A winding-up petition cannot be based on a debt that is disputed; a clear judgment debt is necessary for such proceedings.

Mohd Ghazali J:

On 2 October 1998 the petitioner filed this petition to wind-up the respondent. I had on 16 December 1999 dismissed the petition with costs and against that decision the petitioner has appealed to the Court of Appeal.

The petition show the respondent was incorporated on 27 April 1983 and its authorised capital is 20,000,000 ordinary shares of RM1 each and its paid up capital is RM4,500,000. It is alleged in the petition that the respondent is indebted to the petitioner in the sum of RM1,020,442-84 ('the said sum') being payment for goods sold and delivered.

It is not disputed that the petitioner's solicitors, Messrs KM Chye & Partners caused to be delivered by hand and by AR registered post a notice of demand pursuant to s. 218(2)(a) of the Companies Act 1965 ('the Act') dated 23 June 1998 to the respondent at its registered office. Pursuant to the said notice of demand, the respondent was required to pay the said sum within 21 days of receipt of the said notice of demand. The respondent did not do so. The said notice read:

Dear Sirs,

OUTSTANDING AMOUNT OF RM1,020,442-84

We act for Metal Reclamation (Industries) Sdn Bhd of Lot 17518, Taman Selayang Baru Industrial Estate, 8 1/2 Miles, Jalan Ipoh, 68100 Batu Caves, Selangor, Malaysia.

We refer to our letter dated 8 June 1998, a copy of which is enclosed.

As solicitors for our clients, WE HEREBY DEMAND the payment of the outstanding sum of RINGGIT MALAYSIA ONE MILLION TWENTY

THOUSAND AND FOUR HUNDRED AND FORTY TWO AND SEN

EIGHTY-FOUR (RM1,020,442-84) which is due and owing by you to our client, or to us as solicitors within twenty one (21) days of receipt of this letter.

If you fail or neglect to pay the said sum or to secure or compound for it to the reasonable satisfaction of our client, we have further instructions to commence winding up proceedings under section 218 of the Companies Act, 1965.

Please note that this is a demand within the meaning of section 218(2)(a) of the Companies Act.

Yours faithfully, (Sgd) K M CHYE & PARTNERS Kuala Lumpur

It is the petitioner's stand that since the respondent has failed and/or refused and/or neglected to pay any or all of the said sum, the respondent is therefore deemed to be unable to pay its debts and in the circumstances it is just and equitable that the respondent be wound up.

On 8 February 1999 the respondent filed a notice of intention to appear and to oppose the petition. It is illustrated therein that the respondent is in receivership. In its affidavit which was filed on 21 May 1999, the deponent, one Lim Tian Huat of Messrs Arthur Andersen & Co, state that he is a duly appointed receiver and manager of the respondent. He explained therein, inter alia, the following:

(1) that the respondent has obtained various banking facilities from Bank Kerjasama Rakyat (M) Berhad ('the bank') which were secured by four debentures all given in favour of the bank;

(2) events of default under the debentures have occurred enabling his appointment as the receiver and manager of the respondent; (3) since his appointment, he instructed the respondent's solicitors to seek the consent of the petitioner in respect of the withdrawal of the proceedings herein;

(4) he is still in the process of verifying the liability of the respondent to the petitioner and the accuracy of the claims made therein and to date have not received a copy of the statement of affairs to be filed and submitted by the respondent's directors; further the claim by the petitioner for the goods in question has yet to be resolved to date;

(5) to the best of his knowledge the amounts owed to the bank to date is in excess of RM15 million;

(6) the bank, in the course of his appoin