Mohd Jemuri Serjan SCJ:

[1] This is an appeal against the decision of the High Court given at Kuala Lumpur on 11 April 1989 granting a declaration that all amounts due to the respondents from the appellant being pro-rata bonus, termination benefits, leave pay and indemnity rank prior to the debenture holders by virtue of s 191 read with s 292(1)(A) of the Companies Act 1965.

[2] The facts of the case in so far as they are relevant to the issues before us are these.

[3] The respondent and 192 others were employees of the appellant, Indo Malaysia Engineering Company Bhd on or about 31 December 1973, the said Indo Malaysia Engineering Company Bhd issued in favour of United Asian Bank Bhd of No 4, Jalan Mountbatten, Kuala Lumpur a debenture to secure the payment from the said United Asian Bank Bhd in the sum of RM2,000,000. On 11 July 1986, the said United Asian Bank Bhd in exercise of the powers contained in the said debenture appointed one Mr Chua Teong Hooi and one Raja Arshad bin Raja Tun Uda of Price Waterhouse as receivers of the property therein contained. The said receivers in exercise of the powers conferred on them by the said debenture terminated the services of the plaintiffs on 11 July 1986. Thereupon the plaintiffs lodged a complaint to the Commissioner for Labour, Port Klang under s 69 of the Employment Act 1955 against the defendant company for a non payment of termination benefits, pro rata bonus, leave pay and indemnity in lieu of notice amounting to RM1,778,795.79. After due inquiry and in exercise of the powers conferred on him by the Employment Act 1955 the Commissioner for Labour ordered the defendant company to pay to the plaintiffs the sum of RM1,778,795.79 being pro rata bonus, termination benefits, leave pay and indemnity in lieu of notice.

[4] It is not disputed that on 31 July 1986 the plaintiff and the other 192 employees were paid a total sum of RM139,249.21 being one month's salary and arrears and pay in lieu of unconsumed leave. It is also not disputed that pay in lieu of leave unconsumed was paid on 13 July 1986 in the sum of RM73,873.59 and the claims of 13 ex employees who were already paid a total sum of RM365,196.83 were struck off. The consent order dated 10 March 1987 was obtained whereby the order made by the Commissioner for Labour, Port Klang dated 19 August 1986 was varied. Therefore the balance of RM1,339,725.37 is the amount of the claim in this appeal.

[5] By an Originating Summons No: D-31-33-87 which was heard in Open Court on 17 April 1989 the respondents applied for the following relief namely:

(a) a declaration that, subject to s 191 read with s 292(1)A of the Companies Act 1965 all amounts due to the plaintiffs from Indo Malaysia Engineering Company Bhd being pro rata bonus, termination benefits, leave pay and indemnity in lieu of notice amounting to RM1,778,795.79 ranks prior to the debenture holders.

(b) In the alternative a declaration that the order made on 4 September 1986 by the Commissioner for Labour, Port Klang ordering Indo Malaysia Engineering Company Bhd, to pay the plaintiffs a sum of RM1,778,795.79 being pro-rata bonus, termination benefits, leave pay and indemnity in lieu of notice, ranks prior to the debenture holders subject to s 191 read with s 292(1)(A) of the Companies Act 1965.

[6] It is pertinent to mention here that the reference to s 292(1)A in (a) and (b) above, was an error on the part of Counsel for the plaintiffs in the Court below because s 292(1) does not have such a reference. Notwithstanding the glaring error the question for determination in the Court below and before us is whether the payments ordered under s 69 of the Employment Act 1955 are preferential debts under s 191(1) read with s 292(1) of the Companies Act 1965. It is worthwhile to reproduce s 191(1) and s 292(1) in so far as they are relevant for the purpose of this appeal.

[7]Section 191 reads:

191.(1) Where a receiver is appointed on behalf of the holders of any debentures of a company