A creditor can initiate winding-up proceedings if the debt remains unpaid for over 21 days, establishing prima facie insolvency, regardless of disputes over the debt amount or pending cross-claims.

[1] Brief Facts

1.1. On 17 February 2006 the petitioner obtained a judgment against the respondent and three others in Kuala Lumpur High Court Civil Suit No: D8-22-1313-2004 for the principal sum of RM1,538,239.26 together with interests and costs. As the respondent failed and/or refused to pay the judgment sum despite requests and demands made by the petitioner, the petitioner on 5 February 2010 served a notice pursuant to s. 218(2)(a) of the Companies Act 1965 (the Act) on the respondent at its registered address.

1.2. In the s. 218 notice, the petitioner demanded for payment of the principal sum of RM1,538,239.26 together with interests calculated up to 4 February 2010, less two payments received, thereby totalling RM2,826,207.06. As the respondent did not pay the said sum of RM2,826,207.06 or any part thereof within the stipulated 21 days, the respondent was deemed prima facie insolvent and unable to pay its debt.

1.3. On 10 March 2010 the petitioner filed the winding-up petition to wind-up the respondent pursuant to the s. 218 notice.

1.4. Prior to the filing of the present petition, the petitioner had on 10 March 2006 filed a winding-up petition against the respondent in respect of the sum of RM2,122,088.39 being the principal and interests due and owing. This first petition was struck off on 28 July 2007. On 31 October 2007 the petitioner filed a second petition to wind-up the respondent in respect of the sum of RM2,699,033.47 being the principal and interests due and owing. This second petition was dismissed on 17 September 2008.

1.5. As a result of the two previous winding-up petitions filed by the petitioner, the first of which was struck off and the second dismissed by the Court, the respondent filed a claim on 3 May 2010 against the petitioner vide Kuala Lumpur High Court Civil Case No: S22-391-2010 for damages not exceeding RM5 million for malicious prosecution and abuse of process. The respondent contended that the claim was a genuine cross-claim against the plaintiff's winding-up petition.

1.6. The plaintiff's judgment obtained against the respondent was based on a corporate guarantee given by the respondent in respect of a contract undertaken by Visage Engineering Sdn Bhd (Visage). The petitioner had commenced arbitration proceedings and had obtained an award against Visage. Visage applied to set aside the award in the High Court but was unsuccessful, following which Visage appealed to the Court of Appeal. The appeal is pending.

[2]The Petitioner's Case

2.1. Counsel for the petitioner submitted inter alia :

2.1.1. That the petitioner had obtained a summary judgment on 17 February 2006 before the Senior Assistant Registrar. Being dissatisfied with the judgment, the respondent appealed to the judge in chambers who dismissed the appeal. The respondent then appealed to the Court of Appeal which also dismissed the appeal. The respondent applied for leave to appeal to the Federal Court but the leave application was refused. Hence, the judgment obtained by the petitioner is a final judgment.

2.1.2. That Visage is not a party to the winding-up proceedings and that the Petition is not dependent on the outcome of Visage's appeal in the Court of Appeal.

2.1.3. That the respondent's dispute on the judgment debt is not bona fide.

2.1.4. That the purported cross claim filed by the respondent for malicious prosecution is to delay the winding-up proceedings.

2.1.5. That the respondent is insolvent and una