1. ) Khee San Berhad v 1. ) Tunai Impian Enterprise Sdn Bhd (WA-24NCC-1067-12/2022)

Can a scheme creditor apply to court to set aside a scheme of arrangement which had been approved by the scheme creditors [including this scheme creditor], and approved by the court under section 366(3) and (4) of the Companies Act 2016 [“CA 2016”]?

Can a scheme creditor apply to court to set aside a scheme of arrangement on the ground of a total failure of consideration because a secret deal he had agreed with the applicant of the scheme of arrangement to secure his favourable vote was not honoured by the applicant?

Can this scheme creditor further argue that because this secret deal was not disclosed by him to the scheme creditors and to the court that approved the scheme, the approved scheme of arrangement is illegal and can be set aside on ground of illegality? [See written submissions of 1st Proposed Intervener Tunai Impian Enterprise Sdn Bhd (“Tunai or “TIESB”) in Enclosure 51 paragraphs 3,4 and 22]

The scheme creditor in question is Tunai.

I heard counsel on 28-11-2024 and on 20-01-2025. On 20-01-2025 I dismissed Tunai’s application for prayers 2 to 7 with costs. On costs, I ordered Tunai: i. to pay costs of RM 20,000 to the applicants subject to allocatur; and ii. pay costs of RM 8,000 each to the 2nd intervener and 3rd intervener subject to allocatur.

Tunai has appealed to the Court of Appeal on 14-02-2025. These are my Grounds of Judgment.

The 1st applicant is Khee San Berhad [“1st applicant” or “KSB”]. The 2nd applicant is Khee San Food Industries Sdn Bhd [“2nd applicant” or “KSFI”].

The 3rd applicant is Khee San Marketing Sdn Bhd. The 4th applicant is Mega Global Confectionary Sdn Bhd.

The 1st intervener is Tunai. The 2nd intervener is HSBC Bank Malaysia Berhad [“HSBC”]. The 3rd intervener is ALLIANCE Bank Malaysia Berhad [“ABMB”].

The facts revealing Tunai’s secret deal with the applicants in particular the 2nd applicant [“Secret Deal”] is disclosed in Tunai’s written submissions in Enclosure 51 from paragraphs 22 to 28.

At this stage it is sufficient to set out a few relevant paragraphs from Enclosure 51 on the Secret Deal to expose Tunai’s duplicity: FAILURE OF CONSIDERATION ISSUE

Further, we respectfully draw this Honourable Court’s attention on how KSFI and/or the Applicants caused total failure of consideration, which led to TIESB’s intended withdrawal of its approval in Scheme E. Key facts are as follows: - …

However, it is our submission that TIESB’s support in Scheme E is strictly subject to KSFI’s compliance and performance pursuant to the Consent Order.

We say this because KSFI has full knowledge or is deemed to have knowledge of the following: -

25.1 TIESB will never support the proposed Scheme of Arrangement;

25.2 Since the Applicants obtained a Court’s order to convene a creditors’ meeting on 23.9.2023, TIESB was never interested to attend any of the meetings on 11.11.2022 and 25.11.2022;

25.3 The Applicants sought to hold an Adjourned Court Convened Creditors’

25.4 Only on 8.12.2022, one day prior to the Adjourned Court Convened Creditors’ Meeting, TIESB had informed KSFI’s solicitors (at that time), Messrs Krish Maniam & Co that: - “TIESB agreed to support Scheme E subject to and conditional upon KSFI and the white knight agreeing to honour the terms of the Consent Order…”. Refer: TIESB’s solicitors’ letter dated 8.12.2022, Enclosure 18, Exhibit “CSW-10”, pages 66-67.

25.5 Early in the morning before the Adjourned Court Convened Creditors’ Meeting on 9.12.2022, KSFI had expressly acknowledged TIESB’s condition and confirmed that: -

Messrs Norendra & Yap was appointed as the solicitors on record for the sales of the lands;

The sales of the lands will be formalised on 12.12.2022; and

KSFI will comply with the Consent Order. Refer: Messrs Krish Maniam & Co’s email dated 9.12.2022, Enclosure 18, Exhibit “CSW-11”, pages 71-72.

25.6 Relying on KSFI’s assurance, TIESB supported the Scheme E on the same day on 9.12.2022 while anticipating the sale and purchase agreement to be executed by KSFI.

KSFI is deemed to have notice of TIESB’s conditional support to Scheme E, in that, TIESB will only support Scheme E provided KSFI honours its obligations to execute the Sale and Purchase Agreement pursuant to Consent Order. … …

