The ousted founders of Kargo Xpress (Kuala Lumpur International) have filed a MYR50 million ringgit (USD11 million) lawsuit against MMAG Holdings Bhd, alleging that company conspired to cause financial harm to the cargo carrier.

Gunasekar Mariappan and Philip Phang Kin Ming filed the lawsuit in Kuala Lumpur's High Court, naming Victor Chin Boon Long, Kenny Khow Chuan Wah, Chong Koon Meng, M Jets International Sdn Bhd (Kargo Xpress's legal name), Shanmugananthan Ratnam, Anton Alex Schubert, Saysu S Michael, and JT Aerotech Solutions Sdn Bhd (JTAS) as defendants.

As reported in the Malaysian Reserve outlet, Gunasekar and Phang say they entered into a term sheet agreement with Chin, who they describe as a shadow director and driving force behind MMAG, to buy a charter airline called M Jets International Sdn Bhd (M Jets) and rebrand it as Kargo Xpress.

Under the agreement, Chin used MMAG to buy an 80% stake in M Jets for a reported MYR21.36 million (USD4.7 million), while Gunasekar and Phang acquired the remaining 20% via a company called JT Aerotech Solutions Sdn Bhd (JTAS). MMAG, JTAS, and the seller proceeded with a series of back-to-back agreements to close the sale in late 2020.

On its website, the publicly-listed MMAG describes itself as a "fully-fledged integrated supply chain management company that provides first, mid and last-mile delivery services in Malaysia and across Asia with full connectivity by air, sea and land." Its subsidiary, M Jets International Sdn. Bhd, holds the air operator certificate for Kargo Xpress. That airline started up in 2021 and now operates three B737-800(BCF)s. A fourth aircraft, a B737-400(F), is inactive.

However, after the sale closed and Kargo Xpress launched, Gunasekar and Phang claim MMAG and the other defendants conspired to remove them from operational and management roles at M Jet, resulting in a loss of contracts and revenues. They say that Shanmugananthan, Anton Alex and Saysu colluded with Chin, MMAG, and the remaining defendants to eventually remove them from roles at M Jets, and prevent them from looking after their investment.

Events culminated earlier this year when Chin and MMAG went on to lodge complaints with Malaysia's Anti-Corruption Commission (MACC), resulting in the formal suspension of Gunasekar and Phang from their operational and board roles at M Jets. However, neither has been charged with any offence. ch-aviation reported on the mid-February raid on the M Jets office; the freezing of the airline's bank accounts; the subsequent ousting of Gunasekar and Phang; and the smooth transition of power at the airline to Woo Kam Weng as interim CEO.

In their lawsuit, Gunasekar and Phang are seeking the return of their initial investment and a compensation package covering such things as the loss of security deposits and profits. Specifically, the duo is claiming MYR9.6 million (USD2.1 million) in special damages from the defendants; MYR30.45 million (USD6.7 million) in damages for alleged loss of profit, investment and business opportunities; and MYR9.8 million (USD2.2 million) in exemplary and punitive damages. There is also a claim for interest and costs.

In a July 13 filing with the Bursa Malaysia, MMAG Holdings Bhd said it was reviewing the claim. MMAG says the lawsuit has no current impact on its operations or finances but says that may change down the track, depending on the lawsuit's outcome. The High Court has scheduled a case management hearing on July 25.