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2022 MarsdenLR 231
HIGH COURT MALAYA KUALA LUMPUR
ALAM TEKNOKRAT SDN BHD – Appellant
Versus
AFFIN ISLAMIC BANK BERHAD – Respondent
[Originating Summons No: WA-28JM-23-12/2021]
A Judicial Management Order requires strict proof of inability to pay debts, alongside full and frank disclosure of financial details by the applicant.
Headnote:(A) Companies Act 2016 – Section 405 – Judicial Management Order – Application for Judicial Management Order dismissed; applicant failed to demonstrate inability to pay debts and necessary criteria for such an order. Court emphasized the need for full disclosure and strict proof in supporting claims. (Paras 8, 9, 13, 14)
(B)
Legal Standards – Court reiterated the principle from Twin Unitrade Sdn v. TSK Hardware Sdn Bhd that requires full and frank disclosure in ex parte applications. (Para 9)
(C)
Speculative Claims – Court noted that the applicant’s assertions regarding the Technology Solutions Provider status were speculative and unsupported by evidence. (Para 10)
Facts of the case:
The applicant company sought a Judicial Management Order, claiming inability to pay debts; however, financial documentation was lacking and revenue increased in the previous year.
Findings of Court:
Court found that lack of evidence substantiates the applicant’s claims and that the unsuitable financial state was not proved.
Issues
: The main issues were the applicant's ability to pay debts and the validity of its application for a Judicial Management Order.
Ratio Decidendi:
The court held that claims must be supported by evidence; failure to disclose relevant information invalidates the application.
Result:
Application dismissed with costs.
JUDGMENT
(Enclosure 1)
[1] The Applicant has in enclosure 1 via an ex parte Originating Summons dated 6 December 2021 (OS) applied to this Court for a Judicial Manager (JM) to be appointed over the Applicant company (Applicant) pursuant to s 405 of the Companies Act 2016 .
[2] Amongst the grounds relied on for the OS are as follows:
(a) the applicant is unable to pay its debts;
(b) there is a reasonable probability that a judicial management order (JMO) will ensure the survival and/or rehabilitation of the Applicant or preserve all or part of its business as a going concern;
(c) a JMO will be more advantageous to the Applicant's creditors as oppose to a winding up of the Applicant.
[3] Affin Islamic Bank Berhad (Intervener) was granted leave to intervene in the proceedings on 14 March 2022.
[4] The Intervener had inter alia submitted that the OS was not a bona fide application as:
(a) the OS was an afterthought;
(b) the OS was speculative as the process of obtaining the certification from Malaysia Digital Economy Cooperation (MDEC), as referred to herein thereafter in my grounds, was only at the application stage and not as yet approved.
Court's Findings
[5] This Court has perused the OS before this Court and after examining the documents filed before it, the following is the decision of the Court.
[6] This Court has in coming to its decision considered the Applicant's proposal as per the Affidavit in Support of the OS which consisted of inter alia the following:
(a) to recover debts owed as a result of a unilateral termination of a contract between SPAD and the Applicant which was allegedly worth RM7,469,850.00;
(b) to secure a successful negotiation with all remaining creditors and litigants of the Applicant, especially when led by a JM;
(c) to successfully secure the certification by MDEC as a Technology Solutions Provider (TSP) to enable the Applicant to provide support to Malaysian SME's in a digital adoption under the SME Business Digital Grant as announced in the Budget 2020;
(d) to develop new technology (Wizeewig) for Digital Transformation platforms;
(e) that the experience and clientele of the SKALI Group of companies (of which the Applicant is part of) would be paramount to the success of the above proposals when led by an independent JM.
[7] I have further observed and examined:
(a) that in the Company Search conducted on the Applicant dated 4 February 2021 in exhibit TRF-1 in enclosure 2 that there is no report or filing for the current year by the Applicant but that the revenue for the financial year end as at 31 December 2015 which was only tabled on 15 August 2018 was a revenue of RM10,740,456 compared to a loss after tax of -RM4,779,379 and that its current assets then were RM17,466,450 whilst its current liabilities then was RM23,580,990;
(b) exhibit TRF-2 in enclosure 2 which is the Applicant's Annual Return for the calendar year 2021 which shows the Applicant's amount of indebtedness based on the Registered Charges as at 20 January 2021 as RM3,565,047.74;
(c) exhibit TFR-3 in enclosure 2 which is a summary of the Applicant's Income Statement but I note that the Applicant has not annexed their Audited accounts and/or their Financial Statements for this Court to verify the same;
(d) the documents in exhibit TFR-15 enclosure 31 shows that there is a SME Business Digitalisation Grant which consists of a strategic collaboration between the Ministry of Finance, Bank Simpanan Nasional and Malaysia Digital Economy Cooperation (MDEC) to make available a grant for Small Medium Enterprises (SME) to adopt digitalization in their daily operations;
(e) Exhibit TFR 22 in enclosure 31 shows the Status Report and mentions inter alia of Wizeewig which is a very low costs of deploying business management systems over the internet with the same having a 118% increase in business for the year 2021 and higher returns to the Applicant with gross margins of 65-85%.
[8] From the evidence before this Court, I am not satisfied that the
