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Mustafa founder in legal tussle with stepfamily
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The founder of the popular Mustafa Centre, Mr Mustaq Ahmad (above), is being sued by his step-siblings and their mother, who are seeking a court-ordered account of the affairs and records of Mohamed Mustafa & Samsuddin.PHOTO: BERITA HARIAN
PUBLISHED JUL 1, 2018, 5:00 AM SGT
Dispute rooted in Mustafa estate and whether two share allotments diluted its share in firm
K.C. Vijayan
Senior Law Correspondent
The founder of the popular Mustafa Centre, Mr Mustaq Ahmad, is being sued by his step-siblings and their mother, who are seeking a court-ordered account of the affairs and records of Mohamed Mustafa & Samsuddin (MMS).
At issue in the stand-off, among other things, are two company share allotments in 1995 and 2001 which the plaintiffs, led by Mr Ayaz Ahmed, are seeking to void because they allegedly diluted their interests as beneficiaries of the Mustafa estate.
Mr Mustaq, 67, and the other defendants, in rejecting the claims, allege that the lawsuit was sparked by Mr Ayaz's demand for more financial benefits.
The feud is rooted in the Mustafa estate and whether its share in MMS was diluted following the two share allotments which enlarged Mr Mustaq's holdings.
The Mustafa estate arose after family patriarch Mustafa Majid Khan died intestate on July 17, 2001.
He was survived by his second wife Asia and their five children as well as Mr Mustaq, whose mother Momina was married to Mr Mustafa from 1945 until she died in 1957.
The patriarch's six children and Madam Asia are beneficiaries of the Mustafa estate in varying portions under a Syariah Court Inheritance Certificate, and Mr Mustaq is the sole administrator and trustee of the estate.
MMS was incorporated in February 1989 to operate the department stores and general wholesale trade, with Mr Mustaq and Mr Shamsuddin Mokhtar Ahmad as shareholders and directors with articles of association including share issue being incorporated into the firm's Constitution.
Mr Mustafa later that year became a shareholder and director, holding 19 per cent of the one million shares in the company.
The plaintiffs claim the Mustafa estate, together with Mr Shamsuddin and his estate after his death in April 2011, remained a minority shareholder in MMS.
They alleged in court papers filed by lawyers from Darshan & Teo that Mr Mustaq and his wife Ishret Jahan as majority shareholders in MMS conducted its affairs in a manner "oppressive" to the Mustafa estate and with disregard to its interest as a minority shareholder.
Among other things, they alleged that the couple used their controlling power at the MMS annual general meetings to pay directors' fees averaging 51 per cent of the company's net profits per year between 2001 and 2014. For almost 13 years, they added, the couple and not the minority shareholders, including the Mustafa estate, benefited from MMS' substantial profits. No dividends were paid between 2000 and 2013, they claimed.
Denying the allegations, the defendants said the plaintiffs did not have any standing to make any claims. They added that a 1973 "common understanding" reached with Mr Mustafa and Mr Shamsuddin, as well as a 2001 "common understanding" with Madam Asia and others on behalf of the plaintiffs, allowed Mr Mustaq to continue running the business as he always did and with full discretion to decide on the quantum of directors' fees to be paid.
The directors' fees paid to the couple averaged about 35.43 per cent of net profits yearly from 2000 to 2016. For financial year 2016, they were paid $5.2 million out of net profits of $10.712 million.
Among other things, the 2001 share allotment exercise saw Mr Mustaq's share portion grow to 61.25 per cent of 13,340,000 MMS shares from 42.57 per cent of nine million shares, while the Mustafa estate's share fell from 22.07 per cent to 14.89 per cent, said the plaintiffs.
Based on this 2013 total of $495.89 million, the Mustafa estate's value of 14.89 per cent would be potentially about $74 million. But Mr Mustaq and co-defendants in court papers filed by lawyers from Rajah & Tann claim shares in MMS allotted to Mr Mustafa and Mr Shamsuddin after it was incorporated were fully paid by Mr Mustaq.
Mr Mustaq said the business started in 1963, when he was 12, with him selling handkerchiefs in Campbell Lane. By 1973, it had grown and his father was supervising the business at 67 Serangoon Road as he was then away in India. It also became the Mohamed Mustafa and Samsuddin Company, a partnership.
