JUDGMENT

Abdul Hamid Mohamad JCA:

The appellant (plaintiff in the court below) granted the respondent (defendant in the court below) a facility of RM20 million under the Islamic banking principle of Al-Bai Bithaman Ajil. Both parties executed two agreements on the same date ie, 2 May 1996. The first is the property purchase agreement ("the first agreement"). Under that agreement the respondent sold 22 pieces of land to the appellant for RM20 million. The second agreement is the property sale agreement. By that agreement the appellant sold to the respondent the same properties upon deferred payment terms. Clause 3.1 provides for 36 monthly instalments totaling RM23,571,864.

As a security for the repayment of the sale price of RM23,571,864 under the second agreement, the respondent, on 2 May 1996, charged to the appellant 15 pieces of the land under the National Land Code 1965.

The respondent failed to pay the instalments under the second agreement. The appellant issued a form 16D notice under the National Land Code 1965 against the respondent. The respondent having failed to comply with the form 16D notice, the appellant filed an originating summons against the respondent for an order for sale under s. 256 of the National Land Code 1965.

Prior to the issuance of the form 16D notice, the respondent had made some payments to the appellant under the second agreement and the total amount paid was RM167,393.86.

The learned judge dismissed the application. The appellant appealed to this court.

Judgment Of The High Court

The judgment is a one-and-a-half-page judgment. The learned judge noted, inter alia, that:

(a)the appellant failed to pay a portion of the instalments due of RM2,556,001.28 as on 11 February 1998;

(b)the respondent did not claim the whole of the purchase price because the respondent had only utilised the facility up to RM4,934,220.48, leaving a balance of RM15,654,168.50 unused.

The learned judge dismissed the application for an order for sale. The learned judge's grounds are as follows:

Saya tolak permohonan plaintif kerana plaintif mungkir janji tidak dapat memenuhi komitmennya untuk membayar RM5 juta kepada defendan dari akaun margin dan kemungkinan itu menjadi punca defendan ketiadaan modal kerja dan ini menyebabkan projek menjadi terbengkalai. Plaintif mengakui tidak menunaikan notis drawdown bertarikh 3.6.96 untuk jumlah RM3,000,000 tetapi dikatakan defendan belum menepati syarat. Saya puashati plaintif gagal membayar wang yang kena dibayar pada masa defendan memerlukannya. Maka saya tolak permohonan plaintif dengan kos.

The Law

As was mentioned at the beginning of this judgment the facility is an Islamic banking facility. But that does not mean that the law applicable in this application is different from the law that is applicable if the facility were given under conventional banking. The charge is a charge under the National Land Code. The remedy available and sought is a remedy provided by the National Land Code. The procedure is provided by the Code and the Rules of the High Court 1980. The court adjudicating it is the High Court. So, it is the same law that is applicable, the same order that would be, if made, and the same principles that should be applied in deciding the application.

The main source of the applicable law is s. 256 of the National Land Code:

256(1) This section applies to land held under:

(a)registry title;

(b)the form of qualified title corresponding to registry title: or

(c)subsidiary title,

and to the whole of any divided share in, or any lease of, any such land.

(2) Any application for an order for sale under this Chapter by a chargee of any such land or lease shall be made to the court in accordance with the provisions in that behalf of any law for the time being in force relating to civil procedure.

(3)On any such application, the court shall order the sale of the land or lease to which the charge relates unless it is satisfied of the existence of cause to the contrary.

The leading c