Receiver-managers may sell company assets if empowered by debenture, without needing court approval, unless the company is in liquidation.

Abdul Malek Ahmad FCJ:

In the original originating summons dated 10 September 1997, the first respondent/plaintiff had applied for an order against the appellant/first defendant for a declaration that the sale and purchase agreement dated 2 July 1996 between the plaintiff and the defendant for the sale of the plaintiff's lease of the land under a qualified title H.S.(D) 143155 PTD 80563 in the Mukim of Plentong, District of Johor Bahru, State of Johor, which said lease was duly registered on 15 January 1992 vide Presentation Number 2474/92, Volume 12, Folio 39 is valid and binding on the plaintiff and defendant and for such further or other relief and costs.

In an amended originating summons on 24 September 1997, the second respondent was brought in as second defendant and the main prayer was amended to read that the receiver and manager of the plaintiff is duly empowered to sell the plaintiff's lease of the said land as described in the original originating summons.

As stated by learned counsel for the appellant and learned counsel for the first respondent in their respective skeletal submissions, the agreed facts were as follows:

(a) the first respondent is the registered proprietor of the lease of the said land;

(b) the first respondent had created in favour of the second respondent a debenture;

(c) the first respondent has also created in favour of the second respondent a legal charge registered under the National Land Code 1965 (hereinafter "the Code");

(d) the second respondent had pursuant to the provisions of the said debenture appointed a receiver and manager in respect of all the assets and undertakings of the first respondent; (e) the said receiver and manager had, as the receiver of the first respondent, entered into a sale and purchase agreement dated 2 July 1996 with the appellant to sell the said lease to the appellant subject to the terms and conditions contained therein;

(f) the appellant did not wish to proceed with the said agreement on the grounds that the receiver and manager did not have right or the capacity to sell, by contract only, the said lease in view of the Federal Court decision in Kimlin Housing Development Sdn. Bhd. (Appointed receiver and manager) (In liquidation) v. Bank Bumiputra (M) Bhd & Ors [1997] 3 CLJ 274 ; [1997] 2 MLJ 805 (hereinafter "the Kimlin case").

What is disputed is the fact that the receiver and manager of the first respondent is entitled to sell the lease on behalf of the first respondent.

The learned trial judge in his brief judgment said:

The question for the Court before granting the prayer as sought is to look at the Memorandum and Articles of the said company to see as to whether or not the company has an object clause to sell its land; and whether or not the Articles of the Company have reserved any provisions in the granting of the lawful Power of Attorney in favour of the Receivers/Managers.

I find as a fact that the Administrative Receivers/Managers are the authorised agents of the company under the debenture and as such are authorised to enter into any sale and purchase agreement on the assets of the company; subject however to the obtaining of the prior consent of the debenture holders and which consent was freely given by the second defendants to the Court.

Therefore, the need on the part of the Receivers/Managers in any way invoking the Orders of the High Court, 1980 only become applicable where such sale is proceeded by the chargee under its foreclosure proceedings and not where the chargor so proceeds with the sale by consenting parties.

I hold, that under these circumstances the administrative Receivers/Managers as agents of the company are absolutely free and empowered to dispose off the assets of the company; and their act binds the company.

In passing, I also take the opportunity to make my comments on a point of procedure to be adopted where administrative Receivers are appointed and proceedings filed in Court. Such proceedings shoul