The 1973 "common understanding" was that the company was owned by Mr Mustaq, and Mr Mustafa and Mr Shamsuddindid not contribute or assume risks for the partnership, and did not receive any payments except out of goodwill at Mr Mustaq's discretion.
The business grew under Mr Mustaq and he built the Mustafa Centre in Syed Alwi Road.
In 1989, Mr Mustaq dissolved the partnership and incorporated MMS with himself and Mr Shamsuddin as shareholders, and added on Mr Mustafa, but all the MMS paid-up capital was funded by Mr Mustaq. He retained the company name MMS because of the goodwill built over the years.
The defendants argued that the shares that devolved on the Mustafa estate after Mr Mustafa died were thus held in trust for Mr Mustaq as the beneficial owner, as he paid for them. They are making a counterclaim for a court declaration to that effect, which the plaintiffs deny.
The defence added that due process was followed in the 1995 and 2001 share allotments, and said that at no time since Mr Mustafa'sdeath in 2001 until 2016 did the plaintiffs query or object to his conduct of affairs in relation to the Mustafa estate.
Mr Mustafa, Mr Shamsuddin and the plaintiffs did not contribute financially to the defendants' businesses or MMS and merely treated MMS as "their personal cash machine", said the defence.
A High Court pre-trial conference is due this month.
1 of 2
The founder of the popular Mustafa Centre, Mr Mustaq Ahmad (above), is being sued by his step-siblings and their mother, who are seeking a court-ordered account of the affairs and records of Mohamed Mustafa & Samsuddin.PHOTO: BERITA HARIAN
PUBLISHED JUL 1, 2018, 5:00 AM SGT
Dispute rooted in Mustafa estate and whether two share allotments diluted its share in firm
K.C. Vijayan
Senior Law Correspondent
The founder of the popular Mustafa Centre, Mr Mustaq Ahmad, is being sued by his step-siblings and their mother, who are seeking a court-ordered account of the affairs and records of Mohamed Mustafa & Samsuddin (MMS).
At issue in the stand-off, among other things, are two company share allotments in 1995 and 2001 which the plaintiffs, led by Mr Ayaz Ahmed, are seeking to void because they allegedly diluted their interests as beneficiaries of the Mustafa estate.
Mr Mustaq, 67, and the other defendants, in rejecting the claims, allege that the lawsuit was sparked by Mr Ayaz's demand for more financial benefits.
The feud is rooted in the Mustafa estate and whether its share in MMS was diluted following the two share allotments which enlarged Mr Mustaq's holdings.
The Mustafa estate arose after family patriarch Mustafa Majid Khan died intestate on July 17, 2001.
He was survived by his second wife Asia and their five children as well as Mr Mustaq, whose mother Momina was married to Mr Mustafa from 1945 until she died in 1957.
The patriarch's six children and Madam Asia are beneficiaries of the Mustafa estate in varying portions under a Syariah Court Inheritance Certificate, and Mr Mustaq is the sole administrator and trustee of the estate.
MMS was incorporated in February 1989 to operate the department stores and general wholesale trade, with Mr Mustaq and Mr Shamsuddin Mokhtar Ahmad as shareholders and directors with articles of association including share issue being incorporated into the firm's Constitution.
Mr Mustafa later that year became a shareholder and director, holding 19 per cent of the one million shares in the company.
- Key players
- PLAINTIFFS
• Mr Ayaz Ahmed,47; executive at Mustafa Centre, Singapore.
• Madam Khalida Bhano, 58; housewife
• Mr Istiaq Ahmad,52; works at Mustafa Goldmart in Chennai, India
• Mr Maaz Ahmad Khan, 50; works at Mustafa Centre, Singapore
• Madam Wasela Tasneem, 41; housewife based in India
• Madam Asia, mother of five plaintiffs listed above and based in India - DEFENDANTS
• Mr Mustaq Ahmad ,67; shareholder, director of Mohamed Mustafa & Samsuddin Co (MMS) and founder of Mustafa Centre
• Madam Ishret Jahan, 65; his wife and shareholder and director of MMS.
• Ms Shama Bano ,40; and Mr Abu Osama,46; their children and directors at MMS
• Mr Iqbal Ahmad, 67; director and company secretary of MMS.
