Ambank (M) Berhad v Gula Perak Bhd (dalam Likuidasi) (B-02(IM)(NCC)-491-03/2023)

MALAYSIAN INDUSTRIAL DEVELOPMENT FINANCE BERHAD ... APPELLANTS CORAM: RAVINTHRAN A/L N. PARAMAGURU, JCA FAIZAH BINTI JAMALUDIN, JCA EVROL MARIETTE PETERS, JCA GROUNDS OF JUDGMENT 18 May 2026 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 4 Introduction [1] Five appeals (these Appeals”) were heard which arose from two decisions of the High Court pertaining to a scheme of arrangement (“Scheme of Arrangement”) for the Respondent. [2] Civil Appeals Nos B-02(IM)(NCC)-490-03/2023 (“Appeal No 490”), B-02(IM)(NCC)-491-03/2023 (“Appeal No 491”), B-02(IM)(NCC)- 492-03/2023 (“Appeal No 492”), B-02(IM)(NCC)-493-03/2023 (“Appeal No 493”) arose from the decision of the High Court on 16 March 2023 in dismissing the Appellants’ applications to set aside an ex parte Order dated of 3 August 2022, granting leave to the Respondent to convene Scheme Creditors’ Meeting pursuant to section 366(1) of the Companies Act 2016 (“the Companies Act”) . [3] Civil Appeal No B-02(NCC)(A)-1168-07/2023 (“Appeal No 1168”) arose from the decision of the High Court dated on 17 July 2023, in sanctioning the Scheme of Arrangement, purportedly approved by the Scheme Creditors’ Meeting on 1 December 2022, pursuant to section 366(4) of the Companies Act. The factual background [4] The Appellants are collectively judgment creditors, syndicated lenders, and unsecured creditors of the Respondent. [5] The Respondent is a company that was wound up on 1 March 2013. [6] Sometime in 2010, the Appellants had obtained judgment against the Respondent, and one Lim Sue Beng (as guarantor) after a full 18 May 2026 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 5 trial, in KLHC Suit No. D5-22-1648-2005. In 2013, the Respondent was wound up pursuant to a petition by one of the judgment creditors. The Appellants then filed proofs of debt totalling approximately MYR14.24 million. [7] Although bankruptcy proceedings were commenced against Lim Sue Beng in 2011, such proceedings were withdrawn (with liberty to file afresh) due to procedural errors. In 2021, the Appellants filed fresh bankruptcy proceedings against Lim Sue Beng, and these proceedings remain pending in the High Court as of the date of hearing of these Appeals. [8] In July 2022, Westchip Sdn Bhd (“Westchip”) proposed to acquire the debts owed to the Respondent’s unsecured creditors. Under the proposal, a total sum of approximately MYR241,873.37 would be paid in full and final settlement of debts amounting to MYR48.37 million. The proposal further contemplated the release of all guarantees, including the discharge of Lim Sue Beng’s liability to the Appellants. [9] In July 2022, the Respondent filed an application for leave (“the Leave Application”) to convene a Scheme Creditors’ Meeting under section 366(1) of the Companies Act, which reads: Section 366 – Power of Court to order compromise or arrangement with creditors and members

The Court may order a meeting in a summary way to be summoned in such manner as the Court directs on an application to the Court for the approval of a compromise or arrangement by-

a company; 18 May 2026 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 6

a creditor or class of creditors of a company;

a member or class of members of a company;

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

a judicial manager, if a company is under judicial management. [Emphasis added.] [10] In August 2022, the High Court granted an ex parte order (“the August 2022 Order”) allowing the Scheme Creditors’ Meeting, which was eventually held in December 2022. [11] In March 2023 (“the March 2023 Order”), the same High Court dismissed Appellants' application to set aside (“the Setting-Aside Application”) the August 2022 Order, leading to Appeals 490-493. [12] In May 2023, the Respondent applied for Court’s sanction of the Scheme of Arrangement under section 366(4) of the Companies Act which reads: Section 366 – Power of Court to order compromise or arrangement with creditors and members ...

