Borhan Bin Mohd Doya … Petitioner v Maha Persada Capital Sdn Bhd … Respondent (28NCC-295-06/2015)

The Applicant by a Notice of Motion dated 30.12.2016 (Encl. 27) filed an application under section 227(2) and 289 of the Companies Act 1965 (CA 1965) to appoint the private liquidator to 2 replace the Official Receiver of Malaysia and cost of this application to be paid from the assets of the Respondent herein. Relevant background of the case 2. The Respondent is a private company has been wound up by this Court on 13.11.2015 and pursuant thereto the Official Receiver of Malaysia (OR) has been appointed as the liquidator of the Company.

Following this application, OR has conducted a general meeting (GM) on 13.2.2017 separately for the creditors and contributors in consideration of Encl. 27. Subsequently, OR filed it Report on 13.2.2017 (Encl. 34) and the gist can be summarised as follows:

3.1 four (4) creditors with the total claims of RM26,387,172.26 are agreeable to the appointment of the private liquidator proposed by the Applicant and the other three (3) creditors with the total claims of RM2,735,885.19 have disagreed with the same.

3.2 no voting was held for the contributors as there was a dispute on the holding of the Respondent. According to Dato’ Yusof, the Applicant had transferred his total shares worth of RM25,000,000.00 to Datin Rahmah Syukura binti Abd Hamid on 24.1.2014 and Dato’ Yusof has been adjudged a bankrupt by the Shah Alam High Court on 5.1.2017. The result of the Report was reproduced herewith in a schedule and read as follows: 3 Bil Ketetapan mesyuarat Undi bagi ketetapan Menyokong permohonan perlantikan Dato' Heng Ji Keng dan Andrew Heng Mengekal Pegawai Penerima Bil Amaun (RM) Bil Amaun (RM) Pemiutang 1 Dato' Ir Yusni bin Meon 3 14,481,823.53 2

(M) Berhad 1 11,349,188.18 3 Borhan Bin Mohd Doya 1 2,025,000.00 4 Sierra Teguh Sdn Bhd 1 600,000.00 5 Tetuan Shahrizat Rashid & Lee mewakili CIMB Islamic Bank Berhad 2 475,952.27 6 Merit Jaya Sdn Bhd 1 110,885.19 7 Boustead Building Material 1 80,208.28 Syer Bil Syer Penyumbang 1 Dato' Ir Yusni Bin Meon Tiada Undi 2 Dato' Yusof bin A Bakar@ Md Talib Tiada Undi 4

At the case management before the Senior Assistant Registrar (SAR) on 27.2.2017, Encik Shahrin Bin Mohamed Saat (Shahrin) had appeared personally and requested for an extension of time to oppose to Encl. 27 as the same was only came to his knowledge recently. The SAR granted his application and Shahrin filed its affidavit in opposition vide Encl. 40 on 14.3.2017.

However before Encl. 27 was set for hearing, the OR vide Encl. filed an application under Rule 94 of the Companies Winding Up Rules 1972 (CWR 1972) to expunge the admission of the Applicant’s two (2) Proof of Debts dated 20.5.2016 (1st POD) and 7.6.2016 (2nd POD) respectively. Both of the PODs are at Exhibit “DYM-7” and “DYM-8” of Encl. 28.

The Applicant opposed to the OR’s application. Parties had since filed and exchanged their respective affidavits and also written submissions on both Encl. 27 and 36 and the same were fixed for hearing on the same day. For the purpose of deciding Encl. 27, I have ordered Encl. 36 to be decided first before Encl. 27.

I had perused parties’ respective affidavits and submissions. In addition, parties’ solicitors and the OR had also made their oral submissions before this Honourable Court on 25.5.2017. After perusing the cause papers together with affidavits filed and all parties written and hearing oral submissions, I have on the same day granted the OR’s application at Encl. 36 and thereafter dismissed Encl. 27. My reasons are as follows. 5 Shahrin’s objection 8. Shahrin canvas his objection on Encl. 27 based on the following reasons:

8.1 The Applicant was not the contributory of the Respondent’s company;

8.2 The Applicant was also not the creditor of the Respondent’s company; and 8.3 The Petitioner and the OR have failed to adhere to the requirements under Companies Act 1965 (CA 1965) and CWR 1972; As for the above reasons, Applicant lack of locus standi and the application should be strike out.

From the Companies Commission of Malaysia’s (CCM) search dated 31.10.2016 at Exhibit “DYM-6” of the Applicant’s Affidavit sworn on 30.12.2016 (Encl. 28), the Respondent has the total issued share capital of 50,000,000.00 ordinary shares with the nominal value of RM1.00 each and the holding of the Respondent was comprises of the Applicant and Dato’ Yusof Bin A Bakar @ Md Talib (Dato’ Yusof) both hold 25,000,000.00 equal shares each.

