THE PARTIES

The plaintiff is a limited company registered under the Companies Act 1965. It is not a commercial bank. It was established in 1977 and was formerly known as Bank Kemajuan Perusahaan Malaysia Bhd. The plaintiff administers funds received from foreign institutions like the World Bank and the Islamic Development Bank (IDB). The 2nd defendant is a promoter of the 1st defendant.

The 2nd, 3rd, 4th and 5th defendants as directors of the 1st defendant executed two letters of guarantee dated 7th and 16th December 1988 in favour of the plaintiff for the facilities provided, and jointly and severally guaranteed, as principal debtors, the obligations of the 1st defendant to the plaintiff. The first was a fixed loan facility of RM200,000.00 from the World Bank for the purchase of machinery. The second was an Import Trade Financing Facility of US$100,000.00 from the IDB for the purchase of raw materials.

THE CLAIM

The plaintiff's claim is against the 2nd defendant as a guarantor pursuant to facilities granted to the 1st defendant.

ARE THE LOANS GRANTED ILLEGAL?

The 2nd defendant took the issue that the loans granted were illegal. He argued that this issue of illegality only arose 'based on the evidence adduced during trial'. In his defence he contended that to his knowledge the plaintiff was only exempted from the Moneylenders Ordinance 1951 and that the said exemption commenced on 22.8.79 and ended on 21.8.91. He also submitted that in 1988 the plaintiff was not licensed under the Banking and Financial Institutions Act 1989 (the BAFIA).

THE MONEYLENDERS ORDINANCE 1951

I am satisfied, on an examination of CABD 189 that the said letter dated 31.5.86 and addressed to the plaintiff clearly states that pursuant to an application made by the plaintiff under section 2(e) of the Moneylenders Ordinance 1951, the Minister of Home and Local Government was agreeable to granting the exemption sought. The said letter was signed by the Chief Secretary to the Ministry. Section 2(e) defines moneylenders as including every person whose business is that of money lending but does not include any body corporate or society for the time being exempted by the Minister by notification published in the Gazette from the provisions of the Ordinance. I also note that the Ministry undertook, in that same letter, to gazette the exemption as soon as possible (secepat mungkin). It was the submission of Mr. James Selva for the 2nd defendant that since the plaintiff's witness (PW1) had in answer to a question in cross-examination stated that the plaintiff did not take any action after receiving the letter dated 31.5.86, presumably to ensure the gazetting of the exemption, there is in effect no proper exemption and that the plaintiff cannot escape from being labelled a moneylender. I reject this submission. There was a clear undertaking by the Ministry to ensure that the notification was gazetted. In any case no evidence was led by the 2nd defendant to establish that the said exemption was not gazetted. In the circumstances, I invoke section 114(e) of the Evidence Act 1950 and raise the presumption that judicial and official acts have been regularly performed. Since the gazetting is a judicial requirement it must be presumed until the contrary is shown that the Minister would have ensured that his official act of gazetting the exemption must have been effected.

BANKING AND FINANCIAL INSTITUTIONS ACT 1989 (BAFIA)

The next issue on illegality is that the loans were not licensed under the BAFIA. The 2nd defendant referred me to CABD 190 which was a letter from Bank Negara and dated 31.3.90 and addressed to the plaintiff. It reads:

"Re : Acknowledgment of Compliance with

section 21(1) of the Banking and

Financial Institutions Act 1989

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We hereby acknowledge that your institution has complied with the requirements of section 21(1) of the Banking and Financial Institutions Act 1989 in respect of the following scheduled

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