The Court may grant its approval to a compromise or arrangement subject to such alterations or conditions as the Court thinks just. [Emphasis added.] [13] The application for the Court’s sanction of the Scheme of Arrangement was subsequently heard before a different High Court Judge, who, in July 2023, allowed the application (“the July 2023 Order”), giving rise to Appeal 1168. 18 May 2026 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 7 The issues [14] The first issue for consideration by this Court was whether the learned High Court Judge had erred in dismissing the Setting-Aside Application. In addressing this issue, the next question was whether the Leave Application constituted an abuse of process on the ground that it was not made bona fide. [15] The second issue was whether the learned High Court Judge had erred in granting the July 2023 Order, namely the sanction of the Scheme of Arrangement. In addressing this issue, the subsequent issue was whether the learned High Court Judge had considered the ostensible purpose and conduct surrounding the Scheme of Arrangement, its proposal and approval. [16] We unanimously allowed these Appeals for the following reasons. Contentions, evaluation, and findings [17] The starting point for an appellate court is the presumption that any decision appealed against is correct in every respect. Therefore, to succeed in these Appeals, the Appellants in the present case must convince this Court that the decisions appealed against are wrong; and if this Court was not so convinced, these Appeals would fail. [18] This principle expounded in Watt or Thomas v. Thomas [1947] AC 487 has been assimilated into Malaysian jurisprudence through several cases including Ng Hoo Kui & Anor v Wendy Tan Lee Peng, Administrator of the estates of Tan Ewe Kwang, Deceased & Ors [2020] 10 CLJ 1, UEM Group Bhd v. Genysis Integrated Engineers 18 May 2026 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 8 Pte Ltd & Anor [2010] 9 CLJ 785, and Ikris Bina Sdn Bhd v. Jianseng Construction Sdn Bhd [2019] 1 LNS 1662. [19] We also made reference to Nor Azlina bt Abdul Aziz v. Expert Project Management Sdn Bhd [2017] 3 MLJ 763, where the principles of appellate intervention were distilled by the Court of Appeal, through Harmindar Singh Dhaliwal JCA (as he then was) in the following passages: [20] Nevertheless there are occasions when appellate interference is warranted and these occasions have been well set out in numerous cases. Some of these occasions are:

where the trial judge took into account irrelevant considerations and failed to give due weight to relevant considerations (see Director of Forests & Anor v Mau Kam Tong & Mau Kim Siong (the executors of the estate of Mau Ming, deceased) & Anor and another appeal [2010] 3 MLJ 509);

where there was no proper evaluation of the evidence by the trial judge (see Lee Nyan Hon & Bros Sdn Bhd v Metro Charm Sdn

where the decision arrived at by the trial court was without judicial appreciation of the evidence (see Gan Yook Chin (P) & Anor v

where a trial court has so fundamentally misdirected itself, that no reasonable court which had properly directed itself and asked the correct questions, would have arrived at the same conclusion (see Raja Lob Sharuddin bin Raja Ahmad Terzali & Ors v Sri

where the trial judge was plainly wrong in arriving at his decision see Lee Ing Chin @ Lee Teck Seng v Gan Yook Chin & Anor [2003] 2 MLJ 97); 772 Malayan Law Journal [2017] 3 MLJ; 18 May 2026 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 9

where a trial judge had so manifestly failed to derive proper benefit from the undoubted advantage of seeing and hearing witnesses at the trial, and in reaching his conclusion, has not properly analysed the entirety of the evidence which was given before him (see First Count Sdn Bhd v Wang Yew Logging & Plantation Sdn Bhd [2013] 4 MLJ 693 which followed the Privy Council case of Choo Kok Beng v Choo Kok Hoe & Ors [1984] 2