Premised on KSFI’s fundamental failure above, we submit that TIESB is entitled to rescind the statutory contract and withdraw its support in Scheme E. [Emphasis added] Non-disclosure to scheme creditors and to court of Tunai’s Secret Deal and conditional support for Scheme E [12] Tunai’s Secret Deal and conditional support for Scheme E were not disclosed to the scheme creditors despite Tunai’s knowledge that all five schemes A to E were inter-conditional. Tunai also failed to disclose this relevant fact to the court when the court was asked to approve all five schemes A to E that were inter-conditional. Background facts which led to Tunai’s Secret Deal [13] The background facts which led to Tunai’s Secret Deal are as follows: i. Tunai had filed a claim in Kuala Lumpur High Court Suit No. WA- 22NCC-387-08/2020 [“Suit No.387”] against the 2nd applicant, for a sum of RM 18,665,891.63 premised on a breach of a Moneylending Agreement dated 13-03-2019 between them [“Moneylending Agreement”]. [See Enclosure 16 page 29 at paragraph 9]. ii. Suit No.387 was settled by a Consent Order dated 03-06-2021. [See Enclosure 16 page 30 at paragraph 10]. iii. The material terms of the Consent Order are as follows: a. The 2nd applicant was required to sell 7 plots of land to Tunai at RM 40 million; b. The 2nd applicant then was required to lease that land from Tunai for a period of 2 years for RM 7.2 million; c. The 2nd applicant’s debt of RM 18 million was to be treated as part payment to purchase that land; d. Leaving the balance purchase price of RM 14.8 million payable by Tunai. [14] Sometime later in November 2021, an Interim Judicial Manager was appointed over the 2nd applicant. The Interim Judicial Manager commenced Kuala Lumpur High Court Originating Summons No. WA- 24NCC-701-05/2022 to challenge, amongst others, the validity of the Consent Order and the Moneylending Agreement. [See Enclosure 16 at page 33 paragraph 15.4]. [15] This OS No.701 was discontinued on 04-07-2022 without liberty to file afresh. [16] When opposing OS No.701, Tunai took the position (in affidavit affirmed by its director) “that all legal issues that were raised and could have been raised” i.e. any illegality surrounding the Moneylending Agreement had been merged into the Consent Order [See Tunai’s affidavit in Enclosure 35 page 197 at paragraph 17]; and the Interim Judicial Manager of the 2nd applicant ”is estopped from reagitating the alleged illegality of the Moneylending Agreement... as these issues …had been merged into the Consent Judgment.” [See Tunai’s affidavit in Enclosure 35 page 200 at paragraph 21]. 1st scheme of arrangement [17] Meanwhile, the appointment of the Interim Judicial Manager over the 2nd applicant had triggered the application of PN17 over its holding company, the 1st applicant. To resolve the PN17 status as well as its obligations to creditors of the group, the 1st applicant and its subsidiaries proposed a scheme of arrangement under section 366 of CA 2016. [See Enclosure 22 / PDF: page 122 / paragraph 8 - 11]. [18] The 1st scheme of arrangement did not materialise. [Enclosure 22/ PDF: pages 122 - 126 paragraph 8 - 24]. 2nd scheme of arrangement [19] A 2nd scheme of arrangement was then proposed by the applicants via Kuala Lumpur High Court Originating Summons No. WA-24NCC-884- 09/2022 [“KSB Schemes”]. [20] The KSB Schemes consist of five different schemes or classification of creditors, namely Schemes A, B, C, D and E as set out in the Explanatory Statement dated 07-10-2022 circulated to the scheme creditors [‘ES’]. [See Enclosure 26 Exhibit ‘HSBC-2’]. [21] Scheme E together with Schemes A, B, C and D are inter-conditional upon each other pursuant to clause 16 of the ES. [See clause 16 of the ES in Enclosure 26 Exhibit ‘HSBC-2’ at page 67]. [22] All 5 schemes achieved the requisite statutory approval under section 366(3) of the CA 2016 through the acceptance by more than 75% of the total value of the scheme creditors present and voting at the Court Convened Meetings and Adjourned Court Convened Meeting. [See Enclosure 26 exhibit 'HSBC-2’ at page 67]. [23] HSBC and ABMB had attended the Court Convened Meeting held on 31-10-2022 and voted in support of Scheme D. [24] Tunai is the only creditor under Scheme E and voted for it at the Adjourned Court Convened Meeting held on 09-12-2022. Scheme E consists of the following terms: a) Tunai shall waive 50% of the debt amount amounting to RM 9,180,000.00 and all interests accruing after the Cut-Off Date; b) The remaining 50% debt shall be converted into the Settlement Shares at the Issue Price (‘Settlement Shares’); c) Tunai shall discharge including uplifting the lien holders’ caveats and to hand over the titles of the 7 plots of industrial land with the 2nd applicant’s factory erected thereon, namely: i) GM 628 Lot 1819 in the Mukim and Daerah of Petaling. ii) GM 672 Lot 1820 in the Mukim and Daerah of Petaling. iii) GM 673 Lot 1821 in the Mukim and Daerah of Petaling. iv) GM 734 Lot 1822 in the Mukim and Daerah of Petaling. v) GM 735 Lot 1823 in the Mukim and Daerah of Petaling. vi) GM 736 Lot 1824 in the Mukim and Daerah of Petaling. vii) GM 236 Lot 1832 in the Mukim and Daerah of Petaling. (collectively ‘the Property’) to the 2nd applicant and free the 2nd applicant from all actions, proceedings, claims, demands or guarantees whatsoever which Tunai has or can or may have against the 2nd applicant for or in respect of the debt owing to Tunai upon receipt of the Settlement Shares; d) Tunai shall be prohibited from enforcing any orders or judgments obtained against the 2nd applicant. [25] The KSB Schemes has been approved by the court on 21-12-2022 under section 366(3) and (4) of the CA 2016 [“Sanction Order’]. [See Enclosure 26 Exhibit ‘HSBC-5’ pages 106 - 168]. [26] Tunai did not disclose in any of the Court Convened Meetings and Adjourned Court Convened Meeting that Tunai’s approval of Scheme E was conditional upon the 2nd applicant’s fulfilment of the terms of the Consent Order entered into between, inter alia, Tunai and the 2nd applicant. Tunai now attempts to set aside the KSB Schemes Of Arrangement [27] 15 months after the KSB Schemes had been approved by this court, Tunai now attempts to set aside Scheme E, which if allowed by me will result in the other four schemes being also set aside as they are inter-conditional. [28] When the schemes are made inter-conditional, if any scheme does not become effective, the proposed restructure will not proceed. [See Atlassian Corporation Pty Limited [2013] FCA 1451 at paragraph 12 and Ausnet Services Ltd v CMR of Taxation [2024] FCA 90 at paragraph 97]. [29] The facts on Tunai’s attempts to set aside Scheme E are as follows: Firstly, Tunai commenced Kuala Lumpur High Court Originating Summons No. WA-24NCC-371-07/2023 OS No.371 [“OS No.371”] seeking to, inter alia, withdraw their vote in Scheme E alleging there was a failure