Bank Pembangunan Malaysia Berhad v Zavarco Berhad (WA-28NCC-966-12/2022)

Enclosure 1 is a Petition to wind up the Respondent pursuant to section 465(1)(e) and 466(1)(a) of the Companies Act 2016 (“CA 2016”).

Having read the affidavits and submissions filed by the parties, I allowed the Petitioner’s prayers in Enclosure 1. I ordered that the Respondent be wound up and that Dato’ Gan Ah Tee and Bernard Tan Chek Hean be appointed joint Liquidators of the Respondent.

The Petitioner granted a Term Loan Facility of RM400 million to Aries Telecom (M) Bhd (“Aries”) to part-finance the construction of a fibre-optic network in Peninsular Malaysia (“the Facility”).

The Facility is secured by, amongst others, the following:

4.1 A Guarantee and Indemnity dated 28.06.2012 (“Corporate Guarantee") executed by the Respondent in favour of the Petitioner; and

4.2 A Guarantee and Indemnity dated 17.04.2017 (“Personal Guarantee”) executed by Zulizman bin Zainal Abidin (“Zulizman”) in favour of the Petitioner. [5] On 26.07.2018, arising from Aries’ default in repayment of the Facility, the Petitioner filed an action in Suit 313 against the Respondent, Aries and Zulizman (“collectively referred to hereinafter as “the Defendants”) to recover the amount due and owing under the Facility, Corporate Guarantee and Personal Guarantee respectively. In Suit 313, the Defendants brought a counterclaim against the Petitioner alleging that they had been rendered incapable of paying the Facility due to the failure of Aries’ listing exercise (“the Counterclaim”). [6] On 09.05.2019, the High Court allowed the Petitioner’s application for summary judgment against the Defendants for the sum of RM451,266,763.13 as at 09.07.2018 together with interests and costs of RM10,000.00 (“Suit 313 Judgment”). The Court also allowed the Petitioner’s application to strike out the Counterclaim. Both parties appealed against the decision of the High Court. [7] On 25.11.2021, the Court of Appeal:

7.1 Dismissed the Motion by the Defendants to adduce further evidence;

7.2 Dismissed the Defendant’s appeal against the Judgment; and

7.3 Allowed the Defendants’ appeal against the High Court decision to strike out their Counterclaim. [8] On 17.12.2021, the Defendants applied for leave to appeal to the Federal Court against the decision of the Court of Appeal (“Leave Application”). On 25.04.2022, the Federal Court unanimously dismissed the Leave Application with costs. [9] On 06.04.2022, the Defendants made an application to amend their Defence and Counterclaim (“Amendment Application”). On 23.12.2022, the learned High Court judge allowed the Amendment Application. SUIT 395 [10] On 15.08.2022, the Respondent and Zulizman commenced an action in Suit 395 against the Petitioner to impeach the Suit 313 Judgment. [11] The Petitioner applied to strike out Suit 395 and on 23.08.2023, the Striking Out Application was allowed with costs to be paid by the Respondent and Zulizman. In delivering his brief oral grounds, the learned High Court judge held as follows:

11.1 On the issue of fraud or concealment, his Lordship agreed with the Petitioner’s position that Suit 395 was a collateral attack on the Suit 313 Judgment since the issue of bribery and/or corruption had been raised and determined in the Court of Appeal and Federal Court in Suit 313. They were not new matters.

11.2 The existence of bribery and/or corruption would not absolve the Respondent from its liability under the Guarantee and Indemnity. His Lordship accepted the rationale of the decision of the Singapore High Court in Indian Bank v Green Mint Pte Ltd and others [2021] SGHC 265. Therefore, the Respondent’s submission that the existence of bribery and/or corruption would render the Facility illegal was untenable.

11.3 The Court was also cognisant of the fact that the Respondent had since amended and enlarged its pleadings in the Counterclaim in Suit 313 to include the same allegations of bribery and/or corruption. THE PETITIONER’S CASE [12] The Petitioner’s petition to wind-up the Respondent is premised on section 465(1)(e) of the CA 2016. The provision reads: Circumstances in which a company may be wound up by Court

(1) The Court may order the winding up if – …

the company is unable to pay its debts; …” [13] The background facts and chronology of the present proceedings are as follows:

13.1 On 09.05.2019, the Petitioner had successfully obtained Judgment against the Respondent.

13.2 Subsequently, on 13.07.2022, the Petitioner through its solicitors, served a statutory demand dated 13.07.2022 on the Respondent by leaving the same at its registered office calling upon the Respondent to make payment of the Judgment sum, interests, costs and allocatur fees.

13.3 Twenty-one (21) days have lapsed since the said demand was served, however, the Respondent has neglected to pay or satisfy the said sum or any part thereof or to secure a compound for it to the reasonable satisfaction of the Petitioner.

13.4 In such circumstances, the presumption of insolvency arises, and it is for the Respondent to prove that it is able to pay its debts as and when they fall due (see Malaysia Air Charter Company Sdn Bhd v Petronas Dagangan Sdn Bhd, FC [2004] 4 CLJ 437; KTS News Sdn Bhd v See Hua Realty Bhd, HC [2017] 1

13.5 Further:

There is no dispute as to the existence of the debt based on the Suit 313 Judgment and the same remains due and owing.

In the Respondent’s affidavits, the Respondent did not aver that it was able to pay the debts due and owing to the Petitioner.

The Respondent did not produce any bank statements or statement of accounts to demonstrate that it was able to satisfy the Judgment sum. [14] Therefore, it is apparent that the Respondent is unable to pay its debtsand is consequently commercially insolvent. Thus, the Respondent should be wound up by this Court. [15] The Court of Appeal in Pacific Orient Insurance Co Bhd v Muniammah Muniandy, CA [2011] 1 CLJ 947 held that for as long as a judgment has not been stayed or set aside, there cannot be any bona fide dispute as to the amount of indebtedness payable under the judgment: “A valid and enforceable judgment of court as in the present case, (unless set aside or stayed) cannot be considered a disputed debt. The law is settled on this point.” The Petition is premised on a Judgment. Consequently, there cannot be said to be any bona fide dispute as to the debt. [16] (i) The Court of Appeal in Crocuses & Daffodils (M) Sdn Bhd v Development & Commercial Bank, CA [1997] 2 MLJ 756 held: “Since the four affidavits containing averments of the cross-claims are inadmissible in evidence, the only other evidence of the cross-claim available to the company is that pleaded in their 1991 suit, which is yet to be heard and determined. It must not be forgotten that the petition is founded on a judgment that had been obtained by consent and since that consent judgment is now being questioned in the 1991 suit, an issue arises as to the bona fide of the cross-claim itself. Under these circumstances, we consider that it is unjust and inequitable to stay the winding up proceedings and deny the bank the right to have the company wound up for their debt. This is so as the cross-claim can still be proceeded by the liquidator on behalf of the company under s 236(2) of the Act.” See also: People Realty Sdn Bhd v Red Rock Construction Sdn Bhd, CA [2008] 1 MLJ 453.

(ii) Therefore, existence of the Counter-claim in Suit 313 and the Respondent’s appeal in Suit 395 do not bar this Honourable Court from allowing the Petition. Suit 313 and the Respondent’s appeal in Suit 395 can still be proceeded with by the appointed liquidator or the contributories of the Respondent after obtaining sanction from the Court under section 486 of the CA 2016. [17] Additionally, pursuant to the express terms of the Corporate Guarantee, the Respondent agreed that all sums payable to the Petitioner shall be made without any deduction, set-off or counterclaim. The Petitioner further submits that:

A perusal of the Counterclaim in Suit 313 will show that the allegations therein and the purported losses suffered only relate to Aries and not the Respondent. It is not the Respondent’s claim in Suit 313 that the Respondent be discharged from the Corporate Guarantee. The Respondent’s liability under the Corporate Guarantee is separate and independent from any counterclaim that Aries may have against the Petitioner (see Bank Pembangunan Malaysia Bhd v Ketheeswaran a/l M. Kanagaratnam, CA [2022] 5 MLJ 393).

Therefore, Suit 313 and the appeal in Suit 395 does not, in any event, bar the execution of the Judgment or the filing of a Petition against the Respondent who had undertaken, as an independent obligation and as the principal obligor, to guarantee and indemnify the Petitioner for the losses suffered arising from the Facility (see American Express Sdn Bhd v Dato Wong Kee Tat & Ors, SC [1990] 1 MLJ 91, Southern Finance Bhd (formerly known as United Merchant Finance Bhd) v Sun City Development Sdn Bhd & Anor, HC [2006] 6 MLJ 673; Ketheeswaran a/l M. Kanagaratnam (supra). [18] Since Suit 395 have been struck out, it is no longer relevant to the present Petition. Consequently, I find that the Respondent has failed to raise any bona fide dispute to this Petition, and the Petitioner’s prayer for the Respondent to be wound-up under section 465(1)(e) of the CA 2016 should be allowed. [19] The only other issue is the appointment of Joint Liquidators for the Respondent. On 29.09.2023, VCB Malaysia Berhad (“VCB”) filed a Notice of Intention to appear at the hearing of this Petition. In Enclosure 59, VCB, which claims to be a creditor of the Respondent, opposed the Petitioner’s proposed Joint Liquidators and instead proposed that the Official Receiver be appointed as Liquidator. [20] The main grounds given by VCB to oppose the Joint Liquidators are as below:

