Conditional Winding-Up Orders: A Court's Discretion
In Prolink Marketing Sdn Bhd v Ambank Islamic Berhad[1], the main issue before the Court of Appeal was whether the High Court was empowered to make a conditional winding-up order. In considering that issue, the Court of Appeal examined Section 469(1)(c) of the Companies Act 2016 (CA 2016). The Court of Appeal dismissed the appeal and upheld the High Court’s conditional winding-up order against the Appellant.
Background Facts
On 21.10.2019, Ambank Islamic Berhad (the Respondent) had obtained a judgment against Prolink Marketing Sdn Bhd (the Appellant) at the High Court in relation to monies due and owing under a facility agreement between the parties.
Thereafter, the Respondent served on the Appellant a statutory notice of demand dated 7.11.2019 demanding the judgment sum to be paid within 21 days. The Appellant failed to make payment and the Respondent filed a winding-up petition.
The High Court ordered a conditional winding-up order dated 5.8.2020 which required the Appellant to pay the full sum demanded by the Respondent within five months of the date of the order, failing which the Appellant shall immediately be wound-up on 5.1.2021 (Conditional Winding-Up Order).
The Respondent submitted that the High Court was empowered to make the conditional winding-up order pursuant to Section 469(1)(c) of the CA 2016 which reads:
“Powers of Court on hearing petition for winding up
(1) On hearing the petition for winding up, the Court may, by order-
…
(c) make any interim or any other order that the Court thinks fit.”
The Court Of Appeal’s Decision
The Court of Appeal dismissed the appeal and held as follows:
The court may exercise its discretion and make other orders as it thinks fit which relate to the winding-up petition. The court’s discretionary powers on hearing winding-up petitions are pursuant to Section 469(1) of the CA 2016. These powers of the court include dismissing the petition, adjourning the hearing of the petition or making any interim order or any other order as the court thinks fit.
Any order by the Court pursuant to Section 469(1)(c) of the CA 2016 must relate to the winding-up petition where the ultimate result must be to either allow or dismiss the winding-up application. The application of Section 469(1)(c) by courts is not without limitation even though the phrase ‘any other order as the court thinks fit’ seems to provide a wide discretionary power to the court.
There is no provision under the CA 2016 which prohibits the court from imposing conditions on the debtor to settle the debts within a period of time before the winding-up is to be made effective. Instead, Section 469(1)(c) specifically allows the court this discretion to impose such conditions.
Commentary
This decision is significant for debtors and creditors alike in winding-up petitions filed in court. It highlights the discretionary power available to our courts and the cautious exercise of such power for the benefit of all parties.
It is clear that the discretion to grant ‘any other order as the court thinks fit’ in Section 469(1)(c) of the CA 2016 in respect of winding-up petitions allows the court to effectively achieve justice expeditiously and fairly. Should the court decide to grant a conditional winding-up order similar to this case, debtors are allowed more time to satisfy the debt owed to the creditors instead of being faced with an order for immediate winding-up of its company. Nevertheless, debtors must be reminded that discretion by the court to grant such additional time may only be exercised where the debtor has produced sufficient and credible evidence to show that it is able to pay the debt within the additional time. The court’s discretion shall not be abused by debtors who are simply delaying the order of winding-up when it is evident that they do not have the ability to settle its debts.
On the other hand, creditors also benefit from the court’s discretion under Section 469(1)(c) of the CA 2016, should the court choose to exercise it, as the pressure exerted on debtors by conditional winding-up orders may result in them retrieving their monies quickly. Most importantly, the tedious and time-consuming process of liquidation of the debtor company can be avoided by the creditors.
This decision by the Court of Appeal is also pertinent as it reiterates the trite law that where there is no ambiguity, the words of a statute must be interpreted according to their plain and ordinary meaning.
[1] [2022] 10 CLJ 247
14 April 2023