Gopal Sri Ram JCA:

[1] This is an appeal against the order of the learned Judge of the High Court sitting at Miri striking out the appellant's petition presented under the provisions of s 181 of the Companies Act 1965 ('the Act'). We heard the appeal on 25 September 1995 and allowed it, indicating to Counsel that reasons for our decision would be given. These now follow.

[2] The brief facts of the case are these. The first respondent is a private company ('the company') limited by shares. It has an authorised share capital of 250,000 shares of which 10,000 have been issued and paid up. Until 3 August 1991, the appellant was a registered shareholder in it. He held 1,500 shares.

[3] On 9 July 1991, the company wrote to the appellant alleging that he owed it a sum of RM111,734.60. The appellant vehemently denies owing this or any other sum to the company. He claims that it is the company that is indebted to him in the sum of RM12,500.

[4] On 25 July 1991, the company's board resolved that the appellant's shares shall be sold at a value to be determined by an independent valuer. The proceeds of sale were to be applied towards the debt allegedly owed by the appellant to the company. By a letter dated 26 July 1991, the company informed the appellant of the resolution of its board and gave him seven days to settle the sum of RM111,734.60, failing which his shares would be sold. In taking this step, the company's board were no doubt relying on arts 12 through 15 of its articles of association which are in the following terms:

12. The company shall have a first and paramount lien upon all shares, (whether fully paid or not) registered in the name of any member, either alone or jointly with any other person, for his debts, liabilities and engagements, whether solely or jointly with any other person, to or with the company, whether the period for the payment, fulfilment or discharge thereof shall have actually arrived or not, and such lien shall extend to all dividends from time to time declared in respect of such shares. But the directors may at any time declare any share to be exempt, wholly or partially, from the provisions of this article.

13. The directors may sell the shares subject to any such lien at such time or times and in such manner as they think fit, but no sale shall be made until such time as the moneys in respect of which such lien exists or some part thereof are or is presently payable or the liability or engagement in respect of which such lien exists is liable to be presently fulfilled or discharged, and until a demand and notice in writing stating the amount due or specifying the liability or engagement and demanding payment or fulfilment or discharge thereof and giving notice of intention to sell in default shall have been served on such member or the persons (if any) entitled by transmission to the shares, and default in payment, fulfilment or discharge shall have been made by him or them for seven days after such notice.

14. The net proceeds of any such sale shall be applied in or towards satisfaction of the amount due to the company or of the liability or engagement, as the case may be, and the balance (if any) shall be paid to the member or the person (if any) entitled by transmission to the shares so sold.

15. Upon any such sale as aforesaid, the directors may authorise some person to transfer the shares sold to the purchaser, and may enter the purchaser's name in the register as holder of the shares, and the purchaser shall not be bound to see to the application of the purchase money nor shall his title to the shares be affected by any irregularity or invalidity in the proceedings in reference to the sale.

[5] On 30 July 1991, the appellant replied, challenging the company's claim that he was indebted to it and putting in issue the existence of any lien attaching to his shares. Those in control of the company's board were obviously deaf to the protestations of the appellant. On 12 August 1991, the company (in r