where the judgment is based upon a wrong premise of fact or of law (see Perembun (M) Sdn Bhd v Conlay Construction Sdn Bhd [2012] 4 MLJ 149). [20] However, this does not mean that the hands of the appellate court are tied. The exception to the general rule mentioned above is when the findings are clearly wrong: China Airlines Ltd v Maltan Air Corp Sdn Bhd [1996] 3 CLJ 163; [1996] 2 MLJ 517; or where crucial evidence has been misconstrued, or disregarded: Multar Masngud v. Lim Kim Chet & Anor [1982] CLJ Rep 237; or if the trial judge is shown to have misdirected himself on the evidence, or to have rejected evidence for a wrong reason, or to have drawn an inference from evidence which was equally capable of supporting a different inference, it then may be the duty of an appellate court to interfere: Woon Ngee Yew and Others v. Ng Yoon Thai and Others [1940] 1 LNS 119; [1941] 10 MLJ (FMSR) 37. [21] In Woon Ngee Yew and Others v. Ng Yoon Thai and Others, it was stated by Mc Elwaine CJ in the following passage: An Appellate Court should be very loath to differ on a finding of fact by a Court which has seen and heard the witnesses but if the learned Judge can be shown to have misdirected himself on the evidence, or to have rejected evidence for a wrong reason or to have drawn an inference from 18 May 2026 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 10 evidence which was equally capable of supporting a different inference it may be the duty of an Appellate Court to interfere. Whether the High Court Judge erred in dismissing the Setting-Aside Application [22] In considering whether the learned High Court Judge had erred in dismissing the Setting-Aside Application, it was necessary to first determine whether the ex parte Leave Application was made bona fide. [23] An ex parte application, one made without notice to the other party, is a powerful tool, but it carries with it a fundamental responsibility. When a party comes to court seeking an order without the other side being present, they are not merely a litigant; they become an officer of the court. This imposes a duty of uberrimae fidei, or the "utmost good faith." The court is effectively being asked to make a decision that could affect the rights of an absent party, and it can only do so safely if it can trust the applicant completely. [24] It is well settled that at the ex parte leave stage for convening a Scheme Creditors’ Meeting, the court's role is supervisory in nature. The learned High Court Judge was not required to conduct a final adjudication on the merits of the scheme, nor was he expected to undertake a minute examination of its fairness. The threshold is deliberately low, as the applicant needed to only demonstrate that the proposed Scheme of Arrangement was of such a character that it was fit for consideration by a meeting of creditors. [25] Nevertheless, this supervisory function retains an important gatekeeping purpose: to ensure that the proposed scheme of 18 May 2026 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 11 arrangement is advanced in good faith and that the composition of creditors is not tainted by conflict, collusion, or unfairness. Although the court does not adjudicate upon the substantive merits of the scheme of arrangement at this threshold stage, it must remain vigilant against any abuse of process and satisfy itself that the meeting to be convened is procedurally proper and capable of fairly reflecting the collective will of the creditors. [26] The discretionary power to order a scheme creditors’ meeting under section 366(1) of the Companies Act is not unfettered. In exercising this discretion, the court must consider whether the application has been made bona fide. This principle was expounded in In Re Kuala Lumpur Industries Bhd [1991] 3 CLJ Rep 86, where it was held that the Court must be satisfied that an application under section 176(1) of the Companies Act 1965 (which is the equivalent provision to section 366(1) of the Companies Act) is presented in good faith. The requirement of good faith is not a mere formality; it demands that the court consider whether the proposed scheme of arrangement serves any genuine commercial purpose, or whether it is merely a device to subvert the legitimate rights of dissenting creditors. [27] We also drew guidance from the case of