RK Nathan J:

Facts

The plaintiff bank sued the defendant based on various credit facilities granted to the defendant at the defendant's request. In its defence the defendant, amongst others, contended that the plaintiff had no cause of action. It was further averred in the defence that on 18 February 1991 OCBC Singapore, a company incorporated in Singapore and being a different corporate entity from the plaintiff advanced the defendant credit facilities amounting to RM500,000 which the defendant accepted and utilised. On 18 November 1991 the same OCBC Singapore gave the defendant additional facilities amounting to RM1.1 million which again the defendant accepted and utilised. Subsequently the same OCBC Singapore further granted a revolving credit facility of a sum of RM5 million. When the plaintiff bank gave facilities in October 1996 the additional facilities were as follows:

(a) overdraft (additional) 400,000

(b) LC Facility (new) 500,000

900,000

In January 1998 the plaintiff reduced the loan facility by a sum of RM2 million. This effectively meant that the loan facility available was solely the facility granted by OCBC Singapore.

The plaintiff took out an O. 14 application for summary judgment and sought judgment for RM5,627,020. The learned senior assistant registrar entered judgment for the plaintiff on 8 August 2001 for the said sum. Being dissatisfied with that decision the defendant appealed. After hearing submissions I allowed the appeal with costs and fixed case management for 20 February 2002.

Findings Of The Court

Dato' Murthi, for the defendant, referred the court to the three letters of offer dated 18 February 1991, 18 November 1991 and 24 August 1995. The letters dated 18 February 1991 and 18 November 1991 were issued by OCBC Singapore.

In its affidavit in support of the summary judgment the plaintiff argued that it had a right to proceed with this action based on a vesting order dated 24 June 1994. The defendant's contention is that the said vesting order is ultra viresthe Banking and Financial Institutions Act 1989 (Act 372) (the BAFIA). Section 49 of the BAFIA relates to the requirement of a sanction for the reconstruction of a licensed institution. The relevant section is reproduced for ease of reference. It reads as follows:

49. (1) No person shall enter into an agreement or arrangement

(a) which will result in a change in the control of a licensed institution or its holding company;

(b) for the sale, disposal, or transfer howsoever, of the whole or any part of the business of a licensed institution;

(c) for the amalgamation or merger of a licensed institution with any other person; or

(d) for the reconstruction of a licensed institution, unless:

(A) the proposed agreement or arrangement is in writing; and

(B) all the parties thereto have first made an application in writing to the Minister for his approval of such agreement or arrangement and have obtained the Minister's approval thereto.

It seems to me clear that only if a licensed institution is the subject of a sale and disposal or transfer of its business, that the sanction of the Minister must be obtained. I have to consider whether the bank that granted the defendant the said facilities was licenced institution within the definition of s. 49(1)(b) of the BAFIA. Section 2 of the BAFIA defines a licenced institution as any institution licensed or deemed to be licensed under s. 6(4) of the same Act. Section 6(4) reads as follows:

6. (4) Upon receiving an application and the recommendation of the bank under this section, the Minister may grant the licence, with or without conditions, or refuse the licence.

The granting of a licence under s. 6(4) of the Act is no doubt subject to compliance with ss. 4 and 5 of the said Act. It is pertinent to reproduce s. 4 and s. 5(1) which read as follows:

4. No person shall carry on:

(a) banking, finance company, merchant banking, or discount house business, unless it is a public company; or

(b) money-broking