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THE Kuching High Court has dismissed an application by Petroleum Sarawak Berhad to recover RM7.95 million claimed under a bank guarantee by Petroliam Nasional Berhad, ruling that the demand was lawful and consistent with the terms of the guarantee.
In delivering his decision, Judge Faridz Gohim Abdullah held that Petronas's claim on the bank guarantee was valid, describing it as an unconditional and on-demand instrument that could be called upon without the need to first establish a breach of contract.
The court emphasised that the issues before it were strictly confined to whether the demand on the bank guarantee was invalid or unlawful, as framed in the Originating Summons filed by Petros.
“The court cannot determine issues that are not expressly sought in the relief,” the judge said.
The judge noted that Petros had not sought any declaration challenging the validity of the Gas Sales Agreement nor requested a ruling that the Gas Distribution Ordinance 2016 applied to Petronas in a manner requiring it to obtain a state licence. As such, broader constitutional and statutory questions raised in submissions fell outside the scope of the present proceedings.
The court further observed that the bank guarantee was expressly drafted as unconditional and payable upon written demand, without the necessity of proving any contractual default beforehand.
It also took into account that the guaranteed sum had already been received and utilised by Petronas, rendering any application for an injunction to restrain the call on the guarantee academic.
The dispute arose after Petronas called on the bank guarantee following Petros's alleged failure to settle payment for gas supplied in August 2024.
Petros had argued that Petronas lacked a valid licence under the Sarawak Gas Distribution Ordinance 2016 to supply gas within the state. Petronas, in turn, maintained that it operates under the Petroleum Development Act 1974, a federal law which it contends prevails over any inconsistent state legislation.
However, the High Court ruled that questions concerning any conflict between federal and state laws, including issues of constitutional validity, fall within the exclusive original jurisdiction of the Federal Court and could not be adjudicated in the present action.
Finding no element of illegality or impropriety in the bank guarantee claim, the court dismissed Petros’s application with costs.
Petros was represented by Tan Sri Cecil Abraham, Sim Hui Chuang, Lim Lip Tze and Rosalie Tien, while Petronas was represented by Datuk Dr Cyrus Das, Khoo Guan Huat and Alex Ngu Sze Sha. Sarawak State Legal Adviser Datuk Seri Fong Joo Chung appeared as an observer on behalf of the Sarawak government. - February 25, 2026