Sri-Hartamas Development Sdn Bhd v. MBf Finance Bhd [1990] 1 CLJ 827, where it was stated by Siti Norma Yaakob J (as she then was) in the following passage: I accept the fact that this Court is not equipped to inquire into the practical implications of the scheme but nevertheless by virtue of s. 176(4) of the Act, that gives me the discretion not only to order a creditor's meeting under subsection (1) but also to refuse to make an order for such a 18 May 2026 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 12 meeting, I consider that I can evaluate and consider whether the scheme is reasonable and fair so as to benefit all 3 classes of creditors based on the information disclosed by the applicant as to the framework of the scheme itself. [Emphasis added.] [28] In the present case, a perusal of the learned High Court Judge’s grounds of judgment indicated that the dismissal of the Setting-Aside Application was premised on the view that it was not for the Court, at that stage, to determine the merits or viability of the application. [29] Having regard to the established case law, we took the view that the Court’s function is not that of a mere rubber stamp, but one that requires the exercise of judicial scrutiny. It retains the inherent jurisdiction to prevent the convening of meetings that may operate oppressively, unfairly, or in a manner that prejudices the minority creditors. A perfunctory approach at this stage, one that simply wades through the application without any meaningful scrutiny, risks allowing a scheme of arrangement tainted by irregularities to proceed, thereby undermining the very safeguards that the legislature has put in place to protect dissenting creditors. The supervisory jurisdiction must be exercised with due diligence, not abdicated through inattention. [30] In the present case, there were serious questions regarding the legitimacy of the Scheme of Arrangement, given that the Respondent had been wound up for more than ten years, the Respondent’s unsecured debts, and that the Scheme of 18 May 2026 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 13 Arrangement had proposed a full and final settlement not only of the scheme creditors’ claims but also of any claims owed to the Appellant, including those arising from corporate and personal guarantees. [31] The Appellants contended that the abuse of process argument was a central pillar of their case against the Scheme of Arrangement. They argued that the entire Scheme of Arrangement was not a genuine attempt to rehabilitate the Respondent (which was already wound up), but was instead a collateral attack mounted for an ulterior purpose: to rescue Lim Sue Beng, from pending bankruptcy proceedings [32] After perusing the relevant documents, we agreed with the Appellants that the application for the Scheme Creditors Meeting was not made bona fide, and was in actual fact an abuse of process. [33] In fact, at the Leave Application stage, the Respondent should have demonstrated more than just a proposal. That proposal should have contained "sufficient particulars to enable the court to assess that it was feasible and merited due consideration" by the creditors. This was not done, and had also not been addressed by the learned High Court Judge during the Setting-Aside Application stage. [34] In our view, if the learned High Court Judge had taken into account these factors, having granted the August 2022 Order, his Lordship would have set aside such Order on the basis that it was not filed bona fide. 18 May 2026 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 14 [35] We also took note that in his Grounds of Judgment, the learned High Court Judge had refused to set aside the August 2022 Order because the Scheme Creditors Meeting had already been held on 1 December 2022. The learned High Court Judge stated that if the Appellants were unhappy with the result of the Scheme Creditors Meeting, they could have challenged the result, but not the August 2022 Order granting leave to convene the meeting. [36] We appreciate that the learned High Court Judge may have taken the view that the Setting-Aside Application had, by then, become academic. However, we were of the considered view that the learned High Court Judge had the opportunity to revisit and, if necessary, set aside the August 2022 Order at the