Mohamed Dzaiddin J:

[1] This is an application by way of notice of motion under s 176 of the Companies Act 1965 (the Act) for sanctioning a scheme of arrangement between the respondent company and its creditors or any class of them whereby each of the creditors including the petitioners herein do accept in full and final discharge and satisfaction of his debt as admitted or established a cash composition equal to 35 cents in every ringgit of such debt as the same would have been provable had the respondent been placed in an insolvent winding-up.

[2] Para (1) of s 176 of the Act states:

Where a compromise or arrangement is proposed between a company and its creditors or any class of them or between the company and its members or any class of them the Court may on the application in a summary way of the company or of any creditor or member of the company, or in the case of a company being wound up of the liquidator, order a meeting of the creditors or class of creditors or of the members of the company or class of members to be summoned in such manner as the Court directs.

[3] At the hearing before me on 25 February 1991 all the judgment creditors, about 152 of them including the petitioners, supported the respondent's application. MUI Finance Bhd who had earlier filed a notice of intention to oppose the petition for winding up changed its mind and supported the application. It claimed to be an unsecured creditor of the respondent by virtue of a letter of guarantee dated 29 October 1984 executed by the respondent guaranteeing the repayment of banking facilities for RM5 million granted to Bagan Town Development Sdn Bhd Subsequently, on 14 December 1987 the respondent's liability under the said guarantee was reduced to RM2 million and since then the respondent, despite repeated demands made by MUI had failed to pay the said amount.

[4] However, MUI's participation in the proposed scheme was objected to by Encik Ooi Teik Hoe, Counsel for the respondent, who contended that MUI did not come under the same class of creditors as the petitioners and other judgment creditors within s 176(1) of the Act.

[5] On 28 March 1991 I heard submissions of Counsel on this point. Encik Ooi submitted that MUI stands in a different class from the petitioners and other creditors because unlike the latter who are the judgment creditors of the respondent, MUI was in fact a secured creditor under the legal charge of the proprieties given by Bagan Town Development Sdn Bhd which was further secured by a letter of guarantee executed by the respondent. Counsel further submitted that MUI's recourse was to apply for an order of sale of the charged properties under s 256 National Land Code and until it commenced foreclosure proceedings to obtain the order for sale, MUI cannot participate in the present scheme of arrangement.

[6] Cik Chen, for MUI Finance Bhd submitted that MUI was an unsecured creditor of the respondent by virtue of the guarantee. Although it had demanded for the repayment of the amount which the respondent had guaranteed for its principal, MUI had yet to commence an action to recover the said debt. In such circumstances, MUI could also be said to be a contingent creditor, who should come within the class of creditors as the other judgment creditors.

[7] I shall now refer to the authorities by both Counsel to assist me in my deliberations on this point. Encik Ooi, first, referred me to a passage in Sovereign Life Assurance Co v. Dodd [1891-4] All ER REP 246 at p 251 which states as follows:

The word "class" used in the statute is vague, and to find out what it means we must look at the general scope of the section, which enables the Court to order a meeting of a "class of creditors" to be summoned. It seems to me that we must give such a meaning to the term "class" as will prevent the section being so worked as to produce confiscation and injustice, and that we must confine its meaning to those persons whose rights are not so dissimilar as to mak