Mahadev Shankar J:

This is a petition by United Asian Bank Berhad (hereafter referred to as `the bank') to wind-up Hong Huat Realty (M) Sdn. Bhd. (`the company').

The company was incorporated on 14 February 1972 with a paid up capital of RM560,002. In the course of its business activities it opened a current account No. 05-059 with the bank. Through that account the company obtained overdraft facilities. For these facilities the company offered collateral by way of a charge for RM400,000 on the land comprised in EMR 185 for Lot 1536 and EMR 187 for Lot 1538 in the Mukim of Senai/Kulai valued at the time at about RM500,000. There was also a separate charge for RM100,000 on the land comprised in EMR 13 Lot 52 in the Mukim of Kahang valued at about RM293,000. There was also a deposit of title deed under Johore Government Grant No. 9279 Lot 2799 for RM40,000. The bank also held a personal guarantee from each of the company's directors Dato Yap Sing Hock, Yap Seng Chang and A. Hamid bin Mohamed Thair for RM400,000. And the bank held a fixed deposit from the company of RM1.2 million.

In the usual course of its business, the bank sent monthly statements to the company. By February 1982 the overdraft in the company's account stood at RM1,801,167.79. On 26 March 1982 this figure was reduced by the application of the fixed deposit plus accrued interest of RM1,256,523.23 to reduce the overdraft to a figure of RM544,639.56. For all practical purposes the account became stagnant after that. Monthly statements continued to be sent. The interest continued to mount. Nothing was paid in. By February 1986 the amount due had swollen to RM1,028,453.02.

Shortly after the application of the fixed deposit to the reduction of the overdraft in March 1982 some correspondence was exchanged between the company and the bank, This related to the interest rate applicable. But the queries appear to have been resolved by a personal meeting between the bank and one of the company's directors, one Francis Ng. The company did not dispute a letter sent by the bank to the company's auditors on 14 September 1983 in which it was certified that at the close of business on 30 September 1982 the debit balance was RM616,233.85.

On 13 February 1984 the bank served a notice of default with respect to the charge relating to EMR 185 and 187 aforesaid. The notice states that the debt outstanding as at 30 November 1983 was RM735,034.76 and that further interest was accruing at the rate of 13.75% per annum with monthly rests. Section 254 of the National Land Code was invoked and in the event of failure to pay up the debt within 7 days, notice was given that the bank proposed to apply for an order of sale. This was done through the Collector's office but the sale did not materialise.

The debt and the interest continued to mount and by 27 February 1986 it stood at RM1,028,453.02 (`the debt').

On April Fool's day 1986, the bank through its solicitors issued the statutory notice in accordance with the provisions of the Companies Act, to the company for the payment of the debt within 21 days failing which the company would be deemed to be unable to pay the debt and action would then be taken for the winding-up of the company. A copy of this notice was sent to each of the directors of the company.

The debt was not paid. The petition was filed. It was advertised. This attracted the attention of the company's other creditors who gave notice of their intention to appear at the hearing which eventually took place on 24 September 1986.

The company was involved in two housing projects. One was known as the Saleng Project and the other as the Taman Nora Housing Project. From the results of searches made in the Companies Registry and filed by the bank in these proceedings, it appears that the company had charged the land comprised in Grant No. 3951 for Lot No. 1169 in the Mukim of Senai/Kulai, Johore Bahru in favour of Asiavest Merchant Bankers (M) Bhd. for RM2 million. These moni