hearing of the Setting-Aside Application. However, his Lordship had declined to do so on the basis that the Scheme Creditors’ Meeting had already been convened. In doing so, the learned High Court Judge had failed to properly exercise the Court’s discretion, as the mere fact that the meeting had taken place ought not to have precluded a substantive reconsideration of the propriety of the August 2022 Order. This, with respect, constituted a clear error on the part of the learned High Court Judge. [37] The fact that the Scheme Creditors’ Meeting was subsequently convened and held did not cure the initial absence of bona fide. Similarly, the subsequent “approval” of the Scheme of Arrangement by a majority of creditors should not have precluded the learned High Court Judge from scrutinising whether the Leave Application was itself an abuse of process. A defect that goes to the root of 18 May 2026 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 15 jurisdiction or good faith is not remedied merely by the passage of time or by the outcome of the Scheme Creditors’ Meeting. The Court’s supervisory jurisdiction necessarily extended to ensuring that the very foundation upon which the Scheme Creditors’ Meeting was convened was proper, genuine, and untainted. [38] In the present case, serious allegations of conflict of interest involving certain creditors, including Lim Sue Beng, were not adequately considered by the learned High Court Judge. These concerns went directly to the propriety of the creditor composition and whether the voting process could fairly reflect the collective will of the creditors. The failure of the learned High Court Judge to properly address these matters during the hearing of the Setting-Aside Application amounted to a misdirection in law. [39] As such, we were unanimous in our view that the learned High Court Judge had erred in dismissing the Setting-Aside Application of the August 2022 Order. Whether the High Court Judge had erred in sanctioning the Scheme of Arrangement [40] With regard to the July 2023 Order, it was our view that the learned High Court Judge had erred in sanctioning the Scheme of Arrangement, for the following reasons. [41] The principal difficulty lay in the Grounds of Judgment for the July 2023 Order, which merely narrated the factual background and repeated the Parties’ arguments without demonstrating any 18 May 2026 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 16 application of the established legal principles to the issues before the court. [42] In our view, the judgment was, in substance, a non-speaking judgment. Such judgment was fundamentally flawed because it failed to fulfil the essential function of a judicial decision. As emphasised in Ganapathy Rengasamy v Public Prosecutor [1998] 2 CLJ 1, a judgment must do more than merely set out the facts and state the ultimate conclusion; it must reflect a discernible judicial thought process by applying the relevant law to the facts and explaining the reasons for the court’s conclusion. Where a judge merely summarises the parties’ submissions and announces a result without analysis, the judgment is defective. [43] Furthermore, as recognised by the Court of Appeal in Dr Hari Krishnan v Megat Noor Ishak [2018] 3 MLJ 281, such defect would render the right of appeal largely illusory. An appellate court cannot meaningfully review a decision when the reasoning of the lower court is unknown. In those circumstances, the appellate court is effectively compelled to disregard the judgment and undertake a fresh scrutiny of the evidence and issues to determine the correct outcome. For this reason, a non-speaking judgment is unacceptable: it deprives the parties of a proper explanation for the decision, conceals potential legal errors, and undermines the integrity of the appellate process. [44] By virtue of the learned High Court Judge rendering a non-speaking judgment, Her Ladyship had failed to properly direct her mind to the requisite considerations as enunciated in MDSA Resources Sdn 18 May 2026 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 17 Bhd v Adrian Sia Koon Leng [2023] 5 MLJ 900 when granting the July 2023 Order. Specifically, the learned High Court Judge had omitted to consider the following fundamental prerequisites for sanctioning a scheme of arrangement:

whether the statutory provisions had been duly complied with;

(ii) whether the class of creditors was fairly represented by the scheme creditors’ meeting;

(iii) whether the statutory majority was acting bona fide and was not coercing the minority in order to promote interests that were adverse to those of the class whom they had purported to represent; and

(iv) whether the proposed scheme of arrangement was such that an intelligent and honest person, being a member of the class concerned and acting in respect of his interest, might have reasonably approved. [45] As such, the July 2023 Order was vitiated by a non-direction of the mind to the following material considerations, rendering the same liable to be set aside. [46] Unexplained proof of debts – It appeared that the Respondent had failed to comply with the August 2022 Order by allowing creditors who were not listed in the Schedule attached to the August 2022 Order (“the Schedule”) to participate and vote. It was undeniable that the total unsecured debt had ballooned from MYR48.37 million to MYR76.7 million just before the Scheme Creditors’ Meeting, due to 18 May 2026 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 18 the admission of four new proofs of debt from parties connected to the guarantor, Lim Sue Beng. [47] The Respondent’s position was that, while the admission of the proofs of debt occurred shortly before the Scheme Creditors’ Meeting, they were nevertheless admitted within the prescribed time-frame governing voting eligibility and thus did not give rise to any procedural impropriety. [48] We found such contention unacceptable as we drew guidance from the Federal Court case of Genisys Integrated Engineers Pte Ltd v UEM Genisys Sdn Bhd [2023] 3 MLJ 627, where it was stated that lodging a proof of debt is a mandatory process, and the liquidator must meticulously examine every proof of debt to ensure that such debts were genuine liabilities. As Hasnah Mohammed Hashim FCJ observed in the following passages: [23] The creditors of the wound up company are required by law to lodge a POD together with supporting documents to prove that the company in liquidation owes the creditor the sum as specified in the POD. Lodging a POD is a mandatory statutory process for a creditor of a wound up company. A POD is essentially a documentary declaration made by the creditor, towards establishing or proving the debt that the company owes to its creditors. The POD must be lodged by a creditor with the appointed liquidator and it details the debt owed by the wound up company together with supporting documents substantiating the debts so claimed. [24] The objective of this exercise is to ensure that the assets of the wound up company are distributed fairly and justly amongst all creditors so that none of them will gain an advantage over the others. The Supreme Court in Mosbert Bhd (In Liquidation) v. Stella D'Cruz [1985] CLJU 47; [1985] 1 LNS 47 explained that "... the primary object of winding up is the collection and distribution of the assets of the company pari passu amongst unsecured creditors after payment of preferential debts." In other words, the creditor must satisfy the liquidator 18 May 2026 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 19 that the debt is provable and genuine. This is sometimes referred to as 'true liabilities' (see Tanning Research Laboratories INC v. O'Brien [1990] 91 ALR 180). [Emphasis added.] [49] In the present case, the proofs of debt were admitted without proper scrutiny, and the learned High Court Judge had failed to address such issue. [50] Failure to Meet 75% Threshold – Following from the improper admission of four new proofs of debt as referred to above, these debts were not part of the Schedule when the Court granted the August 2022 Order. [51] Therefore, if the improperly admitted debts were excluded, the total value of the valid debt would have reverted to MYR48.37 million. In that scenario, the Appellants, who voted against the Scheme of Arrangement, held MYR14.24 million in debt. This amount constituted approximately 29.44% of the total valid vote. As the Appellants had voted against the Scheme of Arrangement, the level of approval would only have been 70.56%, which fell short of the mandatory 75% threshold required by section 366(3) of the Companies Act, which reads: Section 366 – Power of Court to order compromise or arrangement with creditors and members ...

The compromise or arrangement shall be binding on-

all the creditors or class of creditors; 18 May 2026 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 20

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. [Emphasis added.] [52] We had also noted and acknowledged the Appellants’ argument that the guarantor, Lim Sue Beng, was an unsecured creditor with a "special interest" that fundamentally differed from that of ordinary, independent creditors. [53] From the facts, it was undeniable that Lim Sue Beng had a special interest in the proposed Scheme of Arrangement because he was the guarantor of the Respondent's debts and faced personal bankruptcy proceedings brought by the Appellants based on a judgment debt of over MYR14 million. Unlike ordinary unsecured creditors whose only concern was how much they could recover from the wound-up company, Lim Sue Beng stood to gain a personal windfall from the Scheme of Arrangement. The terms of the Scheme of Arrangement provided that acceptance of a tiny payment (0.5 sen for every MYR1 owed) would operate as full and final settlement, releasing not only the Respondent but also all guarantors from any further liability. [54] Lim Sue Beng’s interest was, therefore, directly aligned with securing the approval of the Scheme of Arrangement, regardless of its commercial merits, because it offered him an escape from a 18 May 2026 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 21 multi-million-ringgit personal debt and halted the bankruptcy proceedings against him. This placed Lim Sue Beng in a different position from ordinary, independent creditors, who would have to decide whether the proposed Scheme of Arrangement was acceptable. [55] Courts have consistently held that such a personal stake amounts to a special interest that must be discounted or given less weight, because it risks distorting the vote and coercing the minority into accepting a scheme of arrangement that benefits only a select few. [56] On this issue, we derived guidance from the Federal Court decision in MDSA Resources Sdn Bhd v Adrian Sia Koon Leng, which sets out the governing legal framework for the treatment of related-party creditors in a scheme of arrangement. The principles may be summarised as follows:

Special Interest Justifies Different Treatment: The Federal Court recognised that a related-party creditor may possess a “special interest” in advancing the proposed scheme, which may not align with, and may even run counter to, the interests of independent creditors. In such circumstances, there is no true “community of interest” between the related-party creditor and the general body of creditors, thereby justifying differential treatment of their votes.

The Federal Court further held that, in light of this special interest, the votes of related parties ought to be discounted or accorded lesser weight, given the real risk that such creditors may prioritise the success of the scheme over the interests of other creditors. In appropriate cases, particularly where the related party 18 May 2026 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 22 is wholly owned or controlled, such votes may even be disregarded entirely. [57] Applying these principles to the present case, the vote of Lim Sue Beng (representing MYR16.62 million, or 21.66% of the total debt) ought to have been disregarded. Once excluded from the computation, the Appellants’ dissenting vote of 18.56%, calculated against the remaining valid debt, would have been sufficient to defeat the Scheme of Arrangement, as the votes in favour would consequently have fallen below the requisite 75% statutory threshold. [58] In essence, the Scheme of Arrangement only appeared to pass the 75% test by (a) including questionable debts and (b) counting the votes of a party with a personal stake in the outcome, whose interests were not aligned with the general body of creditors. MDSA Resources Sdn Bhd v Adrian Sia Koon Leng provides powerful authority for the court to look beyond the raw numbers and scrutinise the quality and motivation of the votes to ensure the majority is acting bona fide on behalf of the entire class. [59] Failure to Satisfy the "Reasonableness" and “Bona Fide” test – We drew guidance again from the decision of the MDSA Resources Sdn Bhd v Adrian Sia Koon Leng, where the Federal Court articulated the test of reasonableness in the context of a scheme of arrangement. The Federal Court held that the scheme of arrangement must be one which an intelligent and honest person, being a member of the relevant class and acting in respect of his own interests, might reasonably approve. 18 May 2026 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 23 [60] In our view, the Scheme of Arrangement was not reasonable to begin with for the following reasons. [61] Westchip was the "white knight" that proposed to pay off the unsecured creditors of the Respondent at a rate of 0.5sen for every MYR1 owed, effectively extinguishing over MYR48 million in debt for just MYR241,873.37. Crucially, Westchip received no apparent commercial benefit in return, as it did not acquire any assets, shares, or control of the Respondent. From the documents perused, it was obvious that Westchip's involvement was not a genuine commercial rescue, but a vehicle to achieve a collateral purpose, namely, releasing the guarantor, Lim Sue Beng, from personal liability and derailing the bankruptcy proceedings against him. The fact that Westchip was a newly incorporated company with only MYR2 paid-up capital and no track record, further supported the argument that the scheme was unreasonable, lacked bona fide and was an abuse of process. [62] Secondly, there was also no benefit to the Respondent, since the Respondent had been in liquidation since March 2013. It had no ongoing business, no operations, and its directors had been replaced by a liquidator whose sole duty was to wind up its affairs. There was no "financial woe" to resolve because the Respondent had no future to save. It could not have been rehabilitated or restored to solvency. Any scheme proposed for such a company could not have benefitted the entity itself, as it would have remained in liquidation regardless of whether its debts were settled. 18 May 2026 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 24 [63] In this case, the Scheme of Arrangement merely arranged for a third party to pay creditors a tiny fraction of what they were owed. It did not propose to set aside the winding-up order, return control to the directors, or restart the business. The Respondent itself was simply a passive vehicle used to achieve that collateral purpose, with no tangible benefit to its own legal position. [64] Thirdly, and as alluded to earlier, it was undeniable that the only parties who stood to gain from the Scheme of Arrangement were the creditors (who would receive a nominal payment) and the guarantor, Lim Sue Beng (who would be released from personal liability). It became increasingly clear that the true, dominant purpose of the Scheme of Arrangement was to trigger paragraph 6.3 of the Statement of Proposal, which expressly provided that upon completion of the scheme, all personal guarantees would be deemed "fully settled and irrevocably released and/or discharged." The provision reads:

6.0 Effect and the Salient Features of the Acquisition Proposal …

6.3 The Proposal is deemed to be the full and final settlement of all amounts owing by the Company to Scheme Creditors and/ or claim by the Scheme Creditors which includes other claims whatsoever owing by the Company, as well as any corporate and personal guarantees, collateral, securities, indemnities and undertakings provided or given by the Company and/ or any other persons in relation to the claims and/ or outstanding amount owed, as well as any judgments obtained against the Company and/ or guarantors. [Emphasis added.] 18 May 2026 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 25 [65] This provision would have the direct effect of releasing Lim Sue Beng from his personal liability under the judgment debt, thereby extinguishing the bankruptcy proceedings pending against him. [66] In this regard, we drew guidance from the cases of Penang Port Commission v Kanawagi Superumaniam [2009] 1 CLJ 169 and Indah Desa Saujana Corporation Sdn Bhd & Ors v James Foong Cheng Yuen & Anor [2008] 1 CLJ 65, where the Court of Appeal in both cases held that the commencement of proceedings for the purpose of mounting a “collateral attack” on another legal process amounted to an abuse of the court’s process. In the latter case, Abdul Malik Ishak had observed as follows: [81] The court has an inherent jurisdiction to prevent an abuse of its process: Raja Zainal Abidin Raja Hj Tachik & Ors v. British-American Life & General Insurance Bhd. [1993] 3 CLJ 606 SC. [82] Illustrations of an abuse of the process of the court include:

An intention to embarass the defendants: Ansa Teknik (M) Sdn. Bhd v. Cygal Sdn. Bhd [1989] CLJU 26; [1989] 1 LNS 26; or

Where the process of the court has not been used in a bona fide manner and has been abused: Hadi Hassan v. Suria Records Sdn. Bhd & Ors [2004] 8 CLJ 225. [83] The categories of abuse of process of the court are never closed and will certainly proliferate pursuant to the myriad of circumstances available from the factual matrix found in each particular case. [84] In Gabriel Peter & Partners (suing as a firm) v. Wee Chong Jin [1988] 1 SLR 374 at p. 384, the Singapore Court of Appeal explained the scope of "an abuse of the process of the court" under O 18 r 19(1)(d) which is in pari materia with ours. The term has been given a wide interpretation by the courts and includes considerations of public policy and the interests of justice. It signifies that the process of the court must be 18 May 2026 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 26 used bona fide and properly and must not be abused. On the facts before us, the defendants have established an abuse of the process of the court. [Emphasis added.] [67] Applying that principle to the present facts, it was evident that the true objective of the Scheme of Arrangement was not to rehabilitate the Respondent, which was already in liquidation, but to derail the legitimate bankruptcy action against the guarantor. [68] Furthermore, the Respondent had failed to make full and frank disclosure of the true objective of the Scheme of Arrangement. The materials presented to creditors did not clearly reveal that the primary effect of the Scheme of Arrangement would be to release Lim Sue Beng from personal liability. As the Federal Court in MDSA Resources Sdn Bhd v Adrian Sia Koon Leng emphasised, transparency and full disclosure of all material information are essential to enable creditors to make an informed decision, and such disclosure is fundamental to demonstrating the bona fide of a proposed scheme. [69] The omission in the present case was not merely technical, but went to the very heart of the purpose of the Scheme of Arrangement and deprived creditors of the opportunity to assess whether the Scheme of Arrangement genuinely served their interests or merely those of a single, especially interested party. Conclusion [70] In the premises, having carefully and judiciously considered the evidence before this Court, the submissions of the Parties, and the 18 May 2026 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 27 Grounds of Judgment of the learned High Court Judges, we allowed these Appeals with costs. Consequently, the August 2022 Order, the March 2023 Order, and the July 2023 Order were set aside, and the Scheme of Arrangement was declared invalid. Dated: 18 May 2026 ………….…SIGNED…………… (EVROL MARIETTE PETERS) Judge of the Court of Appeal Malaysia Counsel: For the Appellants – Lua Ai Siew and Ailialef Hamima binti Aznan;