High Court dismisses challenge to Minister of Finance’s approval for disposal of non-performing loans
23 April 2026
The High Court in Mohamed Aminudeen bin Abdul Hamid v Menteri Kewangan Malaysia & Ors (WA-25-88-02/2020)dismissed a judicial review application brought to challenge an established blanket approval granted by the Minister of Finance (“Minister”) under the Banking and Financial Institutions Act 1989 (“BAFIA”). The approval formed part of a regulatory framework permitting the transfer of non-performing loans (“NPLs”) by licensed financial institutions to non-licensed entities in the wake of the 1997 Asian Financial Crisis.
The High Court’s decision is significant to the banking industry as it reinforces the validity of a framework widely relied upon in the disposal of distressed assets and clarifies the limits of judicial review over such measures. In particular, it considers whether such approvals are amenable to challenge and the extent to which statutory powers may be exercised on a general or “blanket” basis in responding to systemic financial distress.
Partner Kwong Chiew Ee and Associate Lee Ji Kean represented one of the Respondents that was successful in opposing the judicial review.
This article provides an overview of the High Court’s decision.
Snapshot
The dispute finds its roots in the aftermath of the 1997 Asian Financial Crisis, which left Malaysian financial institutions grappling with a significant volume of non-performing loans (“NPLs”). In response, Bank Negara Malaysia (“BNM”) adopted a series of measures aimed at stabilising the financial system and facilitating the orderly disposal of distressed assets.
A key aspect of this regulatory response was the facilitation of transfers and disposals of NPLs to non-licensed financial institutions. On 6 July 2007, BNM procured a blanket approval from the Minister, granting all financial institutions approval (“Blanket Approval”) to dispose of NPLs to non-licensed financial institutions, provided that such disposals complied with the Guidelines on the Disposal/Purchase of Non-Performing Loans by Banking Institutions. This approval operated within the statutory framework of section 49 of the BAFIA and the Banking and Financial Institution (Licensed Institutions) (Disposal of Non-Performing Loans) (Exemption) Order 2007 (“Exemption Order”) and effectively facilitated secondary market transactions involving distressed loan portfolios in Malaysia.
Present matter
Between 1999 and 2000, the applicant, Mohamed Aminudeen bin Abdul Hamid (“Applicant”), obtained financing facilities from Malayan Banking Berhad (“MBB”), charging two properties as security to MBB. The Applicant subsequently defaulted on his repayment obligations.
On 3 January 2008, MBB entered into a conditional sale and purchase agreement with Glorious Flame Sdn Bhd, formerly known as Resolution Alliance Sdn Bhd (“RASB”), for the disposal of its NPL portfolio, which included the Applicant’s loan. The sale of the NPLs to RASB was approved in line with the Blanket Approval.
Following this, MBB and RASB obtained a vesting order from the High Court of Kuala Lumpur (“Vesting Order”) to effect the transfer of part of MBB’s NPLs to RASB. RASB subsequently obtained orders for sale in respect of the Applicant’s charged properties in 2011 and 2016. One of the properties was sold by public auction in 2013, while the auction of the second property has since been held in abeyance due to various challenges by the Applicant.
The Applicant sought to challenge the legality of the Blanket Approval by way of judicial review on the grounds of procedural impropriety, illegality, and irrationality. The Applicant claimed that:
- the Blanket Approval was inconsistent with section 49 of the BAFIA which, it was argued, requires approvals to be considered on a case-by-case basis. On this footing, the Applicant submitted that, in granting a Blanket Approval, the Minister had effectively abdicated or unlawfully delegated its statutory discretion to BNM; and
- the subsequent sale of MBB’s NPLs to RASB resulted in a substantial outflow of funds from Malaysia. In light of the scale of the financial implications, it was argued that such an outcome was incompatible with the Minister’s overarching responsibility to safeguard Malaysia’s financial stability.
Prior to the present judicial review, the Applicant had commenced no fewer than seven civil suits against the Minister, BNM, and others (collectively, “Respondents”) arising from the disposal of, and ensuing orders for sale, his properties. The judicial review application was filed only on 13 February 2020 - nearly 13 years after the Blanket Approval had been granted, and after the Applicant had unsuccessfully litigated the same underlying subject matter through multiple prior civil suits.
Against this backdrop, the Respondents contended that the present judicial review was not only procedurally defective, having been filed outside the time limit stipulated in the Rules of Court 2012
(“RoC 2012”), but also constituted an attempt to reopen matters that had already been litigated contrary to the doctrine of res judicata as the issues surrounding the Blanket Approval, the Vesting Order, and the Exemption Order had either been directly or indirectly raised in the earlier proceedings.
It is in this context that the court was called upon to determine three principal issues: first, whether the application was time-barred; second, whether the impugned Blanket Approval was amenable to judicial review as an administrative act, or insulated as a matter of policy; and third, whether the doctrine of res judicata operated to preclude the Applicant’s claims.
Judgment
The High Court dismissed the Applicant’s judicial review in its entirety on both procedural and substantive grounds, with an additional and independent reliance on the doctrine of res judicata.
Procedural issues
The court began with the issue of delay. The impugned Blanket Approval was issued on 6 July 2007, whereas the judicial review application was only filed on 13 February 2020 - more than 12 years later. Applying Order 53 rule 3(6) of the RoC 2012, which requires applications to be made “promptly”, the court held that such a prolonged and unexplained delay was fatal to the application as it was time-barred and liable to be dismissed on this ground alone.
