MALAYSIAN CO-OPERATIVES AND THE NEW LAWS

Several provisions in the Acts establishing the Malaysian Co-operative Commission and amending the Co-operative Societies Act 1993 are not in keeping with the percepts of the Federal Constitution

Koperasi Keretapi Berhad (“KKB”) - THE RAILWAY CO-OPERATIVE SOCIETY MALAYSIA -has on 2nd January 2008 filed a legal action at the High Court in Kuala Lumpur to challenge several of the provisions in the Malaysia Co-operative Commission Act 2007 and the Co-operative Societies (Amendment) Act 2007 which came into force on 1st January 2008.

KKB feels it is unreasonable for its capital, which has been built up over the years for the benefit of its members as a result of good management by the members of its Board, to now be taken away and used by the Government without adequate compensation.

The requirement for an outside body approving the members of the Board is also an unreasonable restriction on the rights of the members of KKB to manage KKB.

KKB has taken this step because we feel aggrieved by several of the provisions which unreasonably restrict the fundamental liberty of members of KKB to associate under Article 10 of the Federal Constitution

the fundamental liberty of KKB not to be deprived of its property for the use of the Government without adequate compensation in accordance with Article 13 of the Federal Constitution

the fundamental liberty of the officers of KKB not to be subjected to arbitrary arrest under Article 5 of the Federal Constitution

Koperasi Keretapi Berhad is one of the earliest co-operative societies established in Malaysia. In 1923, it was formed for the benefit of employees of Malayan Railways with the name “Railway Cooperative Thrift and Loan Society Limited” with only 98 members.

As at 31 December 2006, as a result of careful management by the management of the co-operative over the approximately 84 years of its life, the Co-operative has a subscription capital of RM4,342,257.99 and fixed and current assets amounting to RM4,674,199.73 and reserve capitals of RM1,092,000.00 whilst its current liabilities are only RM282,185.88.

The legal action filed by KKB asks for declarations that:-

Section 43 (1) of the Malaysian Cooperative Societies Commission Act 2007 (the Act) requiring that all cooperative societies shall deposit their funds not immediately needed for operations or investments into the Cooperative Deposit Account and Section 42(2) of the Act requiring cooperative societies to pay a percentage of its share capital, subscription capital and assets to the Central Liquidity Fund without providing for adequate compensation for the compulsory acquisition or use of the funds is inconsistent with Article 13 (2) of the Federal Constitution and is therefore invalid pursuant to Article 4 (1) of the Federal Constitution.

Section 42 (1) of the Malaysia Cooperative Societies Commission Act 2007 (the said Act) enabling the Malaysia Cooperative Societies Commission to require any cooperative society or any class, category or description of cooperative society by order in writing to contribute to the Central Liquidity Fund established under Section 42 of the said Act is money howsoever raised or received by the Federation and ought to be paid pursuant to Article 97 of the Federal Constitution to the Federal Consolidated Fund from which withdrawals are permitted in the manner stated in Article 104 of the Federal Constitution and the said Section 42 (1) of the said Act is therefore invalid under Article 4 (1) of the Federal Constitution for being inconsistent with the Federal Constitution.

Section 54 of the Malaysia Cooperative Societies Commission Act 2007 (the said Act) which provides that every offence punishable under the said Act, the Cooperative Societies Act 1993 or any other written law enforced by the Malaysia Cooperative Societies Commission shall be a seizable offence and that a police officer not below the rank of Inspector or an Investigating Officer may arrest on reasonable suspicion without being required to state the reasons for the arrest is inconsistent with to Article 5 (1) and (3) of the Federal Constitution which provides that no person shall be deprived of his life or personal liberty save in accordance with law and further requires that the person arrested shall be informed as soon as may be of the grounds of his arrest and shall be allowed to consult and be defended by a legal practitioner of his choice and the said Section 54 of the said Act is therefore invalid under Article 4 (1) of the Federal Constitution.

Section 43 (2) of the Cooperative Societies Act 1993 (as amended by the Cooperative Societies Amendment Act 2007)

which requires that a cooperative society shall, prior to the appointment or re-appointment of any person as a member of the Board of a cooperative society, seek verification from the Malaysia Cooperative Societies Commission on whether such person satisfies the fit and proper person criteria as may be specified by the Malaysia Cooperative Societies Commission is inconsistent with the citizens’ fundamental right of freedom of association guaranteed by Article 10 (1) of the Federal Constitution and not excepted by Article 10 (2), 10 (3) or 10 (4) of the Federal Constitution.

KKB has taken this legal action to safeguard the interests of our members and their savings.
We hope the Government will review their decision to enforce the Act or will take the necessary steps to repeal or amend the Act so it is consistent with the requirements of the Federal Constitution.

Dated 2nd January 2008

Che Hani bin Ismail

Secretary

Koperasi Keretapi Berhad