Indrani a/p Marimuthu for the Applicant v Irwan bin Ismail and Muhammad Izzat bin Zainal for the Respondent (PENGGULUNGAN SYARIKAT NO: WA-28NCC-1299-12/2019)

By way of winding up petition dated 5.12.2019 (Petition) the Petitioner, Ambank Islamic Berhad (Petitioner) had applied to this Court to wind up Prolink Marketing Sdn Bhd (Respondent) pursuant 2 to section 465(1)(e) and (h) and 466 (1) (a) of the Companies Act 2016 for the failure of the Respondent to settle the sum of RM15,470,245.98 under a final judgment (Judgment) obtained at the Kuala Lumpur High court vide Suit no. WA-22M-253-04/2019 (Suit 253).

The Respondent had filed an Affidavit in Opposition (AIO) on 24.1.2020 and had alleged inter alia as follows:- a) the Respondent’s current situation was due to OCBC Bank (Malaysia) Berhad (OCBC) who had allegedly wrongfully and negligently breached the facility agreement which caused damage to the Respondent and that the Respondent had accordingly commenced Suit 253 as a result thereof b) the Respondent had signed up new rice supply contracts and identified potential investors to be on board to assist the Respondent to overcome its financial crisis exhibit KC-1 and 2 of the Respondent’s Additional Affidavit affirmed on 28.2.2020 c) the said alleged investments prove that the Respondent is moving forward and is solvent d) the Respondent has pledged 8 lots of valuable industrial land (Securities) to the Petitioner valued at RM17 million and that the petitioner had initiated foreclosure proceedings but that the value of the said lands was fixed at only RM8,525,000 3

The Petition was fixed originally for hearing on 4.2.2020 and thereafter on 1.4.2020 which was postponed on the first occasion due to an interim stay order obtained by the Respondent on the Petition granted by another High Court, and on the next occasion due to the Movement Control Order in place.

Thereafter the Respondent had on 15.6.2020 filed in this court an application to adjourn the hearing of the Petition pending the outcome of the auction proceedings (Stay Application) in respect of the Securities which were charged to the Petitioner, referred to herein below.

The hearing of the Petition was then further fixed for 23.6.2020 wherein on the said hearing date the Petitioner had seeked for an adjournment of the hearing of the Petition due to the Petitioner intending to file an affidavit in reply to the Stay Application filed by the Respondent.

The Stay Application was then heard on 5.8.2020 after which it was dismissed by this Court and the Court proceeded to hear the respective counsels with regards the Petition on the same date and thereafter granted a conditional Order to wind up the Respondent pursuant to section 469(1)(c) of the Companies Act 2016 (Winding Up Order).

The Respondent has since appealed on the Winding Up Order. 4

The Petitioner had submitted that the valuation of the Securities is a matter which should be dealt with in the High Court hearing the foreclosure proceedings and that there was no wrong, negligence or cheating as alleged.

It was also submitted by the Petitioner that the foreclosure action is a different action which the Petitioner is entitled to commence as the Charge of the Securities.

The Petitioner further submits that the alleged profits under the new contracts signed are purely speculative and that there is no concrete evidence that the said contracts or the investment agreements have been executed and that they are vague and doubtful.

It is contended by the Petitioner that the statement of accounts referred to by the Respondent are up to the year 2016 only and that the management accounts up to 30.9.2018 are unaudited and which shows a negative RM37,630,327 with the liabilities of the Respondent exceeding its assets.

The Petitioner also contends that Suit 253 is a separate matter and that the Petition herein has no relevance to the said Suit 253 and that in so far as the suit initiated by the Respondent against the Petitioner in Shah Alam High Court No.BA-22NCVC-182-06/2020 (182 Suit), on the grounds of inter alia breach of contract, misrepresentation, conspiracy and fraud, the Petitioner strenuously 5 denies the Respondent’s claim and states that it has filed a defence to the 182 Suit.

The Respondent thus submits that the new contracts signed and new investors in the Respondent company are evident that the respondent will be able to settle the Petitioner’s claim within 6 months.

