An application for a judicial management order must meet statutory preconditions, including genuine intent for rehabilitation; failure to do so constitutes an abuse of process.

Saheran Suhendran JC:

Introduction

[1] This is a case of an abuse of process of Court caused by the filing of an application for a judicial management order under s 404 of the Companies Act 2016 (" CA 2016"), and the steps a Court may take to cure it.

Background Facts

[2] On 8 April 2024, the Applicant ("Novabrite") filed an application in Enclosure 1 ("JMA6") for an order ("JMO") under s 404. The proposed JMO was for the Respondent, Emrail Sdn Bhd ("Emrail"), to be placed under judicial management. Encik Adnan Hasbi (NRIC No.: 780917-08-5799) ("Hasbi") was nominated as the proposed Judicial Manager ("the JM").

[3] On 27 June 2024, an application ("NoA Leave" or "Encl 14") was filed by the Proposed Intervener ("Balaranee"). It is supported by the Affidavit of Balasubramaniam a/l M Veerappan affirmed on 27 June 2024 ("Encl 15").

[4] On 1 July 2024, NoA Leave and (Encl 15) were served on Emrail. In Encl 15, Balaranee made several serious allegations against Novabrite in relation to multiple JMAs filed over a period of approximately four (4) years. It was alleged that the JMAs were an abuse filed to take unfair advantage of the automatic moratorium arising on the filing of a JMA (paragraph 40 (ii)) and were a tactical ploy to preclude genuine creditors such as Balaranee from initiating action to recover their debts (paragraphs 41 and 44). Balaranee wanted leave to proceed with winding up proceedings filed by it against Emrail vide Companies (Winding Up) Petition Number No.: BA-28NCC-249-05/2024 ("Petition 249") filed on 6 May 2024 (paragraph 45).

[5] No affidavits in reply were filed by Novabrite or Emrail. I am surprised that Novabrite just sat back and let these factual allegations go unanswered given the attacks on the bona fides of its own application in JMA6. Such inaction can only be taken as deliberate as no explanation for the non-response was given. I agree with Counsel for Balaranee that following the Court of Appeal's decision in Ng Hee Thoong & anor v. Public Bank Berhad; [1995] 1 MLJ 281 at 286; [1995] 1 CLJ 609; [1995] 1 AMR 622, the failure to contradict such allegations will be taken as an admission of those allegations.

[6] Indeed, the evidence suggests that throughout the early stages of this JMA6 including steps taken in the filing of affidavits, written submissions and at the early hearing dates for NoA Leave, Emrail played little or no part. Emrail did not file an affidavit in response to Encl 15 except that an 11th hour attempt was made to obtain permission to file such an affidavit (see paragraphs 9 to 18 below). The evidence suggests that Emrail played no part in any of the first 5 JMAs.

[7] NoA Leave was originally fixed for decision on 9 September 2024. I noted from Balaranee's submissions, Counsel raised the issue that the filing of successive JMAs triggering the automatic moratoria for a substantial period, was an abuse of process.

[8] This concerned me. I requested for further submissions on the abuse issue. On 30 August 2024, Novabrite filed Encl 45 and Balaranee filed Encl 47. I adjourned the date for decision to 3 October 2024.

Emrail Finally Enters The Fray

[9] In an unexpected move after these final written submissions by Balaranee and Novabrite were filed on 30 August 2024 and affidavits closed, Emrail filed a Notice of Appointment of Solicitors (M/s OS Kim & Associates) dated 12 September 2024. By a letter dated 20 September 2024, M/s OS Kim (as solicitors for Emrail) wrote to Court stating that they intended to attend the hearing on 3 October 2024 and object to NoA Leave. They asked for directions.

[10] On 23 September 2024, M/s S Ravenasan, solicitors of Balaranee, wrote to Court objecting to M/s OS Kim's request given that NoA Leave and Encl 15 were served on Emrail as early as 1 July 2024, and there was after a considerable delay. It is noted that this was after a second decision date was fixed on 3 October 2024.

[11] They also drew attention to O 32 of the Rules of the High ("RHC").