of consideration and, consequently set aside the Sanction Order. The so-called failure of consideration arose from an alleged promise allegedly made on behalf of the 2nd applicant to honour the Consent Order if Tunai votes in favour of Scheme E. [See Enclosure 19 pages 28 - 32]. [30] This OS No.371 was struck out with liberty to file afresh on 22-03-2024 as the High Court Judge was of the view that his Lordship had no jurisdiction to set aside another High Court’s order. Tunai filed a Notice of Application [Enclosure 14] [31] On 05-04-2024 Tunai filed a Notice of Application [Enclosure 14] before me as the Sanction Order was granted in this OS. With the benefit of the submissions made in OS No.371, Tunai now also contends, inter alia, Scheme E contravenes the Moneylenders (Control and Licensing) Regulations 2003 [“Moneylenders Regulations 2003”]. [32] The reliefs sought by Tunai are: i. That leave be granted to Tunai to intervene and to be named as respondent in this proceeding; ii. A declaration that Tunai’s support for the approval on the Scheme of Arrangement (Scheme E) as set out by the 1st applicant” in the Explanatory Statement dated 07-10-2022 as approved in the Adjourned Court Convened Meeting of Creditor (Scheme E Creditor) on 09-12-2022 is in contravention of Regulation 10 of the Moneylenders Regulations 2003 read together with the Moneylending Agreement dated 13-03-2019 entered between Tunai with the 2nd applicant” and thereby rendering Tunai’s support unlawful; iii. A declaration that the Scheme of Arrangement (Scheme E) is no longer binding on Tunai; iv. Consequentially, that the sanction in relation to Scheme of Arrangement (Scheme E) given pursuant to the order of this court dated 21-12-2022 be set aside/reversed; v. In the alternative, an order of this court to hold further Court Convened Meeting of Creditors on any date to be determined later for the purpose of re-vote by all scheme creditors and/or any further directions to be given as this Honourable Court may deem fit; vi. Costs; and vii. Such further or other relief as this Honourable Court may deem fit, Grounds relied on by Tunai to set aside Scheme E [33] Tunai relies on these grounds to set aside Scheme E [See Enclosure 14]: i. The 2nd applicant through its solicitors, Messrs Krism Maniam & Co, had entered into an agreement with Tunai prior to Tunai’s adjourned court-convened meeting on 09-12-2022 whereby the 2nd applicant and/or the White Knight agreed to honour the terms of the Consent Order in consideration for the support of Tunai in Scheme E (“Agreement”); ii. The 2nd applicant and/or the White Knight failed to disclose the Agreement to the creditors in Scheme A to Scheme D; iii. The 2nd applicant and/or the White Knight failed to comply with the Consent Order and the Agreement, i.e., failed to execute a sale and purchase agreement in respect of the sale of the 2nd applicant’s properties to Tunai and/or its nominees and thereby frustrating the Agreement; iv. The 2nd applicant and/or the White Knight then alleged that their solicitors i.e., Messrs Krish Maniam & Co never had the capacity and/or authority to represent the 2nd applicant and to enter into the Agreement with Tunai; v. Apart from the total failure of consideration in respect of the Agreement, the execution of Scheme E would be in contravention of Regulation 10 of the Moneylenders Regulations 2003, read together with the Moneylending Agreement dated 13- 03-2019 between Tunai and the 2nd applicant and the Moneylenders Act 1951 rendering Scheme E void and/or illegal pursuant to section 24 of the Contracts Act 1950. Objection by the Applicants [34] The applicants oppose Tunai’s application. [35] They rely on the following grounds [set out in their written submissions Enclosure No. 53 at paragraphs 2, 5 to 7 and 60 to 63], which I have rephrased below for clarity and cohesion: i. There is no jurisdiction to set aside or reverse the Sanction Order sanctioning all the applicants’ schemes including Scheme E. All the schemes are inter-conditional; ii. Tunai cannot rely on the new section 369D of the CA 2016; iii. Tunai’s application is tainted with illegality; and iv. Tunai’s application is also barred by the doctrines of merger, judicial estoppel and res judicata due to the Consent Order between, inter alia, Tunai and the 2nd applicant in Suit No.387. [See Enclosure 16 page 88]. Objection by HSBC and ABMB [36] Both HSBC and ABMB intervened in the OS to oppose Tunai’s application. They are the judgment creditors of the 1st applicant and 2nd applicant for monies due and owing under banking facilities granted by HSBC and ABMB to the 2nd applicant and guaranteed by the 1st applicant. [37] HSBC and ABMB are also scheme creditors under Scheme D along with other financial institution creditors whereas Tunai is the only creditor under Scheme E. [38] HSBC and ABMB rely on the following grounds set out in their written submissions in Enclosure No. 47: i. Tunai is bound by the terms of the schemes of arrangements and cannot now seek to withdraw their support and set aside the sanction order granted by the court under section 366(3) and 366(4) of the CA 2016; ii. The Secret Deal between Tunai and the applicants are illegal and thus Tunai’s application is tainted with illegality. iii. There is no contravention of the Moneylenders Regulations 2003. iv. Tunai having voted in support of Scheme E and failing to raise any objection at the hearing of the applicants’ application for court approval of the schemes is now estopped from setting aside the court sanction just because its Secret Deal was not honoured by the 2nd applicant due to disputes. v. Tunai’s application is also barred by the doctrines of merger, judicial estoppel and res judicata due to the Consent Order between, inter alia, Tunai and the 2nd applicant in Suit No.387 Issues to be determined [39] The issues arising for determination are as follows: i. Whether a court can set aside an earlier court order which had approved a scheme of arrangement under section 366(3) and (4) of the CA 2016; ii. Whether Tunai can set aside the court order which had approved scheme E under section 366(3) and (4) of the CA 2016; iii. Whether Tunai can rely on the new section 369D of the CA 2016 to set aside an earlier court order which had approved Scheme E under section 366(3) and (4) of the CA 2016; and iv. Whether Tunai having voted for Scheme E and failing to disclose the Secret Deal at the hearing of the applicants’ application for court approval of the schemes is now estopped from setting aside Scheme E just because its Secret Deal was not honoured by the 2nd applicant due to subsequent disputes. Issue 1 - whether a court can set aside an earlier court order which had approved a scheme of arrangement under section 366(3) and (4) of the CA 2016 Applicants’ submissions [40] The applicants submit in Enclosure 53 from paragraphs 16 to 23:

There are 2 schools of thought in relation to Court’s jurisdiction post a sanction order.

The first school of thought is - the court cannot alter the substance of the scheme save in cases of obvious mistakes or fraud. This approach was adopted by the English Privy Council in Kempe v Ambassador Insurance Co [1998] 1 WLR 271.

The second school of thought is - a sanction order operates as an order of court. The Court may make any order subsequent to the sanction order under its inherent jurisdiction if the sanction order does not represent the true intention of the actual order or under the slip rule. This approach was adopted by the Supreme Court of Australia [sic-it should be the Supreme Court of New South Wales] in Re AGL Gas Networks Ltd

37 ACSR 441.

Justice Ong Chee Kwan analysed both these schools of thought in Top Builders Capital Bhd & Ors v Seng Long Construction & Engineering Sdn Bhd & Ors [2023] MLJU 580 (High Court). His Lordship preferred the English approach but subject to the added supervisory powers vested”.

The High Court in Top Builders Capital Bhd & Ors v Seng Long Construction & Engineering Sdn Bhd & Ors further observed that such supervisory powers do not confer jurisdiction to vary or set aside a scheme of arrangement but simply one to give effect to the scheme…

Separately, in an earlier decision in Tai See Yoon & Ors v NCT Tropika Sdn Bhd [2022] MLJU 3438, Justice Zainal Azman dismissed an application to set aside a sanction order relying on the Federal Court’s decisions in Badiaddin bin Mohd Mahidin & Anor v Arab Malaysian Finance Bhd and CIMB Investment Bank Bhd v Metroplex Holdings Bhd (without citing the English and Australian approaches).

At this juncture, in the event this Court were to prefer the first school of thought, then, there is no jurisdiction to enable this Court to application in Enclosure 14 save in cases of obvious mistakes or fraud, which is not Tunai’s pleaded case.

Similarly, if this Court were to prefer the second school of thought, there is neither justified reason put forth by Tunai for this Court to exercise its inherent jurisdiction nor any basis for slip rule to be applied here. [Emphasis added] Tunai’s submissions [41] Tunai contends the Court has the power to make further alterations even after granting of the Sanction Order, taking into consideration the interest of the creditors. [42] Tunai cites section 366[3] and [4] of the CA 2016, the inherent jurisdiction of the court under Order 92 Rule 4 of the Rules of Court 2012 and Top Builders Capital Bhd & Ors v Seng Long Construction & Engineering Sdn Bhd & Ors [2023] MLJU 580 [“Top Builders Capital”], where the High Court said: “[44] To my mind, the fact that Section 366(4) stipulates that the Court may grant its approval to a compromise or arrangement ‘subject to such alterations or conditions as it thinks just’ does not necessarily mean that the Court has no powers to make further ‘alterations or conditions as it thinks just after granting its approval at all. Indeed, Section 366(4) did not express any such limitations. On the contrary, it is my judgment that Section 366(4) confers on the Court an overarching supervisory power over the scheme throughout from the moment an application is placed before the Court until the completion of the implementation of the scheme. Such supervisory power is necessary and is consistent with the Court’s aforesaid stated roles.” [Emphasis added] Submissions from HSBC and ABMB [43] HSBC and ABMB contend that:

It is trite that once the Court gives its approval to a scheme, the scheme is binding on all the parties to the scheme, including the dissenters. Please see Section 366(3) of the CA 2016.