The court further underscored that section 114 of the BAFIA and its successor provision, section 267 of the Financial Services Act 2013, confer a comprehensive statutory shield on the relevant public authorities. In particular, these provisions immunise the Minister, the Government of Malaysia, and BNM from “any action, suit, prosecution or other proceeding” in respect of acts done pursuant to the statutory framework, unless it is shown that such acts were carried out in bad faith.
Failure to establish procedural impropriety, illegality, and irrationality
The Applicant argued that the statutory framework under section 49 of the BAFIA prohibited the approval of any sale of NPLs by a licensed institution to a non-licensed entity, positing that section 49(9)(a) precludes BNM from making such a recommendation and the Minister from granting approval.
The court noted that this argument failed to account for the operation of section 118 of BAFIA, which confers upon the Minister a broad statutory power to grant exemptions from any provision of the Act, subject to specified safeguards. The exercise of that power is conditioned upon a recommendation by BNM and the Minister being satisfied that the exemption would not be prejudicial to the promotion of a sound financial structure in Malaysia, nor contrary to the public interest.
Pursuant to section 118, the Exemption Order was duly gazetted on 10 May 2007. The effect of the Order was to disapply section 49(9)(a) in relation to the disposal of NPLs by licensed institutions to non-licensed entities, provided that such disposals complied with the applicable regulatory guidelines. In substance, the statutory prohibition relied upon by the Applicant had already been lifted through a valid exercise of the Minister’s exemption power.
In this context, BNM’s subsequent application to the Minister on 28 June 2007 for a Blanket Approval must be understood as operating within an amended legal framework in which such transactions were expressly permitted. The Blanket Approval did not circumvent the statutory scheme, and the challenge on grounds of procedural impropriety and illegality therefore failed.
Further, the court characterised the grant of the Blanket Approval as a policy decision taken in response to the prevailing financial conditions following the 1997 Asian Financial Crisis. The court reiterated that courts are slow to intervene in matters involving policy considerations, further emphasising that governmental decisions of this nature are informed by technical, economic, and non-legal considerations. These fell outside the institutional competence of the judiciary. On this basis, the Blanket Approval was held to be insulated from judicial scrutiny.
The argument that the Blanket Approval resulted in a substantial outflow of national funds did not withstand scrutiny in light of BNM’s rationale that it was necessary to manage the disposal of NPLs during the financial crisis and preserve the stability of the Malaysian banking system. The approval facilitated the expeditious disposal of NPLs with regulatory safeguards, and any alleged outflow of funds was balanced against the need to restore liquidity during the financial crisis. Therefore, the challenge on the ground of irrationality failed.
Lastly, the court also took cognisance of the potentially dire consequences of invalidating the Blanket Approval on the banking industry. Given the lapse of time, the charged and/or assigned properties forming part of the NPL portfolios would, in the ordinary course, have been enforced through numerous orders for sale and subsequently transferred to third party purchasers. These transactions, carried out over many years, involved a wide pool of parties who had relied, directly or indirectly, on the validity of the Blanket Approval. The consequences of setting aside the Blanket Approval would therefore extend beyond the parties before the court to the banking system and numerous third-party interests. The scale of disruption that could follow was a relevant and weighty consideration.
In those circumstances, even assuming that the Applicant had established some form of legal wrong, the court held that the discretionary remedy of certiorari - a common law, prerogative writ issued by a superior court to judicial or administrative bodies to review and potentially quash decisions deemed unlawful, made without jurisdiction, or violating natural justice - ought not to be granted. Judicial review relief is discretionary, and may be refused where the public interest outweighs the Applicant’s grievance. Here, the potential prejudice to the integrity of the banking system and to third party transactions rendered it inappropriate to grant the relief sought.
Res judicata
The court also accepted that the present proceedings were barred by res judicata. Upon reviewing the earlier cause papers, the court found that the issues raised relating to the Blanket Approval, Vesting Order, and Exemption Order had already been considered, whether directly or indirectly, in the seven prior suits commenced by the Applicant. The Applicant was therefore precluded from relitigating these matters under the guise of judicial review.
Comment
The High Court decision underscores the limits of judicial review in the context of financial regulatory measures. Prior to the present judicial review application, the legality of the framework governing the disposal of NPLs had been tested only indirectly through a series of civil suits, including proceedings resisting the foreclosure and sale of assets charged to secure NPLs. This application marked the first direct challenge to the Blanket Approval by way of judicial review.
At its core, the judgment affirms the validity of a framework that has been central to how banks manage and dispose of NPLs. Following the 1997 Asian Financial Crisis, the ability of financial institutions to transfer distressed assets efficiently was critical to restoring balance sheets, improving capital positions, and maintaining liquidity. By upholding the Blanket Approval, the court has effectively reinforced the legal certainty underpinning these transactions, including those already completed and those that are part of legacy portfolios.
The decision also provides assurance to market participants involved in the secondary debt market. Purchasers of distressed debt, financiers, and downstream acquirers of secured assets can take comfort that the regulatory approvals supporting such transactions are not easily open to collateral attack many years later.
More broadly, the judgment confirms that decisions grounded in economic or financial policy attract significant judicial deference. Measures adopted by the government and regulator in response to financial crises, including those aimed at maintaining financial stability and liquidity, are unlikely to be impugned unless they are shown to be arbitrary, unconstitutional, or an abuse of power.