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2020 MarsdenLR 706
COURT OF APPEAL PUTRAJAYA
JAGDIS SINGH BANTA SINGH & ANOR – Appellant
Versus
RETURN 2 GREEN SDN BHD – Respondent
[Civil Appeal No: W-02(IM)-1101-06-2019]
The necessity for unanimous creditor support in liquidator removal is not mandated by law, and liquidators must act impartially and diligently in asset recovery.
Headnote:(A) Companies Act 2016 – Section 482(b) – Appeal to remove liquidator – The High Court dismissed the application as appellants lacked support from other creditors – This finding was flawed as statutory provisions did not stipulate necessity of such support – Court emphasized that removal may be ordered on cause shown alone. (Paras 6, 12, 13)
(B) Liquidator's duties – The liquidator must act fairly and judiciously in administering the liquidation – Failure to notify all creditors or adequately investigate company assets may result in removal – Liquidator's actions in surrendering valuable assets without proper backing were questioned. (Paras 13, 15, 36)
Facts of the case: The appellants are creditors alleging unfair treatment by the liquidator in surrendering the company’s assets to a creditor. They invested RM4,750,000.00 in Return 2 Green Sdn Bhd without signing formal agreements for the total amount owed. (Paras 2, 3, 4)
Findings of Court: The learned High Court Judge erred in dismissing the petition on procedural grounds without addressing the merits of the claims against the liquidator. The liquidator's conduct was deemed unsatisfactory, warranting their removal. (Paras 6, 28, 36)
Issues: Whether leave of Court is needed for removal of liquidator, whether creditor support is obligatory, and whether appellants qualify as creditors. (Paras 6, 11)
Ratio Decidendi: The Court ruled that previous decisions regarding liquidator removal do not impose a condition of overall creditor support; the determination must be based on actual cause shown. The liquidator’s actions raised serious doubts about competence and impartiality. (Paras 13, 36)
Result: Appeal allowed; High Court order set aside.
Introduction
[1] This is an appeal against the dismissal of the appellants' application to remove the liquidator of a company that had been wound up. The learned High Court Judge did not hear the application on the merits but dismissed it on the sole ground that the appellants who claimed to be creditors failed to get the support of the other creditors.
Brief Background Facts
[2] The appellants in this case are Jagdis Singh a/l Banta Singh and Marvellous Existence Sdn Bhd. They filed an application under s 482(2) of the Companies Act 2016 to remove Mr Augustine a/l TK James as the liquidator of Return 2 Green Sdn Bhd. The company was wound up on 14 September 2012 at the instance of TSLK Enterprise Sdn Bhd (TSLK). The crucial claims in the affidavits to support the application are as follows.
[3] The first claim of the appellants is that they are creditors of Return 2 Green Sdn Bhd. The following facts were averred in the affidavit in support filed by Jagdis Singh a/l Banta Singh. He said that in 2010, Ramaness a/l Parasuraman who was a director of Return 2 Green Sdn Bhd asked him to avail an investment opportunity in the company. In taking up the offer, Jagdis Singh a/l Banta Singh and his brother in law, one Dr Gurnam Singh paid a total of RM4,750,000.00 through Marvellous Existence Sdn Bhd to Return 2 Green Sdn Bhd and/or to Ramaness. Jagdis Singh a/l Banta Singh averred that Ramaness or Return 2 Green Sdn Bhd acknowledged the payments through issuance of 990,000 shares to 13 individuals including himself. Ramaness also caused Return 2 Green Sdn Bhd to prepare an agreement to acknowledge that a sum of RM3,500,000.00 is owed to the appellants. However, the agreement was not signed by the appellants as they maintained that the actual sum owing was RM4,750,000.00.
[4] Counsel for the appellants also referred to the receipts issued by Return 2 Green Sdn Bhd for various sums received from Jagdis Singh a/l Banta Singh and Dr Gurnam Singh as evidence of the status of the appellants as creditors. In addition, counsel for the appellants submitted that the liquidator failed to exhibit any evidence to rebut their proof of payment. The liquidator also failed to issue a letter to reject the appellants' proof of debt.
[5] The second claim of the appellants is that the liquidation was not being conducted fairly with a view of recovery of the assets of the company for the benefit of its creditors. Instead, the liquidator acted to assist TSLK to gain control of the only valuable asset of the company which is machinery. The affidavit evidence and submission of the parties on this point will be discussed in some detail in the later part of this judgment.
Issues In The Appeal
[6] As we said earlier, the learned High Court Judge did not deal with the merits of the application to remove the liquidator. He also did not deal with the issue whether the appellants were creditors. The application was dismissed on the ground that other creditors and contributories did not support it. Before us, counsel for the appellants argued that the support of other creditors and contributors is not a mandatory requirement in an application to remove a liquidator. He urged us to consider the merits of the application and grant the application to remove the liquidator. At the outset of the hearing, counsel for the liquidator also raised a preliminary objection to the appeal. He submitted leave of Court was not obtained for the application to remove the liquidator. Thus, the main issues in this appeal would be:
(1) Whether leave of Court is required for removal of liquidator?
(2) Whether support of all creditors and contributories is obligatory?
(3) Whether the appellants are creditors?
(4) Whether cause shown on the merits for removal of liquidator?
Leave Of Court
[7] The application to remove the liquidator was made under s 482(b) of the Companies Act 2016 . The provision reads as follows:
A liquidator or interim liquidator appointed by the Court