However, Shahrin maintained that he was the real, actual and the majority shareholder with the holding of 25,500,000.00 shares in the Respondent Company. The other shareholder was Zaidi bin Abdul Hamid with the holding of 24,500,000.00 shares and both of them were not called by the OR at the GM on 13.2.2017. 6

The shares were transferred to Shahrin by Dato’ Yusof on 25.9.2014 and his statement was supported by the certified true copy of Form 32A (Form of Transfer of Security) dated 25.9.2014 together with the certified true copy of the Stamp Certificate from Lembaga Hasil Dalam Negeri Malaysia (LHDN) dated 25.9.2014 at Exhibit “SMS-1” in Encl. 40.

Further, by a certified true copy of Form 32A dated 24.1.2014 together with the certified true copy of the Stamp Certificate from LHDN dated 24.1.2014, the Applicant had sold his shares of 25,000,000.00 in the Respondent company to Datin Rahmah Syukura binti Abd Hamid on 24.6.2014 (at Exhibit “SMS-2” in Encl. 40).

The transactions at paragraphs 11 and 12 were later confirmed by Mohd Zaki bin Ahmad Zabidi, the Respondent Company’s Secretary vide a letter dated 8.2.2017 to the OR which was exhibited at Exhibit “SMS-7” of Shahrin’s Affidavit sworn on 10.4.2017 (Encl. 46). Nevertheless, both the transfer were not lodged to CCM.

Although, the Applicant had lodged the following three (3) Proof of Debt (POD), Shahrin stated that the Applicant was still not the creditors for the Respondent Company since the OR had filed an application to expunge the admission of the 1st and 2nd PODs and the 3rd POD have yet to be admitted by OR. The Applicant’s POD are as follows :

14.1 the POD dated 20.5.2016 for the claim of RM2,700,000.00 (1st POD); 7

14.2 the Proof of Debt dated 7.6.2016 for the claim of RM11,298,219.03 (2nd POD); and 14.3 the Proof of Debt dated 23.9.2016 for the claim of RM483,604.50 (3rd POD).

Shahrin added that the 3rd POD seems to be doubtful as the supporting documents enclosed by the Applicant with the 3rd POD are selective and/or inconsistent with the 3rd POD. Shahrin averted that the official receipts enclosed were not the official receipt of the Respondent Company, no written agreement provided by the Applicant to show that the Respondent Company had sought advances from the Applicant as the Director at the material time and no Respondent Company’s resolution adduced by the Applicant in relation thereto.

Shahrin further added that the POD filed by SME Bank (M) Berhad (SME Bank) for the claim of RM11,349,188,18 should also be disregarded as SME Bank was a secured creditor and there was no mention in the OR’s Report that SME Bank has waived its secured debt in the event this Court is minded to consider the said Report. As such, SME Bank support in the Applicant’s application should also be disregarded.

Shahrin’s solicitors further submitted that the Petitioner had failed to have the notice in Form 12 gazetted and advertised when the Respondent Company was ordered to be wound up by Court as required by Rule 34(1) of the CWR 1972.

As such, Shahrin’’s solicitors also submitted that there is a likelyhood that the other creditors might have no knowledge on the Respondent’s winding up and they were not called by the OR at 8 the GM on 13.2.2017. Therefore, their positions maybe prejudiced.

It is lastly also submitted by Shahrin’s solicitors that OR has too failed to comply with the requirement of under sections 50(1) and 518(1) of the Company Act 2016 when inviting the Applicant and Dato’ Yusof to the GM though both were not the shareholder/contributor of the Respondent Company. Shahrin’s solicitors therefore urged that the Report dated 13.2.2017 should have be rejected and disregarded by the Court. The Applicant’s solicitor’s submission 20. In reply to the Shahrin objection, the Applicant’s solicitors submitted that the Court should have referred to the CCM’s searches dated 31.10.2016 and 16.1.2017 at Exhibits “DYM-6” of Encl. 28 and Exhibit “DYM-11” of the Applicant’s Affidavit in reply sworn on 27.3.2017 (Encl. 42) wherein the Applicant was stated as the shareholder of the Respondent Company.

