Modernland Overseas Pte Ltd v Comptroller of Income Tax and another matter [2025] SGHC 239

Modernland Overseas Pte Ltd (“MOPL”), the applicant in HC/OA 686 of 2025, and JGC Ventures Pte Ltd (“JGC”), the applicant in HC/OA 687 of 2025 (collectively, the “Applicants”), are both wholly owned subsidiaries of PT Modernland, an Indonesian-incorporated public company listed on the Indonesia Stock Exchange. The PT Modernland group (the “Group”) is a property developer. The Applicants were incorporated as special purpose companies for the issuance of bonds and notes in Singapore.

The Applicants issued two notes, namely:

(a) MOPL’s Guaranteed Senior Notes, issued on 6 April 2017 and bore interest at 6.95% per annum and were due in 2024 (ISIN: XS1592893546, Common Code 159289354) for a principal amount of US$240,000,000 (“MOPL Existing Notes”); and

(b) JGC’s Guaranteed Senior Notes, issued on 30 August 2018 and bore interest at 10.75% per annum and were due in 2021 (ISIN: XS1871087133, Common Code: 187108713) for a principal amount of US$150,000,000 (“JGC Existing Notes”).

(Collectively, the “Existing Notes”)

The Group’s operations and revenue were affected by the COVID-19 pandemic. As a result, the Applicants defaulted on their payment of interests that were due in August and October 2020 under the Existing Notes — an event of default. The Applicants each sought and obtained moratoriums under s 64 of the Insolvency, Restructuring and Dissolution Act 2018 (“IRDA”). Thereafter, each Applicant proposed a pre-packaged scheme of arrangement with its scheme creditors (ie, the noteholders) under s 71 of the IRDA. The schemes will be referred to as the “MOPL 2021 Scheme” and the “JGC 2021 Scheme” (together the “2021 Schemes”).

The noteholders voted in favour of the respective 2021 Schemes. The 2021 Schemes were both approved by the court under s 71 of the IRDA. Under each of these 2021 Schemes, the terms of the Existing Notes were altered by the “2021 MOPL Notes Indenture” and the “2021 JGC Notes Indenture” (together, the “2021 Notes Indenture”). The Applicants referred to these notes after the alteration as the “Amended Notes”. I will adopt this terminology in this judgment.

After the 2021 Schemes took effect, the Applicants sought an advance ruling from the Respondent to confirm that the Amended Notes qualify as QDS. After an exchange of letters from August 2021 to September 2022 between the Applicants and the Respondent, the Respondent ruled that the Amended Notes were not the same debt instrument as the Existing Notes for the purposes of the QDS scheme. When the Amended Notes are assessed independently, it is immediately apparent that they do not qualify for the QDS scheme. The Applicants accept that the Amended Notes, when assessed independently, do not qualify for the QDS scheme. However, their case is that the Amended Notes and the Existing Notes are the same debt instrument for the purposes of the QDS scheme, that is, that the Amended Notes should not be assessed independently.

The Applicants, therefore, applied under O 4 r 7 of the Rules of Court 2021 (“ROC 2021”) and ss 45 and 45A of the ITA, seeking declaratory relief. They seek:

In my view, the applications must be dismissed for the following reasons. The Amended Notes were expressly referred to as “new Global Note[s]”. In both the 2021 Notes Indentures, the notes were described as an issuance of new notes and the Existing Notes were to be cancelled. For convenience, the express terms are reproduced here:

Furthermore, the documents contemplate a full release of claims by the noteholders of the Existing Notes under the 2021 Schemes. In the explanatory notes to both the MOPL 2021 Scheme and the JGC 2021 Scheme, it states:

In effect, the noteholders of the Existing Notes have released MOPL and JGC from their obligations under the Existing Notes when the Amended Notes came into effect. This release of obligation is consistent with cancellation of the Existing Notes, rather than an “amendment” as pleaded by the Applicants.

The Applicants’ counsel, Mr Sunit Chhabra, argues that a “realistic view” should be taken in that the “cancellation” was only a “mechanism” by which the amendment or variation took place, and not as an actual cancellation. However, in my view, the wording of the Applicants’ own 2021 Notes Indentures are clear. The Existing Notes were cancelled and a new note was reissued. The Respondent is entitled to view it as such in assessing its qualification for the QDS scheme. Commercial terms must be given the natural and ordinary meaning that commercial persons readily understand. In such major transactions, any special reading must be fully set out or explained. Accordingly, the Amended Notes are new notes, and not simply an amendment to the Existing Notes.

Mr Chhabra also argues that a purposive interpretation of the ITA provisions suggests that once a security is a QDS, it will always be a QDS until maturity. However, this argument presupposes a finding that the Existing Notes were simply “amended” and not cancelled. In my view, since the 2021 Notes Indentures say that the notes were “cancelled”, this is therefore a circular argument.