(SINGAPORE) Malaysia's national carrier, Malaysian Airline System (MAS), is being sued by Air Maldives, over an alleged breach of a management contract inked between the two about a decade back.

The Maldivian government, the majority owner of Air Maldives, has itself launched its own suit - over a related deal - against Naluri Corporation, the former flagship company of Malaysian businessman Tajudin Ramli, who used to be MAS's chairman.

Both Air Maldives and the government of the Republic of Maldives have alleged that MAS and Naluri failed to honour their respective agreements to help Air Maldives set up, operate and manage an international air operation.

It's understood that both Malaysian companies are contesting the lawsuits.

An announcement by MAS on the Bursa Malaysia website on May 16 this year said the airline had received a letter from the Secretariat of the ICC International Court of Arbitration in Paris, giving notice of an arbitration proceeding initiated by Air Maldives 'alleging that MAS had failed to perform its duties under a management agreement entered between MAS and Air Maldives on Jan 16, 1996'.

The announcement went on to say that MAS was taking legal advice to challenge the claim.

MAS added that it was unable to, at that time, state what, if any, effect the claim would have on its financial position - as the notice of arbitration did not specify the amounts claimed by Air Maldives from MAS.

'Neither does it provide sufficient information to enable MAS to meaningfully assess the quantum of Air Maldives' claim,' it added.

There have been no subsequent announcements by MAS on the matter.

Naluri posted an earlier announcement on the Malaysian stock exchange's website. On April 16, 2007, it said it had been served with a Notice of Arbitration by the solicitors acting for the government of the Republic of Maldives.

Attempts by BT to contact both MAS and Naluri for comment were unsuccessful.

Local law firm Allen & Gledhill (A&G) represents both Maldivian parties in their separate suits. When contacted yesterday, A&G partner Kenneth Pereira confirmed his firm was acting for the Maldivian government and Air Maldives - and that they had commenced legal action against Naluri and MAS, respectively.

Mr Pereira declined to give further details, except to say that the Maldivian government was suing Naluri on the grounds that it had failed to perform its duties under various agreements. It is claiming for losses suffered - and damages are estimated at some US$69 million.

It is understood that some years back the Maldivian government sought to develop Air Maldives, a domestic airline, into an international one. It approached MAS, then under Mr Tajudin, for its help.

Air Maldives then signed a memorandum of understanding with Naluri - a company owned by Mr Tajudin - in July 1994, in which Naluri agreed to provide professional and technical expertise to establish international air operations for Air Maldives.

In a shareholders' agreement signed in October 1994, it was agreed that Naluri would provide the necessary funding in case Air Maldives didn't have the means to establish such international air operations. Naluri then became a 49 per cent shareholder of Air Maldives.

Air Maldives is suing MAS in a separate suit, but over a related matter. The two had inked a management agreement in January 1996, in which MAS was to provide management services to Air Maldives - including managing the latter's business, seconding employees and training Air Maldives staff.

Mr Tajudin had been considered Malaysia's national hero, during his stewardship of MAS - but has since slipped into almost complete obscurity, after having sold back the loss-making airline to the Malaysian government in 2000.

When Mr Tajudin borrowed RM1.79 billion in 1994, then worth about S$1.03 billion, to buy a 32 per cent stake in MAS from the government, he was praised as the type of New Malay the country needed.

But, in a shocking development last July, Mr Tajudin said he was forced by former prime minister and then finance minister Mahathir Mohamad to buy MAS in 1994, to help bail out the country's central bank. He said he reluctantly took out a loan for the purchase, pledging other companies he owned as collateral.

The loans became non-performing during the 1997 Asian financial crisis and were taken over by then Malaysian asset management agency Danaharta, along with Mr Tajudin's companies. The Malaysian government's purchase of MAS in 2000 was seen widely as a bail-out for Mr Tajudin.

Dr Mahathir has denied Mr Tajudin's claim that he was forced to buy MAS as a 'national service', saying it was the latter who first indicated his interest in buying the carrier.

Meanwhile, MAS has sued Mr Tajudin for an alleged breach of fiduciary duties.

MAS filed the suit last year, claiming Mr Tajudin had breached his duties during his tenure as the company's director, chairman and principal executive officer, in procuring MAS to enter into various projects and business with third parties in total disregard to the interest of the company.

Naluri - Mr Tajudin's flagship - was named as one of the four co-defendants in the suit filed in the High Court in Malaysia. The others are Promet (Langkawi) Resorts Sdn Bhd, Kauthar Venture Capital Sdn Bhd and Pakatan Permai Sdn Bhd.

The suit alleges that Mr Tajudin had conspired with the co-defendants respectively to cause loss and damage to the company.