In my previous Article (NST RED 4th October
2012), I wrote about “Lawlessness in Foreclosure by some
Banks”.
In that Article, I highlighted the plight of 3 Bank
Borrowers who were victims of these “Lawless Banks”. I would have
thought that Malaysian Banks’ “Lawless
Conduct” is confined to their non- compliance with Foreclosure Procedures.
Malaysian Banks’ “Lawless
Conduct” is not confined to non-compliance with Foreclosure Procedures.
There is evidence Malaysian Banks manipulate, use and misuse to their advantage
the Provisions in Part X of the Companies Act 1965 for the Winding-Up of
Insolvent Companies.
Objectives of Part X of the
Companies Act 1965
The Objective of Parliament when it included Part X in
the Companies Act 1965 was to provide the legal basis, provisions and
mechanisms for an orderly winding-up of an Insolvent Company so that no
particular “privileged” individual
creditor or “privileged” group of
creditors can have an advantage over other “less
privileged” creditors.
When a Company is Insolvent, what it owes to creditors
would be much more than what it has in assets including property and cash to
pay creditors. If not restrained and prohibited by Law, the Owners and
Directors of the Company would be tempted and/or pressured to favour certain
creditors and pay these creditors with whatever assets and money the Company still
has to the detriment of other creditors because there would no assets and money
left to pay these less connected and less privileged creditors.
The Provisions in Part X of the Companies Act 1965 are
intended to prevent the Owners and Directors of Insolvent Companies from
favouring certain “special” creditors
at the expense of other creditors of the Company.
When the Provisions in Part X of the Companies Act
1965 are implemented and enforced vigorously and fairly, all the creditors of
Insolvent Companies in Malaysia would then be treated equally and fairly and
can expect to receive their equal share of the Insolvent Companies’ assets and
monies, proportionate to the debt owed to them individually relative to the
total debt owed by the Insolvent Companies’ to all their creditors.
A Utopian Dream
It is a “Utopian Dream” to expect that the
Provisions in Part X of the Companies Act 1965 are implemented and enforced
vigorously and fairly at all times. It is also an “Utopian
Dream” that creditors of Insolvent Companies in Malaysia can expect to be
treated equally and fairly and to receive their proportionately equal share of
the Insolvent Companies’ assets and monies.
The Real World
The reality in Malaysia is the rich, the powerful and
the well connected will be treated differently when it comes to implementation
and enforcement of the Provisions in Part X of the Companies Act 1965.
Not Level Playfield
Until now, with few exceptions, when Malaysian Banks
commenced with Winding-Up proceedings against Insolvent Companies, “the
field is not level”. It is a slopping and slippery field for other
creditors of the Insolvent Companies.
Even when the Banks have a weak case and even when
they do not comply with the Provisions in Part X of the Companies Act 1965, by
the sheer weight and power of their money and their battery of high powered
litigation lawyers, Malaysian Banks will invariably prevail and win against the
Insolvent Companies’ other hapless creditors.
Lawless conduct of some
Malaysian Banks
Even though the Provisions in Part X of the Companies
Act 1965 are intended to prevent the Owners and Directors of Insolvent Companies
from favouring certain “special”
creditors at the expense of their other creditors and even though these
Provisions also govern the actions and conduct of Malaysian Banks in the
distribution of the Assets of the Wound-Up Company, some Malaysian Banks are
acting and conducting themselves as though the Provisions in Part X of the
Companies Act 1965 do not exist.
To substantiate and support my above assertions, I
will undertake an In-Depth Case Study of the real experiences of the Non-Bank
creditors of an Insolvent Company that was Wound-Up by a “Lawless” Malaysian Bank.
Protection of Privacy
To protect the privacy of the Malaysian Bank and the
Wound-Up Insolvent Company cited in this Case Study, we have changed and
disguised their respective names and identities and renamed the location of the
properties involved. Except for these privacy issues, all the events and
incidences stated in this Article are true and they did in fact happen.
In-Depth Case Study
In this In-Depth Case Study, the main players are
called:
Wound-Up Insolvent Company: Most Unfortunate Development Sdn Bhd
Project Name: Miserable
Valley Project
Malaysian Bank: Most
Ingenious Bank Berhad
Liquidator: Most
Cooperative Liquidator
The Lands
Most Unfortunate Development Sdn Bhd owned 4 plots of
land with total 750 acres land area somewhere in West Malaysia. The 4 plots of
land are issued with 4 separate individual title documents. 2 of the 4 plots of
land were partly developed with residential properties with the remaining 2
plots undeveloped.