We refer to The Oriental Insurance Co Ltd v. Reliance National Asia Re Pte Ltd [2008] SGCA 18 at page 157 … where the Singapore Court of Appeal held as follows: “44. Secondly, once the court gives its approval to a scheme, the scheme is binding on all parties to the scheme, and the scheme cannot afterwards be altered, even if the shareholders and the creditors of the company acquiesce in the alteration …

Nevertheless, the court retains an inherent jurisdiction to amend or set aside a scheme in limited circumstances, for instance, if consent to the scheme was obtained by fraud or where there are obvious mistakes in the documents setting out the scheme. It is also possible for a subsisting scheme of arrangement to be amended by another scheme approved by the court …

Thirdly, in line with the first two principles stated above, a creditor or member “should raise his objections at the hearing for court sanction and not any later” (see Walter Woon at para 16.18; see also Eltraco and Chew Eu Hock). As explained in Chew Eu Hock, the rationale for this principle is that any late objections after a scheme of arrangement has been approved by the court would be “unfair, unreasonable and prejudicial” to the other parties to the scheme, and (more importantly) there is a need to ensure that there is certainty as to the validity of a court-approved scheme…”

In Kamuja Corporation Sdn Bhd v. Aras Dimensi Sdn Bhd (Dalam Likuidasi) [2016] MLJU 659 at page 203-204 … Mohd Nazlan JC (as he then was) held that the purchasers who elected not to participate in the scheme in return for the sum invested, were estopped from challenging the application to sanction the scheme. His Lordship had this to say: “[33] The implications of the finality and binding nature of the Scheme cannot be emphasized enough. For instance, MBSB had relied on the sanction of the Court to disburse its new loan for the Scheme. Otherwise, certainty and stability in trade and commerce would be adversely affected, and it would not be inaccurate to say that it would be practically difficult for financial institutions to structure their business affairs if a binding Order of the Court cannot be relied on and is open to challenge in subsequent proceedings. It is additionally wasteful and constitutes an unfair financial burden on the Respondent which is already in liquidation to be put through a lengthy litigation process, in view of the fact that the Scheme has specified the recourse for the applicants, following from their own decision not to support the Scheme, to obtain a refund of their SPA purchase sums as Non-participating Purchasers.”

A fortiori in the case of TIESB, who had voted in support of Scheme E, cannot now seek to set aside the Sanction Order on the ground that one of the Applicants, KSFI, had reneged on the purported side arrangement entered into secretly between TIESB and KSFI (if any).

To allow TIESB to do so would be unfair, unreasonable and prejudicial to HSBC, ABMB and other scheme creditors, and goes against the need of ensuring that there is certainty as to the validity of a court-sanctioned scheme, particularly when the Applicants have successfully obtained Bursa Malaysia’s approval of the KSB Schemes on 19.8.2024.

TIESB is also estopped and cannot seek to enforce the terms of the Consent Order against KSFI, which clearly has been superseded by the TIESB’s approval of Scheme E, and the sanctioning of the KSB Schemes by this Honourable Court. [Emphasis added] Court’s analysis [44] Issue [1] raises the question whether a court can set aside an earlier court order which had approved a scheme of arrangement under section 366(3) and (4) of the CA 2016. CA 2016 [45] The relevant section on this issue is section 366 of the CA 2016 which reads as follows: Power of Court to order compromise or arrangement with creditors and members

(1) The Court may, on an application under this Subdivision, order a meeting in a summary way to be summoned in such manner as the Court directs, by either—

the company;

any creditor or member of the company;

the liquidator, if the company is being wound up; or

the judicial manager, if the company is under judicial management.

A meeting held pursuant to an order of the Court made under subsection (1) may be adjourned if the resolution for adjournment is approved by seventy-five per centum of the total value of creditors or class of creditors or the members or class of members present and voting either in person or by proxy at the meeting.

The compromise or arrangement shall be binding on—

all the creditors or class of creditors;

the members or class of members;

the company; or

the liquidator and contributories, if the company is being wound up, if the compromise or arrangement is agreed by a majority of seventy-five per centum of the total value of the creditors or class of creditors or members or class of members present and voting either in person or by proxy at the meeting or the adjourned meeting and has been approved by order of the Court.

The Court may grant its approval to a compromise or arrangement subject to such alterations or conditions as the Court thinks just.

