JUDGMENT

Mariana Yahya JC:

[1] The plaintiff's claim against the defendants is for the amount of RM347,076.48 being goods sold and delivered by the plaintiff to the defendants at the defendants' request.

[2] The case had been set down for trial with all the necessary bundles of documents filed by the parties. However, on 13 May 2004, before, Dato' Suriyadi bin Halim Omar J, with the consent of the parties, judgment for the said amount of RM347,076.04 claimed by the plaintiff was recorded. Liability having been agreed by the parties, the only issue left to be determined by the court is the issue of interest. The parties had agreed that the issue on interest be raised as a preliminary issue under O. 33 r. 2 of the Rules of the High 1980 and written submissions were directed to be filed by the learned counsel for both parties.

[3] The question of law for the determination by the court is whether the business transaction between the plaintiff and the 1st defendant pursuant to the credit application contract dated 25 April 1997 and the guarantee and indemnity executed between the plaintiff and the 2nd, 3rd and 4th defendants dated 16 May 1997 contravenes the provisions of ss. 4 , 5 , 6 , 19 and 125 of the Banking and Financial Institutions Act 1989 (BAFIA) and void for illegality under s. 24 of the Contracts Act 1950 .

[4] The effect would be that:

If the answer is in the affirmative - no interest will be awarded to the plaintiff and the plaintiff shall only be entitled to the principal sum less the counterclaim of the 1st defendant if allowed by the court. If the answer is in the negative then the plaintiff shall be entitled to the full interest as claimed.

[5] As directed by the court, the parties had filed written submissions.

[6] Submission Of The defendants

1. The 1st defendant ordered from the plaintiff construction material (tiles) worth RM1,417,606.46 via purchase order number 479 dated 30 June 1997. As at 25 July 2002, the 1st defendant still owed the plaintiff the principal sum of RM347,076.48.

2. The plaintiff is claiming that as at 25 July 2002, the 1st defendant owed the plaintiff RM638,725.40 based on the computation of the principal sum of RM347,076.48 together with interest calculated at 1.5% per month (18% per annum).

3. The 1st defendant has a counterclaim of RM276,035.30 as at 30 October 1998 together with interest calculated at 8% per annum.

4. Based on the said points of law raised by the 1st defendant, the 1st defendant agreed that a set-off between the plaintiff's RM347,076.48 (principal sum) and the counterclaim of the 1st defendant ought to be the appropriate settlement.

5. The 1st defendant contends that BAFIA applies in the transaction.

6. The Parliament has enacted that sch. 3 Of BAFIA is applicable in that any person intending to provide credit facilities to another in respect of building credit business as in the defendants' construction business must be licensed.

7. The plaintiff has no authority to offer any credit account as in the credit application duly stamped on 17 June 2002 and credit facilities and the plaintiff also has no authority to seek and offer joint and several guarantee stamp dated 16 July 1998 against the 2nd to 4th defendants to the extent of the whole debt as claimed by the plaintiff as the plaintiff does not hold a valid licence under s. 6 of the BAFIA and therefore the instruments on which the plaintiff's claim are based on are void and unenforceable.

8. In the alternative, the said instruments are void and unenforceable as the said instruments has contravened the provisions of ss. 4 , 5 , 6 , 19 , 21 , 23 and to the exceptions of s. 125 of BAFIA being an act or undertaking forbidden by law in that it violated a prohibitory enactment by the legislature and void for illegality by reason of s. 24 of the Contracts Act 1950 .

9. As both parties did not know about the validity of the contract which is void ab initio , the 1st defendant prays that:

(a) The contract concerning the credit facilit