It is also submitted by the Respondent that the Petitioner is not curtailed or restricted from realising the said Securities and that the Respondent would pay the balance outstanding after the foreclosure proceedings.

The Respondent contends that it is proper for the Petitioner to give the Respondent time and opportunity to resolve the petitioner’s claim and that the Petition will thwart the Respondent’s efforts and all new contracts will be nugatory and it is not beneficial to all parties involved.

The Respondent states that it does not intend to delay the Petition from being heard but intends to resolve the claim without being wound up and that the winding up will adversely affect the Respondent’s efforts and business and cause substantial damage to the Respondent. Court’s Findings 6

The Court finds after considering the entire evidence before this court, including but not limited to the Judgment, the alleged new rice supply contracts and the potential investors, Suit 253 and the 182 Suit that the Respondent had failed to satisfy this Court that the debt as claimed in the Petition was genuinely disputed.

I have in coming to my decision taken into account that the Judgment has not been stayed or set aside and thus should be obeyed by the Respondent. Every Judgment is enforceable unless and until it is set aside, see Lee Tain Tshung v Hong Leong Fianance Bhd 3 MLJ 364.

It is also trite that a Winding Up Court cannot go behind a judgment. See Sovereign General Insurance Sdn Bhd v Koh Tian Bee [1988] 1 MLJ 304 and Sri Jeluda Sdn Bhd v Pentalink Sdn Bhd [2008] 3 MLJ 692 where the Court of Appeal has held that the court in which the winding-up petition is filed should not go behind the judgment unless there is evidence to show that the judgment was obtained by fraud or collusion. This this Court will not go behind the Judgment and consequently the cause of action which led to the Judgment as well as the 182 Suit.

I also find that the 182 Suit filed by the Respondent against the Petitioner is a matter which will not affect the Petition herein as the Petition herein is based on amongst others section 465(1)(e) of the Companies Act 2016 in that the Respondent company is unable to pay its debt and not premised upon a claim for payment of a debt. As a Statutory Notice of Demand had been issued by the Petitioner against the Respondent and the 21 day notice therein to settle the 7 Judgment had not been complied with by the Respondent, the presumption of the Respondent being unable to pay its debt has been triggered, see Eastool Industries Sdn Bhd v Getforms Electronics (M) Sdn bhd (2001) 6 CLJ 151.

It is worth noting that winding up proceedings are sui generis in nature and is founded not in a claim for payment but a class action in the public interest. This character had been recognised by the English Court of Appeal in Ridgeway Motors (Isleworth) Ltd v ALTS Ltd [2005] 1 WLR 2871. In our jurisdiction, the Court of Appeal in the case of Maril-Rionebel (M) Sdn Bhd & Anor v Perdana Merchant Bankers Bhd & Other Appeals [2001] 4 MLJ 187, had expressed the sui generis character of a winding-up as follows:- “But a petition for winding-up is not execution. For a winding-up petition is not based upon any judgment of a court. Normally, it is based on the inability of a company to pay its debts as and when they fall due. Such inability is normally evidenced by the company’s inability to satisfy or compound a notice of demand issued pursuant to s. 218 of the Companies Act. But the issuance of such a notice is not a sine qua non for the presentation of a winding up petition. What is needed is compelling evidence of the company’s inability to pay its debts as and when they fall due.”

The sui generis character was also stated by Mohd Nazlan J. in NFC Labuan Shipleasing I Ltd v Semua Chemical Shipping Sdn Bhd [2017] MLJU 900 where his Lordship held: 8 “It must be recognized that a winding-up petition is not a claim for payment. It is, instead, what may be regarded as a class action in the public interest which brings into operation the statutory regime for realising and distributing the assets of a company for the benefit of its creditors.”