The Applicant’s solicitors also urged the Court to refer to Encl. and Rule 119 of the CWR 1972, wherein although the vote of the shareholder was not carry out, the wishes of the creditors should have special considerations and weigh in the appointment of the liquidator. Rule 119 of the CWR 1972 is read herewith and reproduced as follows:

Ordinary resolution of creditors and contributories At a meeting of creditors or contributories a resolution shall be deemed to be passed when a majority in number and value of the creditors or, as the case may be, contributories present, personally or by proxy, and voting 9 on the resolution, have voted in favour of the resolution, the value of the contributories being determined according to the number of votes conferred on each contributory by the regulations of the company.

The Applicant’s solicitors also made a reference to the High Court’s case of Li-Foong Enterprise Sdn Bhd v. Mok Yuen Lok & Anor [2006] 1 LNS 33 which read and reproduced herewith as follows:

In the case of an insolvent company or in the case of a winding-up the wishes of the creditors should have special considerations and weight in the appointment of liquidator. (see: InRe Karamelli & Barnett, Limited (1916) 1 Ch 203) If there is reasonable belief that the interest of creditors would be imperiled if the liquidator were to remain in office, or if the liquidator is not sufficiently independent to promote the interest of the creditors and to examine the impropriety of the company's pre-liquidation dealings as the substantial and real interest of the liquidation requires, then he should be removed. (see:George A Bond & Company Limited (1932) SR (New South Wales) Vol 32301). This principle finds support under section 261(1) of the Companies Act 1965 where it is provided, inter alia that "if the creditors and the company nominate different persons, the person nominated by the creditors shall be the liquidator."

The Applicant’s solicitors also submitted that the Petitioner have no objection toward the Applicant’s application (Encl. 27) and in light of the same, Encl. 27 should be granted by the Court. 10 Finding 24. The law on appointment of a private liquidator is govern under section 227(2) of the CA 1965 and it is trite, only the creditors and the contributors of the company are able to apply for the appointment. Section 227(2) of the CA 1965 is read herewith and reproduced as follows :

Appointment, style, etc., of liquidators The following provisions with respect to liquidators shall have effect on a winding up order being made:

if there is no liquidator appointed the Official Receiver shall summon separate meetings of the creditors and contributories of the company for the purpose of determining whether or not an application is to be made to the Court for appointing a liquidator in the place of the Official Receiver;

Whether the Applicant was the shareholder of the Respondent Company?

The Applicant in this case made a sworn statement in his affidavit that he was the shareholder for the Respondent Company and the Applicant’s solicitors urged the Court to have a look at the CCM’s search which stated the Applicant as the shareholder. No other evidence was given by the Applicant to show that the Applicant holding other than the CCM’s search. The Applicant’s solicitors also refer to the case of Abd Hamid Zakaria & Anor v. Rimau Indah Sdn Bhd [2016] 1 LNS 410 which the Court held read herewith and reproduced as follows: 11 “14. S.4(1) of CA 1965 defines a ‘contributory’ as ‘in relation to a company, means a person liable to contribute to the assets of the company in the event of its being wound up, and includes the holder of fully paid shares in the company and, prior to the final determination of the persons who are contributories, includes any person alleged to be a contributory …

15.2 Since the Court has not had sight of the Respondent company’s registrar of members, the Court will accept the company search report as conclusive evidence of the member/shareholder status as held by the learned Judge in Arab-Malaysian Mershant Bank Berhad v. Orient Apparel Bhd [1992] 2 CLJ 647; [1999] MLJU 118 at 9-10 and with which I agree. I find based on the company search report dated 22.12.2014, as contained in Appendix 1 of the Liquidators’ Preliminary Report, the shareholders of the Respondent company are (i) WT Development Sdn Bhd and (ii) Hoklian Development Sdn Bhd. I find despite LKC’s averment that he is a shareholder and contributory of the Respondent, he has failed to show proof of the same and thereof, he is not a contributory within the ambit of s.4(1) of the CA 1965 and he has no locus under s.243(1) of the CA 1965 to make application”

Shahrin on the other hand has produced the Registrar of Members and a letter from Secretary to show his holding in the Respondent Company and the Applicant has resigned as the shareholder.