An order under subsection (3) shall have no effect until an office copy of the order is lodged with the Registrar, and upon being so lodged, the order shall take effect on and from the date of lodgement or such earlier date as the Court may determine and as may be specified in the order. [Emphasis added] General observation [46] I begin my making a general observation. Our section 366 of the CA 2016 uses the phrase “approved by order of the Court” unlike say the Bermuda Companies Act 1981 which uses the phrase “if sanctioned by the court”. Therefore, in the context of our scheme it is more accurate to use the phrase “approved by order of the Court” rather than “if sanctioned by the court”. The verb to use is “approved “and not “sanctioned” though their meanings may be the same. Law in various jurisdictions [47] Issue [1] has different answers in various jurisdictions. There is a useful survey of the case law from the courts in England, Singapore and India in the 2023 High Court judgment in Top Builders Capital and by the Singapore Court of Appeal in The Oriental Insurance Co Ltd v Reliance National Asia Re Pte Ltd [2008] SGCA 18 [“The Oriental Insurance Co Ltd”]. [48] In Kempe v Ambassador Insurance Co [1998] 1 WLR 271 [“Kempe”], the Privy Council held that a time limit fixed under a scheme of arrangement to do an act that had been sanctioned by court cannot be extended by a court upon an application to extend time by a creditor who had failed to meet the deadline. [49] The rationale given by Lord Hoffmann was that the terms of a scheme were agreed by the creditors and the court “in giving its sanction … has an inherent jurisdiction to correct any obvious mistakes in the document which sets out the scheme. [But] it cannot alter the substance of the scheme and impose upon the creditors an arrangement to which they did not agree… to extend time… would have been a material alteration” [See page 276 E - G]. [50] The Singapore Court of Appeal in The Oriental Insurance Co Ltd called the approach adopted in Kempe “the English approach”. [See Grounds of Judgment [48]. [51] Some Australian courts disagreed with the view expressed in Kempe. The Singapore Court of Appeal in The Oriental Insurance Co Ltd called the approach adopted by these Australian courts “the Australian approach”. VK Rajah JA when indicating his preference for the Australian approach said: The Australian approach 53 Contrary to the approach taken by the Privy Council in Kempe ([21] supra), the Australian courts have consistently taken the position that once a scheme of arrangement is approved by the court, it becomes an order of court, and thus, the statutory provisions on civil procedure (the Rules of Court, in our local context) permit the court to grant an extension of time for, inter alia, a creditor to file its proof of debt. … 69 We note that the Judge did not take the view that the Australian approach was wrong; rather, she decided that “the English position [was] more persuasive” (see the GD at [32]). The question of whether the court has jurisdiction to extend time in respect of a court-approved scheme is essentially a question of discretion, and invariably requires a judge to take a considered view on what best accords with the need for commercial certainty and fairness in this area of the law. The Judge was unduly concerned with the overarching need for clarity, certainty and finality (all of which are crucial to the efficacious implementation of schemes of arrangement), and thus mistakenly concluded that anything less than the strict English approach would be undesirable. However, as we have shown, there are real practical conundrums with the strict English approach, and the reasoning in Kempe is, with respect, sharply flawed. On the other hand, adopting the Australian approach does not necessarily entail sacrificing clarity, certainty and finality. In fact, the Australian approach mitigates some of the injustice that may potentially result under the English approach. It also gives due consideration to the established principles relating to schemes of arrangement while meeting, at the same time, the objectives of the legislative framework governing such schemes. We have therefore adopted the Australian approach as according with both the underlying policy and the objectives of s 210 of the Companies Act. [Emphasis added] [52] Justice Ong Chee Kwan analysed both schools of thought, Kempe and The Oriental Insurance Co Ltd in Top Builders Capital. His Lordship preferred the approach taken in Kempe but added that the court has an overarching supervisory power over the scheme throughout from the moment an application is placed before the court until the completion of the implementation of the scheme. This is what His Lordship said: “[44] To my mind, the fact that Section 366(4) stipulates that the Court may grant its approval to a compromise or arrangement ‘subject to such alterations or conditions as it thinks just’ does not necessarily mean that the Court has no powers to make further ‘alterations or conditions as it thinks just after granting its approval at all. Indeed, Section 366(4) did not express any such limitations. On the contrary, it is my judgment that Section 366(4) confers on the Court an overarching supervisory power over the scheme throughout from the moment an application is placed before the Court until the completion of the implementation of the scheme. Such supervisory power is necessary and is consistent with the Court’s aforesaid stated roles.” [Emphasis added] Which approach should prevail in Malaysia? [53] To my mind, with respect I am of the view Kempe sets out the correct jurisprudence when it comes to the powers of the court to entertain an application by the applicant to the scheme of arrangement or by the scheme creditors for changes to the terms of the scheme of arrangement that had been approved by the court under section 366 of the CA 2016. [54] The court has no power expressly granted to it under section 366 to amend or add any new terms to a scheme of arrangement that had been approved by the court under section 366[3] and [4] of the CA

[55] Likewise, there should be no implied power under common law or the Rules of Court 2012 to amend or add any new terms to a scheme of arrangement that had been approved by the court under section 366[3] and [4] of the CA 2016. This is because the court cannot alter the substance of the scheme and impose upon the scheme creditors an arrangement to which they had not agreed to in the first place. [56] A further reason for this approach is that a scheme of arrangement that had been approved by the court must have finality. Scheme creditors like trade creditors and financial institutions must be able to act on the terms of a scheme of arrangement without fear that the terms may be varied or altered subsequently by the court. [57] These policy considerations have been articulated in Kamuja Corporation Sdn Bhd v Aras Dimensi Sdn Bhd (Dalam Likuidasi) [2016] MLJU 659 at pages 203 - 204 by Mohd Nazlan JC who held that the purchasers who elected not to participate in the scheme in return for the sum invested, were estopped from challenging the application to sanction the scheme. His Lordship had this to say: “[33] The implications of the finality and binding nature of the Scheme cannot be emphasized enough. For instance, MBSB had relied on the sanction of the Court to disburse its new loan for the Scheme. Otherwise, certainty and stability in trade and commerce would be adversely affected, and it would not be inaccurate to say that it would be practically difficult for financial institutions to structure their business affairs if a binding Order of the Court cannot be relied on and is open to challenge in subsequent proceedings… [Emphasis added] [58] In my view, the court has a limited role after approving a scheme of arrangement under section 366[3] and [4] of the CA 2016. This role is expressly provided under the new section 369D CA 2016. The court also has a role post-approval of the scheme of arrangement under its inherent jurisdiction if “consent to the scheme was obtained by fraud or where there are obvious mistakes in the documents setting out the scheme”. [See The Oriental Insurance Co Ltd]. This role would fall within the supervisory power stated in Top Builders Capital. Issue 2 - whether Tunai can set aside the court order which had approved scheme E under section 366(3) and (4) of the CA 2016 [59] Tunai relies on two grounds as set out in its written submissions in enclosure 51 at paragraph 3:

3.1 The implementation of Scheme E of the Scheme of Arrangement would contravene the existing Regulation 10 of the Moneylenders (Control and Licensing)

3.2 KSFI has failed to provide fundamental consideration for TIESB’s support in the Scheme of Arrangement, particularly Scheme E (“Failure of consideration Issue”). [60] As answered in Issue [1] above, the court can only set aside Scheme E if consent to the scheme was obtained by fraud or where there are obvious mistakes in the documents setting out Scheme E. [61] There are no obvious mistakes in the documents setting out Scheme E. That leaves us with the question – was consent to Scheme E obtained by fraud? The Illegality Issue [62] Tunai contends in its written submissions in Enclosure 51 at paragraph 16:

We respectfully submit that: -

16.1 At all material times, no parties had ever brought up this issue because none of the parties were aware of this incoming contravention with the Regulations if Scheme E is executed;

16.2 The Scheme of Arrangement including Scheme E was examined / approved, and later sanctioned by this Honourable Court;

16.3 The contravention of the Regulations was only discovered by TIESB’s solicitors at later stage after the sanction order granted on 21.12.2022; and

16.4 TIESB and its solicitors are bound to notify this Honourable Court of the illegality discovered in Scheme E. [Emphasis added] [63] With respect to counsel, I find the submissions “At all material times, no parties had ever brought up this issue because none of the parties were aware of this incoming contravention with the Regulations” inaccurate for these reasons: i. counsel contends the illegality was “only discovered by TIESB’s solicitors at later stage after the sanction order granted on 21.12.2022.”, when in fact TIESB and its solicitors were already aware during proceedings in OS No. 701 [from November 2021 - July 2022] of the alleged illegality concerning the Moneylending Agreement. [See Enclosure 53 at paragraph 8]; and ii. When opposing OS No.701, Tunai took the position (in affidavit affirmed by its director) “that all legal issues that were raised and could have been raised” i.e. any illegality surrounding the Moneylending Agreement had been merged into the Consent Order [See affidavit in Enclosure 35 pages 197 at paragraph17]; and the Interim Judicial Manager of the 2nd applicant “is estopped from reagitating the alleged illegality of the Moneylending Agreement... as these issues …had been merged into the Consent Judgment.” [See Tunai’s affidavit in Enclosure 35 page 200 at paragraph 21]. [64] It is trite law that the court will not assist any party who is privy to illegality. [See Merong Mahawangsa Sdn Bhd & Anor v Dato’ Shazryl Eskay Abdullah [2015] 8 CLJ 212 FC]. [65] Tunai having voted in favour of Scheme E after being aware of a potential illegality issue cannot now come to court to assert the same alleged illegality to set aside Scheme E. It is trite that the court will not condone or lend its hand to a party who takes advantage of its own wrongdoings and comes to court without clean hands. [See Tetap Tiara Sdn Bhd v Pengurusan Perbadanan Jaya One & 21 Ors [2024] 1 AMR 499 CA at [47] [“Tetap Tiara Sdn Bhd”]. Procedural point-all parties affected by a court order must be made parties [66] I am further of the view that if Tunai relies on fraud to set aside Scheme E, it has to file a new suit and make all scheme creditors and the applicants here as defendants. This is because all parties affected by a court order must be made parties to the suit. [See Saujana Resort (M) Bhd v Chin Cheen Foh & Ors And Another Appeal [2021] 3 CLJ 71 CA [“Saujana Resort”] and Awesome Broadcasting Sdn Bhd v Mytv Broadcasting Sdn Bhd [2024] 5 MLRA 8 CA]. [67] In Saujana Resort, Vazeer Alam Mydin Meera JCA held at [41]- … It is trite that in an application for declaration, all parties who would potentially be affected by such an order must be before the court. An action for a declaration is an important device for ascertaining and determining the rights of parties. And it is settled that when a declaratory order is sought, all interested parties must be before the court. See dicta of Viscount Maugham in London Passenger Transport Board v. Moscrop [1942] AC 332 at 345 (HL) … Failure of consideration Issue [68] Tunai contends the 2nd applicant and/or the White Knight agreed to honour the terms of the Consent Order in consideration for Tunai agreeing to vote for Scheme E. Tunai further contends the 2nd applicant and/or the White Knight failed to honour the terms of the Consent Order thereby resulting in a total failure of consideration. [69] Based on my answer to Issue 1, allegation of a total failure of consideration is not a ground to set aside Scheme E. [70] Tunai’s recourse, if there is indeed such a breach by the 2nd applicant and/or the White Knight, is to sue the 2nd applicant and/or the White Knight for failure to honour the terms of the Consent Order. For the record, I have not considered the merits of this allegation of Tunai as this is for the court hearing such a claim to decide. [71] For the reasons above, I therefore answer issue 2 in the negative. Issue 3 - whether Tunai can rely on the new section 369D of the CA 2016 to set aside an earlier court order which had approved Scheme E under section 366(3) and (4) of the CA 2016 [72] Section 369D was introduced by the Companies (Amendment) Act 2024 [Act A1701/2024], which took effect on 01-04-2024. Act A1701/2024 made substantial changes that, in the words of the Companies Commission of Malaysia in a press release issued on 13- 10-2023, “aims to introduce provisions to accord a more comprehensive framework at par with international practices to ensure that scheme of arrangements and compromise could be used as a more effective rehabilitation tool for companies facing financial difficulties”. [73] Section 369D of the CA 2016 reads as follows: Section 369D. Power of Court to review act, omission or decision, etc., after approval, etc., of compromise or arrangement

The Court may, on an application of any company or creditor bound by a compromise or arrangement which has been approved by the Court under subsection 366(4) or subsection 369c(1), clarify any terms of the compromise or arrangement.

Where the Court is satisfied that the company has committed an act or omission, or made a decision, that results in a breach of any terms of the compromise or arrangement, the Court may, on an application of any creditor bound by the compromise or arrangement-

confirm, reverse or modify the act, omission or decision of the company; or

give such direction or make such order as the Court thinks fit to rectify the act, omission or decision of the company.