The above can be illustrated in the English Court of Appeal case of Salford Estates (No 2) Ltd v Altomart Ltd [2014] EWCA Civ 1575 where Salford Estates relied on non-payment of the specific debt mentioned in the Petition as evidence that Altomart was unable to pay its debts as they fall due within section 123(1)(e) of the UK Insolvency Act 1986 which specifies a number of circumstances in which a company is deemed unable to pay its debts. The UK Court of Appeal there had held that: “the ground for invoking the exercise of the court's jurisdiction to wind up a company unable to pay its debts in IA s 122(1)(f) is satisfied. By contrast with the wording of s 9(1) - “(whether by way of claim or counterclaim)” - the Petition is not a claim for payment of the debt. [32] The making of a winding up order might or might not result in the right to payment of an amount equal to the debt specified in the Petition in the present case. It would depend upon the value of the assets available for distribution in the liquidation to Altomart's body of creditors and the respective priority ranking of the creditors, including Salford Estates, under the statutory framework.” 9 Salford Estates (No 2) Ltd (supra) was cited and applied in Awangsa Bina Sdn Bhd v Mayland Avenue Sdn Bhd [2019] MLJU 1365 by Wong Chee Lin J.

For the same reason that Petition herein is founded on the ground that the Respondent company is unable to pay its debt and not premised upon a claim for payment of a debt, I hold that the fact that there are Securities held by the Petitioner is inconsequential to the Petition. In any event the right of the Petitioner to foreclose the Securities is quite separate from the Petition herein as it is a right under the National Land Code 1965 whilst the right to petition for the winding up of a company is a statutory right under the Companies Act 2016 regime.

I have also found that the alleged new rice supply contracts and the potential investors, as seen in exhibits KC-1 and KC-2 respectively of the Respondent’s Additional Affidavit affirmed on 28.2.2020 at enclosure 14, are merely at best evidence of contracts entered into and not an indication of profits for the Respondent or that the same will enable the Respondent to settle the Petitioner’s claims herein.

In the view of this Court, the Respondent has failed to satisfy this court that the Respondent can meet its current liabilities and therefore is unable to pay its debts. The court in a winding up petition is not concerned with whether the Respondent has sufficient assets which can be realized to meet the Respondent’s liabilities but that it can meet its current liabilities. See Malayan Plant (Pte) Ltd v Moscow Narodny Bank Ltd [1980] 2 MLJ 53 where it was held 10 that a company could be both insolvent and wealthy at the same time where the Privy Council had stated: “In such a case it is useless to say that if its assets are realized there will be ample to pay twenty shillings in the pound: this is not the test. A company may be at the same time insolvent and wealthy. It may have wealth locked up in investments not presently realizable; but although this be so, yet if it have not assets available to meet its current liabilities it is commercially insolvent and may be wound up”. I respectfully adopt the said statement.”

I had in coming to my decision herein further noted that the Respondent had, despite the filing of the 182 Suit, admitted that:

the Petitioner is not curtailed or restricted from realising the said Securities and that the Respondent would pay the balance outstanding after the foreclosure proceedings

(ii) that it is proper for the Petitioner to give the Respondent time and opportunity to resolve the petitioner’s claim and that the Petition will thwart the Respondent’s efforts and all new contracts will be nugatory and it is not beneficial to all parties involved

(iii) intends to resolve the claim without being wound up

I thus find that the Respondent has appeared to approbate and reprobate on its stand that it does not owe the Petitioner but at the 11 same time had stated that amongst others the Petitioner should first realise the Securities after which the Respondent would pay the balance outstanding after the foreclosure proceedings.

Be that as it may, I have taken the Respondent’s contention of the new contracts and the potential investors into consideration and to allow the Respondent sufficient time to settle the debt due to the Petitioner by exercising the court’s discretion under Section 469(1)(c) of the Companies Act 2016 which provides that: “(1) On hearing the petition for winding up, the Court may, by order:

(a)

(b)

make any interim or any other order that the Court thinks fit.”

Accordingly, I had made an order that the Respondent be given a period of 5 months from the date of this order i.e up to the 5.1.2021 to settle the debt due to the Petitioner failing which the Respondent will be wound up on 5.1.2021. Dated: 1st of March 2021 sgd. NADZARIN WOK NORDIN JUDICIAL COMMISSIONER KUALA LUMPUR HIGH COURT 12 Parties: Indrani a/p Marimuthu for the Applicant [Messrs M. Indrani & Associates] Irwan bin Ismail and Muhammad Izzat bin Zainal for the Respondent [Messrs Lee & Koh]