In deciding on this issue, I am guided by section 50(1) of the CA 2016 that in the event a dispute arose as to the holding of a company, I should resort to the registrar of members of the Respondent Company. Section 50(1) of the CA 2016 read herewith and reproduced as follows:

Registrar of members

The registrar of members shall be prima facie evidence of any matters inserted in the registrar as required of the authorised by this Act. 12

Shahrin by Exhibit “SMS-2” of Encl. 40 and Exhibit “SMS-7” of Encl. 46 has furnished to the Court the Respondent Company’s registrar of members. Although the said transfer of shares from Dato’ Yusof to Shahrin and from the Applicant to Datin Rahmah Syukura were not lodged by the Secretary to CCM, it does not invalidate the transfers. In this regard, I refer to section 58(1) of the CA 2016 and SSM Practice Note. 3/2009 which provides as follows:

Books and papers of company

Where a company is being wound up, all books and papers of the company and of the liquidator that are relevant to the affairs of the company at or subsequent to the commencement of the winding up of the company shall be prima facie evidence of the truth of all matters recorded in the books or papers in respect of the contributories and the company. SSM Practice Note 3/2009 RE: CONFIRMATION ON THE LATEST SHAREHOLDING STRUCTURE/COMPOSITION OF A COMPANY ISSUED BY A COMPANY SECRETARY

This Practice Note serves to inform that a Letter of Confirmation on the latest shareholding structure/composition of a company issued by a company secretary can be sufficient evidence as to the latest shareholding structure/composition of a company.

Section 103(1) of the Companies Act 1965 (CA 1965) provides that a company shall not register a transfer of shares or debentures unless a proper instrument of transfer in the prescribed form (i.e. Form 32A) has been delivered to the company (i.e. the company secretary) and approved by the board of directors. Upon receipt of such form, the company secretary shall make the requisite entry into the company’s Register of Members to reflect the latest status of the 13 company shareholding structure/composition. There is no requirement for the lodgement of Form 32A with the Registrar under the CA 1965.

The Annual Return, which is lodged annually, does not necessarily contain the latest information pertaining to the company’s shareholding structure/composition due to the gap between the date of the latest Annual Return filed and the date of the next Annual Return to be filed. In the interim, a transfer of a company’s shares may occur. Due to this, the Registrar advices that the most recent and accurate information pertaining to shareholding structure/composition can be sourced directly from the company secretary.

As such, Ministries, Government agencies or any third party requiring evidence and/or confirmation of the latest shareholding structure/composition of a company may rely on the Letter of Confirmation of the latest shareholding structure of the company issued by the company secretary. Such Letter of Confirmation issued can be sufficient evidence as the shareholding information contained therein is derived from the Register of Members kept in the custody of the company secretary.

Apart from the Letter of Confirmation, SSM would also like to highlight that the respective Ministries, Government agencies or third parties may also: i) request to inspect the Register of Members; and/or

(ii) request for a copy of the Register of Members (or of any part thereof), containing the names, addresses, number of shares held and amount paid on shares; Subject to the amount of payment required by the company pursuant to section 160 of CA 1965. 14 [NOTE: Section 158(4) of the CA 1965 stipulates that the Register of Members shall be prima facie evidence on any matters inserted therein as required or authorized by the Act.]

I am incline to agree with the Shahrin’s solicitors’ submission that until today, the Applicant had failed to provide to the Court any proof on the Applicant holding of the shares in the Respondent’s Company. As such, from the facts of the case and the evidence adduced by way of the affidavits, I find that the Applicant is not the shareholder of the Respondent Company within the ambit of section 2 of the CA 2016.

(ii) Whether the Applicant was the creditor for the Respondent Company?

The Applicant has filed three (3) PODs with the OR and the OR vide Encl. 36 had filed an application to expunge the admission of the 1st and 2nd POD. I have allowed the OR’s application and my brief reasons are as follows.

By section 525 of the CA 2016, the liquidator may at any time call for the production of the vouchers or books of the account of a company and by Rule 94 of the CWR 1972, the liquidator may apply to the court to expunge any admission of a debt. Section 525 of the CA 2016 and Rule 94 of the CWR 1972 are read herewith and reproduced as follows respectively:

Rights and duties of unsecured creditors

Every creditor shall prove his debt immediately after the making of a winding up order.

A debt may be proved by delivering or sending an affidavit through the post in a prepaid letter to the liquidator. 15

The affidavit shall —

verify the debt;

be made by the creditor himself or by any person authorized by or on behalf of the creditor or his estate and if made by a person so authorized, it shall state his authority and means of knowledge;

contain or refer to a statement of account showing the particulars of the debt and shall specify the vouchers, if any, by which the statement of account can be substantiated; and

state whether the creditor is or is not a secured creditor.

The liquidator may at any time call for the production of the vouchers or books of account.

A creditor shall bear the cost of proving the creditor's debt unless the Court otherwise specially orders.

Every creditor who has lodged a proof shall be entitled to see and examine the proofs of other creditors at all reasonable times.

A creditor proving his debt shall deduct from his debt all trade discounts, but he shall not be compelled to deduct any discount not exceeding five per centum on the net amount of his claim, which he has agreed to allow for payment in cash.

