JUDGMENTBY: GUNN CHIT TUAN SCJ(DELIVERING THE JUDGMENT OF THE COURT)

On 12 July 1988, MBF Finance Bhd (hereinafter referred to as the respondents) obtained judgment in the High Court at Kuala Lumpur against Sri Hartamas Development Sdn Bhd (hereinafter referred to as the appellants) for the sum of $ 5,197,060.82 together with interest and costs. By a letter dated 24 December 1988, the respondents sent to the appellants a demand under s 218(2)(a) of the Companies Act 1965 (hereinafter referred to as the Act), which reads as follows:

Statutory demand pursuant to s 218 of the Companies Act 1965 (Act

125) for payment of a debt

To: Sri-Hartamas Development Sdn Bhd

3rd floor

Wisma Low Kim Her

225-227 Jalan Tun Sambanthan

50470 Kuala Lumpur

Take Notice that, We, Messrs Cheang & Ariff of 18th Floor, Plaza

MBf, Jalan Ampang, 50450 Kuala Lumpur, solicitors for MBf Finance

Bhd hereby require you to pay to us the principal sum due on a

final judgment dated 12 July 1988 obtained by MBf Finance Bhd

against you in the High Court at Kuala Lumpur in Civil Suit No

D4-23-2067-87 that is to say the sum of M$ 5,197,060.82 together

with interest thereon at the rate of 17% pa from 1 December 1986

until the date of realization and cost at M$ 400 whereon

execution has not been stayed or you must secure or compound for

the aforesaid sum to the satisfaction of the said MBf Finance Bhd

within 21 days of the date hereof and that the consequences of

not complying with the requisition of this notice are that

winding up proceedings may be taken against you.

Dated 24 December 1988.

Sgd Messrs Cheang & Ariff

Solicitors for MBf Finance Bhd

That demand was served on the appellants on 27 December 1988. As the appellants failed to pay the debt as demanded, the respondents on 19 January 1989 presented a petition dated 17 January 1989, to wind up the appellants on the ground that the appellants had failed to comply with a statutory demand and was therefore insolvent and unable to pay its debt. At the hearing in the High Court before Zakaria Yatim J, several grounds were raised to resist the said petition. None of them found favour with the learned judge who, after hearing arguments, ordered the appellants to be wound up.

On appeal to us, Mr G Sri Ram, leading counsel for the appellants, contended firstly that the appellants ought not to have been wound up because the statutory demand did not comply with the terms of s 218(2)(a) of the Act, which is as follows:

A company shall be deemed to be unable to pay its debts if

(a) a creditor by assignment or otherwise to whom the company is

indebted in a sum exceeding five hundred dollars then due has

served on the company by leaving at the registered office a

demand under his hand or under the hand of his agent thereunto

lawfully authorized requiring the company to pay the sum so due,

and the company has for three weeks thereafter neglected to pay

the sum or to secure or compound for it to the reasonable

satisfaction of the creditor.

Counsel contended that the demand was bad because under s 218(2)(a), a company is by law entitled to have three weeks after service of the demand to either pay, secure or compound the sum demanded. He further submitted that a creditor is not entitled to truncate that right conferred by statute which requires strict compliance, and stated that the appellants recognized the seriousness of the ensuing consequences as a presumption of insolvency arises upon a failure to meet the demand. In his written submission, counsel relied on Re Yap Kim Kee & Sons Sdn Bhd , in which case the High Court had held, inter alia, that although the demand in writing nee