James Foong Cheng Yuen J:

This is an application by the applicant, the liquidator of a private limited company known as Bensa Sdn. Berhad (hereinafter shall be referred to as the company), for an order that the 1st respondent, the Malayan Banking Berhad (hereinafter shall be referred to as the Bank) do refund to the company a sum of RM115,000 being money placed on fixed deposit account with the Bank by the company together with appropriate interest. For the placement of the fixed deposit a receipt was issued by the Bank in favour of the company. (This fixed deposit receipt I shall hereinafter refer to as the FD).

At the hearing of this application the Bank did not reply to the application but instead left the matter entirely to the 2nd respondent, the Malayan British Assurance Berhad (hereinafter shall be referred to as the Ins. Co.).

The background of this case is as follows. The company was awarded a contract to construct superstructural works for 2 blocks of flats for the Urban Development Authority (hereinafter shall be referred to as UDA). As commonly required, a performance bond to cover the company's due performance and completion of the said contract was obtained by the company from the Ins. Co. in favour of UDA up to a sum of RM757,515.41.

As consideration for the issuance of the Performance Bond, the Ins. Co. obtained inter alia from the company as collateral the deposit of the FD. Corresponding with the deposit of this FD, the company executed in favour of the Ins. Co., a Memorandum of Deposit cum Letter of Guarantee/Authority dated 13 May 1987 all relating to the FD. With these, the Ins. Co. proceeded to register the aforesaid as a charge with the Registrar of Companies presumably in accordance with s. 108(1) of the Companies Act . A certificate of registration of this charge was issued by the Registrar pursuant to s. 111(2) of the Companies Act on 24 December 1987.

On 3 April 1988, a petition was presented in the High Court at Johor Bahru to wind-up the company and on 27 April 1989 the company was wound-up by the said Court.

On 13 August 1989, the liquidator in this case was appointed for the company and he proceeded to demand from the Bank for the return to the company the sum of RM115,000 placed under the FD.

In the meantime, the company having defaulted in completing the said contract with UDA had their agreement terminated for breach by UDA who in turn claimed from the Ins. Co. under the Performance Bond. To this the Ins. Co. paid out a sum of RM357,515.41 to UDA. In turn, the Ins. Co. took steps to realise the FD deposited with them by the company as a collateral. This was resisted by the Bank on various grounds and is at present subject to a separate civil suit filed in the High Court at Kuala Lumpur.

For the time being, the Bank and the Ins. Co. seem to be of a common mind and have joined hands in warding off this claim by the liquidator before proceeding to settle their own disputes after this case.

The liquidator's claim is mainly on the following grounds,

(i) that the sum of RM115,000 under the FD deposited with the Ins. Co. is not a secured debt under s. 292(1) of the Companies Act and therefore, must be returned to the liquidator for distribution in accordance with s. 292 of the Companies Act ; (ii) that there was undue preference created by the company in depositing the FD as a collateral with the Ins. Co. and therefore, such acts are void under s. 293 of the Companies Act ; (iii) and that the disposition of the property of the company (that is, the FD) was made after the commencement of the winding-up by the Court and is therefore void unless otherwise ordered by the Court as provided for under s. 223 of the Companies Act .

The Ins. Co. in reply argued that the FD was a fixed charge duly registered and therefore falling within the category of a secured debt. As a secured debt it has priority over unsecured debts as provided by s. 292(1) of the Companies Act .

Further, there was no