The plaintiffs claim the Mustafa estate, together with Mr Shamsuddin and his estate after his death in April 2011, remained a minority shareholder in MMS.
They alleged in court papers filed by lawyers from Darshan & Teo that Mr Mustaq and his wife Ishret Jahan as majority shareholders in MMS conducted its affairs in a manner "oppressive" to the Mustafa estate and with disregard to its interest as a minority shareholder.
Among other things, they alleged that the couple used their controlling power at the MMS annual general meetings to pay directors' fees averaging 51 per cent of the company's net profits per year between 2001 and 2014. For almost 13 years, they added, the couple and not the minority shareholders, including the Mustafa estate, benefited from MMS' substantial profits. No dividends were paid between 2000 and 2013, they claimed.
Denying the allegations, the defendants said the plaintiffs did not have any standing to make any claims. They added that a 1973 "common understanding" reached with Mr Mustafa and Mr Shamsuddin, as well as a 2001 "common understanding" with Madam Asia and others on behalf of the plaintiffs, allowed Mr Mustaq to continue running the business as he always did and with full discretion to decide on the quantum of directors' fees to be paid.
The directors' fees paid to the couple averaged about 35.43 per cent of net profits yearly from 2000 to 2016. For financial year 2016, they were paid $5.2 million out of net profits of $10.712 million.
Among other things, the 2001 share allotment exercise saw Mr Mustaq's share portion grow to 61.25 per cent of 13,340,000 MMS shares from 42.57 per cent of nine million shares, while the Mustafa estate's share fell from 22.07 per cent to 14.89 per cent, said the plaintiffs.
- Business as usual
- The family of Mr Mustaq Ahmad said that the company's businesses will not be in any way affected by the lawsuit.
Responding on the family's behalf yesterday, Mr Mustaq's daughter Shama Bano said: "We are deeply saddened and disappointed by the conduct of the plaintiffs, who have taken advantage of my father's kindness and generosity over the decades; and even now when the lawsuit is going on, continue enjoying benefits from my father.
"It is my father's position that the company has always been his and it was he who has built it up over the years. The plaintiffs have never disputed this understanding over the course of almost 50 years until now when they have suddenly made this claim."
She added that the business was running as usual and that the plaintiffs are not involved in the management or operations of the business.
"It is very revealing that the plaintiffs have not provided any evidence that they have made any substantial or meaningful contribution to the business over all these years when my father was building the business up," she said.
K.C. Vijayan
Based on this 2013 total of $495.89 million, the Mustafa estate's value of 14.89 per cent would be potentially about $74 million. But Mr Mustaq and co-defendants in court papers filed by lawyers from Rajah & Tann claim shares in MMS allotted to Mr Mustafa and Mr Shamsuddin after it was incorporated were fully paid by Mr Mustaq.
Mr Mustaq said the business started in 1963, when he was 12, with him selling handkerchiefs in Campbell Lane. By 1973, it had grown and his father was supervising the business at 67 Serangoon Road as he was then away in India. It also became the Mohamed Mustafa and Samsuddin Company, a partnership.
The 1973 "common understanding" was that the company was owned by Mr Mustaq, and Mr Mustafa and Mr Shamsuddindid not contribute or assume risks for the partnership, and did not receive any payments except out of goodwill at Mr Mustaq's discretion.
The business grew under Mr Mustaq and he built the Mustafa Centre in Syed Alwi Road.
In 1989, Mr Mustaq dissolved the partnership and incorporated MMS with himself and Mr Shamsuddin as shareholders, and added on Mr Mustafa, but all the MMS paid-up capital was funded by Mr Mustaq. He retained the company name MMS because of the goodwill built over the years.
The defendants argued that the shares that devolved on the Mustafa estate after Mr Mustafa died were thus held in trust for Mr Mustaq as the beneficial owner, as he paid for them. They are making a counterclaim for a court declaration to that effect, which the plaintiffs deny.
The defence added that due process was followed in the 1995 and 2001 share allotments, and said that at no time since Mr Mustafa'sdeath in 2001 until 2016 did the plaintiffs query or object to his conduct of affairs in relation to the Mustafa estate.
Mr Mustafa, Mr Shamsuddin and the plaintiffs did not contribute financially to the defendants' businesses or MMS and merely treated MMS as "their personal cash machine", said the defence.
A High Court pre-trial conference is due this month.
