A restraining order under Section 176(10) of the Companies Act does not apply to guarantors, and courts require special circumstances for stays in legal proceedings.

A. Introduction

[1] This case discusses the following 2 questions:

(a) whether guarantors for a bank's credit facilities to a borrower company may apply to stay the bank's suit against the guarantors until the expiry of a restraining order of the High Court obtained by the borrower company under s 176(10) of the Companies Act 1965 ( CA ) pursuant to a scheme:-

(i) to compromise the borrower company's debts with the borrower company's creditors; and

(ii) of arrangement between the borrower company and its shareholders.

The above scheme is commonly known as a company's "restructuring" scheme; and

(b) whether the bank may apply for summary judgment against the guarantors in this case.

B. Background

[2] The plaintiff bank (Plaintiff) has given various credit facilities (Credit Facilities) to the first defendant company (1^st Defendant).

[3] The 1^st Defendant's repayment of the Credit Facilities has been guaranteed by the following parties:

(a) corporate guarantees by the second defendant company (2^nd Defendant);

(b) a guarantee dated 25 February 2013 (1^st Guarantee) given jointly by the third defendant company (3^rd Defendant), fourth defendant (4^th Defendant) and fifth defendant (5^th Defendant); and

(c) a guarantee dated 25 February 2013 (2^nd Guarantee) executed jointly by the 4^th and 5^th Defendants.

[4] The 1^st Defendant has defaulted in respect of the repayment of the Credit Facilities and the Plaintiff has sent, among others, a demand dated 5 September 2014 to the 2^nd, 3^rd, 4^th and 5^th Defendants to repay the Credit Facilities (Plaintiff's Demand). There was no reply to the Plaintiff's Demand by any one of the 2^nd to 5^th Defendants.

[5] The Plaintiff filed this action (This Suit) against the 1^st to 5^th Defendants (collectively referred in this judgment as "Defendants") on 25 September 2014 to claim from the Defendants for, among others, the following relief:

(a) repayment of the sum of RM1,522,200.22 as at 31 August 2014 (Sum);

(b) interest on the Sum at the rate of 3% per annum above the prevailing Base Lending Rate of 6.85% per annum with penalty interest at the rate of 1% from 1 September 2014 until full payment; and

(c) costs on a solicitor-client basis.

[6] On 29 October 2014, in This Suit the Plaintiff filed an application for summary judgment against the Defendants (Court Enclosure No 8).

[7] After the filing of Court Enclosure No 8, the 1^st and 2^nd Defendants applied to Shah Alam High Court (SAHC) by way of an ex parte originating summons and obtained the following order on 18 November 2014 (SAHC Order). The SAHC Order provides for, among others, the following:

(a) the 1^st and 2^nd Defendants be given liberty to hold meetings (Creditors' Meetings) with specified creditors (Scheme Creditors) of the 1^st and 2^nd Defendants pursuant to s 176(1) CA to discuss and, if considered fit, to approve, with or without modification