No clarification or order made, and no direction given, by the Court under subsection (1) or (2) may alter or affect any person’s rights under the terms of the compromise or arrangement. [Ins by Act A1701/2024] [74] Under section 369D [1], the court has the power, upon application by a company or creditor bound by the scheme of arrangement approved by the court under section 366[4], to clarify any terms of such scheme. [75] Under section 369D [2], where the court is satisfied that the scheme company has committed an act or omission, or made a decision, that results in a breach of any terms of the arrangement, the Court may, on an application of any creditor bound by the arrangement confirm, reverse or modify the act, omission or decision of the company or give such direction or make such order as the Court thinks fit to rectify the act, omission or decision of the company. [76] Thus, Tunai cannot rely on section 369D of the CA 2016 as the grounds rely on by Tunai to set aside Scheme E do not come within its ambit. Issue 4 - whether Tunai having voted for Scheme E and failing to disclose the Secret Deal at the hearing of the applicants’ application for court approval of the schemes is now estopped from setting aside Scheme E just because its Secret Deal was not honoured by the 2nd applicant due to subsequent disputes [77] I answer issue 4 in the positive. Tunai is estopped from setting aside Scheme E having failed to disclose the Secret Deal to the scheme creditors and disclose to the court the Secret Deal when the court was asked to grant the Sanction Order. [78] The Federal Court in Boustead Trading (1985) Sdn Bhd v Arab-Malaysian Merchant Bank Bhd [1995] 3 MLJ 331 FC said: We take this opportunity to declare that the detriment element does not form part of the doctrine of estoppel. In other words, it is not an essential ingredient requiring proof before the doctrine may be invoked. All that need be shown is that in the particular circumstances of a case, it would be unjust to permit the representor or encourager to insist upon his strict legal rights. In the resolution of this issue, a judicial arbiter would, when making his assessment of where the justice of the case lies, be entitled to have regard to the conduct of the litigant raising the estoppel. This may, but need not in all cases, include the determination of the question as to whether the particular litigant had altered his position, although such alteration need not be to his detriment. [Emphasis added] [79] Tunai is estopped as it had hidden the Secret Deal from the court when the court was asked to approve Scheme E. It is trite that the court will not condone or lend its hand to a party who takes advantage of its own wrongdoings and comes to court without clean hands. [See Tetap Tiara Sdn Bhd at [47]]. Decision [80] For the reasons above, I dismiss Tunai’s application for prayers 2 to 7 with costs. On costs, I order Tunai: i. To pay costs of RM 20,000 to the applicants subject to allocatur; and ii. Pay costs of RM 8,000 each to the 2nd intervener and 3rd intervener subject to allocatur. Lastly, I thank counsel for their helpful submissions which have greatly assisted me. …………(signed)…………. Leong Wai Hong Judge High Court of Malaya Kuala Lumpur (NCC 6) Dated: 10th April 2025. COUNSEL: 1) Tharminder Singh, Joycelyn Goh and Aiman Danial for applicants. (Izral Partnership (Kuala Lumpur)) 2) Kirubakaran K, Daljit Singh and Tan Keng Yi for 1st intervener. (Daljit Singh Partnership (Petaling Jaya)) 3) Koh San Tee, Niisha Lakshme and Tan Sze Ting for 2nd and 3rd intervener. (Benjamin Dawson (Kuala Lumpur)) CASES REFERRED TO: 1) Atlassian Corporation Pty Limited [2013] FCA 1451. 2) Ausnet Services Ltd v CMR of Taxation [2024] FCA 90. 3) Awesome Broadcasting Sdn Bhd v. Mytv Broadcasting Sdn Bhd [2024] 5 MLRA 8 CA. 4) Badiaddin bin Mohd Mahidin & Anor v Arab Malaysian Finance Bhd. 5) Boustead Trading (1985) Sdn Bhd v Arab-Malaysian Merchant Bank Bhd [1995] 3 MLJ 331. 6) CIMB Investment Bank Bhd v Metroplex Holdings Bhd. 7) Kamuja Corporation Sdn Bhd v. Aras Dimensi Sdn Bhd (Dalam Likuidasi) [2016] MLJU 659. 8) Kempe v Ambassador Insurance Co [19981 1 WLR 271. 9) London Passenger Transport Board v. Moscrop [1942] AC 332. 10) Merong Mahawangsa Sdn Bhd & Anor v. Dato’ Shazryl Eskay Abdullah [2015] 8 CLJ 212 FC 11) Re AGL Gas Networks Ltd (2001) 37 ACSR 441. 12) Saujana Resort (M) Bhd v. Chin Cheen Foh & Ors And Another Appeal [2021] 3 CLJ 71 CA. 13) Tai See Yoon & Ors v NCT Tropika Sdn Bhd [2022] MLJU 3438. 14) Tetap Tiara Sdn Bhd v Pengurusan Perbadanan Jaya One & 21 Ors [2024] 1 AMR 499 CA. 15) The Oriental Insurance Co Ltd v. Reliance National Asia Re Pte Ltd [2008] SGCA 18. 16) Top Builders Capital Bhd & Ors v Seng Long Construction & Engineering Sdn Bhd & Ors [2023] MLJU 580 LEGISLATION REFERRED TO: 1) Companies (Amendment) Act 2024 [Act A1701/2024]. 2) Companies Act 2016, sections 210, 366, 366(3), 366(4) and 369D. 3) Contracts Act 1950, section 24. 4) Moneylenders Regulations 2003, Regulation 10. 5) Rules of Court 2012 Order 92 Rule 4.