Ireka Corporation Berhad is embroiled in a dispute over the sub-contract for a significant portion of the Pan Borneo Highway Sabah Phase 1B project, a deal initially valued at RM1.07 billion. The company announced that it received a notice from Gammerlite Sdn Bhd, the main contractor, proposing a mutual termination of the contract.
The proposed termination stems from the earlier dissolution of the Project Operation Agreement (POA) between MTD Construction Sdn Bhd (the project’s main contractor) and GSB on June 30, 2025. This primary termination was reportedly due to GSB’s failure to secure the necessary funding by the deadline stipulated in the POA.
However, Ireka Corporation, through its wholly-owned subsidiary Shoraka Construction Sdn Bhd (SCSB), has formally rejected GSB’s proposal for mutual termination stating that its disagreement is based on two key grounds:
- Certain scopes of work under the Project have already been partially completed by SCSB.
- The mutual termination notice from GSB fails to address the critical aspect of settlement terms for the value of work already completed or related obligations.
As of its announcement, Ireka has not received a response from GSB regarding its communicated disagreement. The company has explicitly stated that it reserves all its rights, interests, and remedies under the Letter of Award (LOA) and applicable laws against GSB. This includes, but is not limited to, the recovery for work performed and associated costs. Ireka also confirmed that it is in the process of engaging legal counsel to advise on its rights and remedies and to explore all available legal options to resolve the matter.
At this preliminary stage, the financial impact of this dispute on the Ireka Group remains indeterminate, pending the conclusion of settlement discussions. The sub-contract, originally worth RM1.07 billion, had seen approximately RM10 million in revenue recognised by Ireka, resulting in about RM1 million in profit based on an estimated 1% physical progress of the project. Any adjustments to these recognised amounts will be contingent on the final settlement terms agreed upon.
Ireka stated it is seeking an equitable settlement for all work performed and costs incurred. The company also anticipates incurring legal and administrative expenses related to the dispute resolution process. Additionally, SCSB is currently evaluating project-related assets and outstanding financial obligations.
