Hamid Sultan JCA:

GROUNDS OF JUDGMENT

[1]This is an appeal by the appellant against the decision of the High Court where the learned Judicial Commissioner, upon dismissing the respondents’ application under section 404 of the Companies Act 2016

[2]The stay is rather unusual and when we asked the respondents whether there is any judicial precedent to stay an order of dismissal of an Originating Summons (O.S.) or writ itself, learned counsel for the respondents was candid and informed us that there was none, but attempted to convince us that they had made the application based on the Court of Appeal’s decision in Ong Koh Hou @ Won Kok Fong v Da Land Sdn Bhd & Ors

[3]After hearing the submission of the parties, we allowed the appeal and find it necessary to write this judgment to ensure that the DA Land judgment is not abused as it has nothing to do with stay of this nature. The stay in this case is unprecedented. The learned Judicial Commissioner also had not written the grounds of judgment for granting the stay.

Preliminaries

[4]The respondents in the instant case, had filed a judicial management order application on 6-08-2018. The effect of filing of the judicial management application means it effectively stops anybody from filing any action against the respondents for a period of six months and/or as the court may order. The filing itself in a way starts a moratorium not to sue the company. It is a strong weapon for the company to resist any form of claim against the company and a benevolent provision for creditors, etc. to appoint judicial managers to protect their interest in a company which may not be able to pay and/or satisfy their obligations. The said section 404 of CA 2016

“Application to Court for a company to be placed under judicial management and for appointment of a judicial manager

404. An application for an order that a company should be placed under a judicial management and for an appointment of a judicial manager may be made to the Court by the company or its creditor if the company or its creditor considers that—

(a)the company is or will be unable to pay its debts; and

(b)there is a reasonable probability of rehabilitating the company or of preserving all or part of its business as a going concern or that otherwise the interests of creditors would be better served than by resorting to a winding up.”

[5]The other relevant sections to appreciate the effect and consequence of the judicial management order is found in section 405 to 411 of CA 2016section 405 emphasises inability to pay debts and the making of the order will salvage the company as a whole or partly; there is also another element added into it for the court to grant the order when an element of public interest requires to do so. The said section 405 of CA 2016

“Power of Court to make a judicial management order and appoint a judicial manager

405.

(1)Where a company or its directors, under a resolution of its members or the board of directors, or a creditor, including any contingent or prospective creditor or all or any of those parties, together or separately, makes an application under section 404, the Court may make a judicial management order in relation to the company if—

(a)the Court is satisfied that the company is or will be unable to pay its debts; and

(b)the Court considers that the making of the order would be likely to achieve one or more of the following purposes:

(i)the survival of the company, or the whole or part of its undertaking as a going concern:

(ii)the approval under section 366

(iii)a more advantageous realisation of the company’s assets would be effected than on a winding up.

(2)Upon hearing the application for a judicial management order, the Court may dismiss the application or adjourn the hearing conditionally or unconditionally or make an interim order or any other order that the Court thinks fit.

(3)Any judicial management order made under subsection (1) shall direct that during the period in which the order is in force, the affairs,