Expunging at instance of liquidator If the liquidator thinks that a proof has been improperly admitted, the Court may, on the application of the liquidator, after notice to the creditor who made the proof, expunge the proof or reduce its amount.

After reading the affidavits and having heard the OR’s and Applicant’s submissions, I am fully satisfied that further information and documents must be furnished by the Applicant to 16 the OR under section 525 of the CA 2016 so as to enable the OR to revaluate the 1st POD. I have also perused the 1st POD at Exhibit “EHAJ-1” of Encl. 37 and found that the Perjanjian Penyelesaian bertarikh 10.7.2014 which was referred by the Applicant and the basis of the Applicant’s claimed in the 1st POD were not enclosed thereto.

It is also pertinent to note, the Applicant should not have lodged the 2nd POD for the claim of RM11, 298,219.03 when it is clearly stated in the Court Amended Judgment in Default dated 6.7.2015 at Exhibit “EHAJ-6” of Encl. 37 that the Applicant, the Respondent and Dato’ Yusof were to be held jointly liable to pay the judgment debt of RM11, 298,219.03 to SME Bank. Therefore, the Applicant should have not later claim the said amount from the Respondent’s estate.

I believe by allowing the OR’s application at Encl. 36 will not at all prejudice the Applicant. My order allowing the 1st POD to be expunged should not be deemed to be a total rejection but only for the OR to revaluate the same. In addition, it is to enable the fair distribution of the Respondent’s estate among the creditors and the contributors. In fact, until today, neither the Applicant has not filed appeal against my decision nor has he filed a fresh POD.

With regard to the 3rd POD, I refer to Rule 124 of the CWR 1972 and being guided by the said rule, I believe that the Applicant is not entitle to vote at the GM conducted by the OR on 13.2.2017 as the 3rd POD have yet to be admitted by the OR. Rules 124 and 125 of the CWR 1972 are referred herewith and reads and reproduced as follows:

Creditors entitled to vote 17 In the case of a first meeting of creditors or of an adjournment thereof a person shall not be entitled to vote as a creditor unless he has duly lodged with the Official Receiver not later than the time mentioned for that purpose in the notice convening the meeting or adjourned meeting a proof of the debt which he claims to be due to him from the company. In the case of a Court meeting or liquidators meeting of creditors a person shall not be entitled to vote as a creditor unless he has lodged with the liquidator a proof of the debt which he claims to be due to him from the company and the proof has been admitted wholly or in part before the date on which the meeting is held. Provided that this and the next four following rules shall not apply to a Court meeting of creditors held prior to the first meeting of creditors. This rule shall not apply to any creditors or class of creditors who by virtue of the rules or any directions given thereunder are not required to prove their debts or to any voluntary liquidation.

Cases in which creditors may not vote A creditor shall not vote in respect of any unliquidated or contingent debt, or any debt the value of which is not ascertained, nor shall a creditor vote in respect of any debt on or secured by a current bill of exchange or promissory note held by him unless he is willing to treat the liability to him thereon of every person who is liable thereon antecedently to the company, and against whom a receiving order in bankruptcy has not been made, as a security in his hands, and to estimate the value thereof, and for the purposes of voting, but not for the purposes of dividend, to deduct it from his proof.

I find the definition of the word “creditor” under CWR 1972 is rather wide. Rule 2 of the CWR 1972 defined creditor as “includes a corporation and a firm of creditors in partnership” and Rule 78 of the CWR 1972 on the other hand states, “in winding-up by the Court every creditor shall prove his debt, unless the Judge in any 18 particular winding-up shall give directions that any creditors or class of creditors shall be admitted without proof”.

In the absent of any decided cases, I find in order to be included within the definition of creditor under the ambit of Rule 2 of the CWR 1972, the creditor must clearly prove his debt and the POD must be admitted by the liquidator for the protection of the company. It will also safeguard the rightful creditors and contributors rights and interests on the company’s estate especially in this case where there is a disputed in the shareholding of the company.

As a matter of prudent, the liquidator should have examine the debt and admit the same first before calling for a general meeting.

For the reasons stated herein, I find that the Applicant is neither the contributory nor the creditor of the Respondent Company. I therefore hereby dismiss Enclosure 27 with no order as to cost. YA DATO’ HAJI MOHD YAZID BIN HAJI MUSTAFA JUDGE HIGH COURT OF SHAH ALAM 20 OCTOBER 2017 The Applicant’s solicitors: Encik Mohd Fairus bin Ismail from Messrs Palany, Fairus & adib Chambers 19 The Respondent’s liquidator: Puan Norfadila together with Puan Norizan from Official Receiver of Malaysia, MdI Cawangan Selangor Shahrin’s solicitors: