The exclusion of a recognized creditor from a creditors' meeting is unlawful under s 176 of the Companies Act, 1965.

[1] This was an appeal against the dismissal by the Shah Alam High Court of the appellant's application for a declaration that the appellant was a scheme creditor of the respondent and was entitled to attend and vote as an unsecured creditor at the unsecured creditors' meeting of the respondent.

[2] The appellant, a fully owned subsidiary of Public Bank Bhd, is a licensed stock broking firm. The appellant had by a letter of offer dated 7 October 1997, offered a margin facility of RM50 million to Autoways Development Sdn Bhd, a wholly owned subsidiary of the respondent. A formal agreement was executed the same day and at the same time too, the respondent, as the parent company of the borrower company, gave a corporate guarantee in favour of the appellant. All these have not been disputed.

[3] By early 1998, it became obvious that the respondent and its group of companies were facing financial difficulties and unable to settle their debts. As a result in May, 1998, they engaged Messrs Arthur Andersen Corporate Advisory Sdn Bhd ("Arthur Andersen") a reputable firm of accountants to prepare a restructuring scheme of arrangements with their numerous creditors for submission to the Court under s 176 of the Companies Act, 1965("the Act"). Arthur Andersen came out with a proposal dated 21 May 1998. This proposal recognised the appellant as a scheme creditor, and confirmed by the affidavit of the respondent's managing director one Chua Sin Han, affirmed on 21 May 1998. This fact was also confirmed in an internal document of the respondent as averred to by the managing director of the respondent in the same affidavit at para 9 thereof.

[4] There can be no doubt that these two documents constitute complete acknowledgement that the appellant was a creditor.

[5] The Arthur Andersen proposal dated 21 May 1998 was put forward by the respondent to the Court when the respondent applied for an ex-parte restraining order under s 176(10) of the Act on 22 May 1998, where the appellant was listed as one of the scheme creditors. The restraining order was served on the appellant on 26 May 1998. It is submitted that this in itself is an acknowledgement that the appellant was one of the scheme creditors, otherwise there was no reason whatsoever to serve the restraining order on the appellant.

[6] This was followed on 9 June 1998 by the respondent asking the appellant to submit its claims of the debt owing for the purpose of the scheme. This request is contained in a letter dated 9 June 1998, from the respondent's managing director one Chua Sin Han addressed to the appellant. There has been no denial of this. It is submitted that this act of the respondent is an unqualified acknowledgement as the respondent had not reserved the right to reject the appellant's claim nor was the letter written "without prejudice". It is, we think, pertinent to reproduce this letter.

9 June 1998

PB Securities Sdn Bhd.

22nd Floor, Menara Penglobal

No 8, Lorong P Ramlee

50250 Kuala Lumpur.

Dear Sirs,

Re: Outstanding Amount due:

1) Autoways Construction Sdn Bhd.

2) Autoways Holdings Berhad

Shah Alam High Court Order No MT3-24-402-1998

We refer to the Restraining Order under S 176(10) of the Companies Act 1965 given by the High Court dated 22 May 1998.

You are now required to forward a "Statement of Claims: of the debt due st to you as at 31 May 1998 in order to assist our Financial Advisers and Corporate Lawyers to work out all actual and contingent liabilities so as to complete the scheme of arrangement and compromise.

We wish to inform that if you fail to submit the said "Statement of Claims st th as 31 May 1998" by the 30 June 1998, you may not be considered in our scheme of arrangement and compromise restructuring exercise because of the t