There are existing proceedings against the Petitioner by the Respondent which appear to be hostile and clouded by the issue of conflict, not to mention the timing of the filing of the Petition, which is rather suspicious. Thus, any Liquidator nominated by the Petitioner should not be considered. Since VCB is not involved in the said proceedings between the Petitioner and the Respondent, it is a major concern of VCB as to which Liquidator is appointed, as ultimately VCB’s rights will be affected.

(ii) There is a need for the Liquidator to be not only independent but seen to be independent, and there should be no possibility of criticism attaching to the Court-appointed Liquidator. THE COURT’S FINDINGS ON VCB’s OPPOSITION TO THE PETITION AND APPOINTMENT OF THE PROPOSED JOINT LIQUIDATOR [21] VCB alleged that it is a creditor to the Respondent for the sum of RM600,000, compared to the amount in excess of RM400 million owing to the Petitioner. The Petitioner submits that even the alleged debt by the Respondent is very suspicious. VCB produced a letter dated 28.02.2023 issued by the Respondent on its own accord, in which the Respondent admits to owing the alleged debt purportedly as an audit confirmation reply. [22] Beyond the letter of 28.02.2023, VCB has failed to produce any other supporting documents, like delivery orders or invoices. The timing of the letter and the lack of other information or documents make the claim of VCB to be a creditor very suspicious. Additionally, it is very curious why VCB as a creditor would oppose a Petition to wind-up the Respondent, which is alleged to be its debtor. Usually, creditors who have not been paid would support any application to wind-up the debtor. [23] This Court finds that VCB would not in anyway be prejudiced by the appointment of the Liquidators proposed by the Petitioner. If at all there is any misfeasance or misconduct by the proposed Joint Liquidators in carrying out their duties, any creditor or contributory may apply to the Court to remove the Liquidators on cause shown. I also find the opposition by VCB lacks bona fide. [24] For the above reasons, I find the Joint Liquidators proposed by the Petitioner, which is the biggest creditor in value, ought to be appointed. I hereby order that the Respondent be wound-up and that the Liquidators proposed by the Petitioner be appointed Joint Liquidators with costs of RM10,000.00 be paid to the Petitioner out of the assets of the Respondent. Dated 28 November 2024 ……………t.t………………. Ahmad Murad Bin Abdul Aziz Judge High Court of Malaya Kuala Lumpur COUNSEL FOR THE PETITIONER: YEAP XI JIN WITH KY LUI MICHELLE LOUIS SOLICITORS FOR THE PETITIONER: TETUAN LEE HISHAMUDDIN ALLEN & GLEDHILL COUNSEL FOR THE RESPONDENT: EMILY WONG, NG SOON KIAT & VINCENT LIM SOLICITORS FOR THE RESPONDENT: TETUAN LIM KIAN LEONG & CO Cases Referred to: ➢ Indian Bank v Green Mint Pte Ltd and others [2021] SGHC 265 ➢ Malaysia Air Charter Company Sdn Bhd v Petronas Dagangan Sdn Bhd, FC [2004] 4 CLJ 437 ➢ KTS News Sdn Bhd v See Hua Realty Bhd, HC [2017] 1 LNS 1562) ➢ Pacific Orient Insurance Co Bhd v Muniammah Muniandy, CA [2011] 1 CLJ 947 ➢ Crocuses & Daffodils (M) Sdn Bhd v Development & Commercial Bank, CA [1997] 2 MLJ 756 ➢ People Realty Sdn Bhd v Red Rock Construction Sdn Bhd, CA [2008] 1 MLJ 453 ➢ Bank Pembangunan Malaysia Bhd v Ketheeswaran a/l M. Kanagaratnam, CA [2022] 5 MLJ 393 ➢ American Express Sdn Bhd v Dato Wong Kee Tat & Ors, SC [1990] 1 MLJ 91 ➢ Southern Finance Bhd (formerly known as United Merchant Finance Bhd) v Sun City Development Sdn Bhd & Anor, HC [2006] 6 MLJ 673 Legislation Referred to: ➢ Companies Act 2016 ➢ Insolvency Act 1967 ➢ Insolvency Rules 1967 Decision date: 5 December 2023