiles, automobiles, agricultural products and financial services.
Mr Mangat and Madam Gill alleged that Mr Chanrai, a director and shareholder of FTMS, along with two other directors in FTMS as well as FTMS’ creditors, orchestrated a scheme to oust them from FTMS Holdings, the now-insolvent company they once led.
FTMS’ creditors were Tembusu Growth Fund III, Qualgro and Ace Spring Investments.
FTMS was founded by Mr Mangat, a chartered accountant. It operated and ran education and training campuses through subsidiaries such as FTMSGlobal Academy, and had investments in 10 countries, including Malaysia, Singapore and Sri Lanka.
After a trial lasting more than 40 days from January 2023 to June 2024, the court found no evidence supporting a conspiracy among the defendants to harm the couple.
Mr Mangat and his wife, who have been undischarged bankrupts since Oct 25, 2018, were unrepresented and sought declarations that all eight loan agreements – which they entered into with Tembusu and Qualgro – were null and void.
Alternatively, they were seeking that the agreements be rescinded as a result of the conspiracy and/or for being unconscionable.
In his written judgment on Oct 28, Senior Judge Chan Seng Onn noted that the creditors’ actions were within their legal rights to enforce loan terms after FTMS repeatedly defaulted on its loan obligations.
He dismissed claims of misrepresentation, noting that Mr Mangat and Madam Gill are experienced businesspeople and were legally advised when they signed the loan and redemption agreements.
The loan conditions were neither unlawful nor part of any malicious plot, and the creditors had acted lawfully and within their contractual rights following FTMS’ repeated defaults on payments, noted Justice Chan.
The dispute originated in 2015 when FTMS Holdings, led by Mr Mangat, borrowed US$3 million (S$4 million) from Qualgro and US$4.5 million from Tembusu, with both loans backed by personal guarantees from Mr Mangat and his wife.
Shortly after obtaining the loans, Qualgro and Tembusu, collectively referred to as the lenders, reported multiple defaults by FTMS on interest payments and initiated “events of default” under the loan terms.
This led to FTMS entering into redemption agreements with the lenders, under stricter repayment conditions.
Thereafter, Mr Chanrai brought in Mr Eric Alfred Schaer and Mr Nicolas Kim-Hoang Nguyen to assist FTMS to raise funds. Both were appointed to the FTMS board in December 2016.
Mr Mangat claimed that Mr Schaer and Mr Nguyen did not have any intention to help FTMS raise funds. He alleged that they were part of the conspiracy to obtain a majority on the FTMS board to control the company.
On Feb 7, 2017, the lenders commenced legal proceedings against the couple. However, on March 28, 2017, the lenders transferred all their loan rights to Ace, a company incorporated in the British Virgin Islands. Ace was later substituted as the plaintiff in their lawsuits.
Mr Mangat and Madam Gill were subsequently removed from their directorships and declared bankrupt on Oct 25, 2018.
In 2022, Ace withdrew from the lawsuit and has since been absent and unrepresented.
Mr Schaer and Mr Nguyen were also absent and unrepresented at trial.
Mr Chanrai was represented by lawyers Alfred Lim, Jaime Lye and Sean Choong from Meritus Law. Tembusu was represented by Mr Daniel Chia, Mr Ker Yanguang and Ms Charlene Wee from law firm Prolegis.
Mr Balakrishnan Ashok Kumar, Mr Darius Tay and their team of lawyers from Blackoak represented Qualgro.
Mr Lim, managing director of Meritus Law, had called Mr Mangat’s case “the tale of a self-made man who over-promised and over-projected when building his house of cards”.
He said the couple had only themselves to blame for the dire straits that FTMS and its subsidiaries got into, further pointing out that the couple had caused FTMS to take on numerous loans at high interest rates to pay for operational costs and fund expansion plans.
Justice Chan noted in his judgment that the financial losses experienced by Mr Mangat and his wife, as well as FTMS, were largely a result of business decisions and repeated loan defaults, rather than any conspiracy by the creditors.
The judge explained that the couple willingly entered into loan agreements with challenging terms, fully aware of their obligations, which contributed to FTMS’ cash flow issues and eventual insolvency.
The judge underscored that Mr Chanrai’s substantial investments in FTMS, which included about $8 million in a share subscription in 2011 and personal loans to the company, made the couple’s allegations of malice implausible.
Given his substantial financial ties to the company, it “makes little commercial sense” for the couple to claim that Mr Chanrai had a predominant intention to injure FTMS as this would also harm his own interests, noted the judge.
Source: Straits Times © SPH Media Limited. Permission required for reproduction.
1658