Penang Chief Minister and prominent opposition leader Lim Guan Eng has pleaded not guilty to two graft-related offences on Thursday (June 30), Malaysian media reported, in a case that has jolted the country.

Mr Lim, 55, claimed trial to the charges related to his purchase of a bungalow at below-market-prices last year and improper change of state land use at the Penang High Court. He was then released on bail set at RM1 million (S$335,300).

The vocal critic of Prime Minister Najib Tun Razak had been formally charged at the Penang Sessions Court on Thursday morning after three months of accusations by ruling Umno party leaders that he had bought his house last year at RM2.8 million (S$939,000) from a businesswoman with dealings with the state government, when the market value of the property was RM4.27 million.

He faces up to 20 year in jail if convicted under Section 23 of the Anti-Corruption Act and Section 165 of the Penal Code.

The businesswoman who sold the bungalow to him was also charged under Section 109 of the Penal Code for abetting Lim to obtain a "valuable property" for RM2.5 million when it was valued at RM4.27 million.

"He obtained the property knowing that you have business dealings with the state government," reads the charge.

Ms Phang also claimed trial and was given bail of RM200,000.

The High Court set case management for Sept 22, when it will consider whether to conduct a joint trial after perusing all the documents.

Mr Lim, who has demanded Prime Minister Najib Tun Razak explain a massive financial scandal linked to state investment fund 1Malaysia Development Berhad (1MDB), was arrested at his office on Wednesday by officers from the Malaysian Anti-Corruption Commission (MACC).

After spending the night in MACC custody, he was taken to the court at 10am on Thursday in a motorcade of seven vehicles. He looked relaxed and was wearing his favourite red tie, Malaysiakini reported.

He smiled and told reporters, "I am alright".

Inside the courtroom, he hugged his teary mother, sister Hui Ying, and wife Betty, who looked distraught, Malaysiakini reported. He also shook hands with his father Kit Siang, adviser of his Chinese-majority party Democratic Action Party (DAP).

Hours before the hearing, police had mounted roadblocks along the road before the MACC building leading to the Penang courthouse, resulting in long traffic jams. A police spokesman told The Star the measure was taken to ensure Mr Lim's transfer from the MACC office to the court went smoothly.

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The public gallery at the Penang Sessions Court was already filled to the brim with journalists, DAP supporters and other opposition politicians hours before Mr Lim's arrival shortly after 10am.

Mr Lim has been chief minister of Penang since 2008 and has led the opposition Democratic Action Party (DAP) since 2004 as secretary-general.

Under Mr Lim's leadership, Malaysia’s second-richest state has, by most accounts, been imbued with new vigour.

DAP is the most popular ethnic Chinese party in Malaysia. It won 38 seats in the federal Parliament in the 2013 general election, forming the second-largest single bloc of MPs after Umno’s 88 seats.

Mr Lim told a press conference after his court hearing on Thursday that he will stay in his job for now.

"For the time being, I will remain Penang Chief Minister. But the state DAP committee will have a meeting to decide," he said after being released on bail. The party was due to hold an emergency meeting on Thursday afternoon.

Mr Lim is no stranger to state prosecution, having been jailed for 12 months in 1998 after being found guilty for sedition.

An angry opposition alleged that Mr Najib was behind the charges against Mr Lim, accusing the premier of mounting a political offensive and planning to call snap elections next year – one year ahead of schedule, Agence France-Presse reported.

Malaysia’s attorney general, Mohamed Apandi Ali, who cleared Mr Najib of wrongdoing over the 1MDB scandal in January, is leading the prosecution.

“The Najib administration is now abusing all its... power to politically persecute its leaders to cripple the opposition before the general election,” Mr Tony Pua, DAP national publicity chief said according to AFP.

Mr Najib faces allegations that billions of dollars were plundered from 1MDB. The accusations, which emerged last year, include the revelation that Najib received at least US$681 million in deposits to his personal bank accounts in 2013. Mr Najib and 1MDB deny any wrongdoing.

But Malaysia’s opposition has been unable to capitalise on the controversy, having been in disarray since the jailing of former opposition leader Anwar Ibrahim for sodomy last year.

“I think the arrest of Lim Guan Eng (and the corruption charges) will hurt the opposition nationally as Lim is another charismatic figure,” Oh Ei Sun, senior fellow at S. Rajaratnam School of International Studies told AFP.