Land Charges
The 4 title documents of the 4 plots of land were all
charged to Most Ingenious Bank Berhad for Bridging Loan Facilities to develop
the Miserable Valley Project with 800 residential properties.
Remaining Undeveloped Land
The remaining undeveloped land including the whole of the
2 plots with separate titles and part of 1 plot that was partly developed was
520 acres.
Winding-Up of Most
Unfortunate Development Sdn Bhd
In 2007 Most Ingenious Bank Berhad, the Bridging
Financier, obtained a Winding-Up Order from the High Court to wind-up
Most Unfortunate Development Sdn Bhd.
Liquidator Appointed
Most Cooperative Liquidator was appointed Liquidator
of Most Unfortunate Development Sdn Bhd.
Outstanding Bridging Loan in
2007
In 2007 when Most Ingenious Bank Berhad applied to
wind-up Most Unfortunate Development Sdn Bhd, the outstanding Bridging Loan
still owed by Most Unfortunate Development Sdn Bhd to Most Ingenious Bank
Berhad was RM65 Million.
Estimated Value of Undeveloped
Land
In 2007 when Most Ingenious Bank Berhad applied to
wind-up Most Unfortunate Development Sdn Bhd, the estimated Market Value of the
520 acres undeveloped land owned by Most Unfortunate Development Sdn Bhd and
charged to Most Ingenious Bank Berhad was between RM5.00 per sq ft and RM10.00
per sq ft that would amount to between RM112 Million to RM224 Million for the
520 acres undeveloped land..
No need to wind-up Most
Unfortunate Development Sdn Bhd
If Most Ingenious Bank Berhad’s objective was to
collect from Most Unfortunate Development Sdn Bhd the RM65 Million Bridging
Loan stilled owed to them, there was no need for Most Ingenious Bank Berhad to
wind-up Most Unfortunate Development Sdn Bhd.
Most Ingenious Bank Berhad could quite easily had
applied to foreclose the 520 acres undeveloped land owned by Most Unfortunate
Development Sdn Bhd and charged to Most Ingenious Bank Berhad and sell all or
some of the 520 acres land and from the proceeds of sale to repay to themselves
the RM65 Million Bridging Loan.
In 2007 when Most Unfortunate Development Sdn Bhd was
wound-up the estimated Market Value of the 520 acres undeveloped land charged
to Most Ingenious Bank Berhad was between RM112 Million to RM224 Million.
Even at the lower end of RM112 Million, the Sale
proceed would be more than enough to repay the RM65 Million Bridging Loan owed
to Most Ingenious Bank Berhad with another RM60 Million balance and available
for Most Unfortunate Development Sdn Bhd to complete the Miserable Valley Project.
Motive of Most Ingenious Bank
Berhad
What was the “Real Motive” of Most Ingenious Bank
Berhad to wind-up Most Unfortunate Development Sdn Bhd ostensibly to recover
the RM65 Million Bridging Loan when they could quite easily had foreclosed all
or some of the 520 acres undeveloped land charged to Most Ingenious Bank Berhad
and subsequently sold the foreclosed land via Public Auction Sale for between
RM112 Million to RM224 Million?
With Sale proceeds of between RM112 Million to RM224
Million from the Public Auction Sale of the 520 acres undeveloped land, Most
Ingenious Bank Berhad would comfortably be able to recover the RM65 Million
Bridging Loan owed to them.
The “Real Motive” of Most Ingenious Bank
Berhad is found in the following paragraphs.
Sale of Assets of Most
Unfortunate Development Sdn Bhd
In 2008, Most Cooperative Liquidator of Most Unfortunate
Development Sdn Bhd via three (3) Sale & Purchase Agreements agreed
to sell to Most Lucky Company Sdn Bhd the properties/assets of the
wound-up Company as follows:-
SPA1 dated 2008 (after the Winding-Up date in 2007)
involving 350 acres land at the Sale Price of RM17 Million
SPA2 dated 2008 (after the Winding-Up date in 2007)
involving 150 acres land at the Sale Price of RM7 Million
SPA3 dated 2008 (after the Winding-Up date 2007)
involving 24.24 acres land at the Sale Price of RM1 Million
Total areas of land agreed to be sold by Most Cooperative Liquidator to
Most Lucky Company Sdn Bhd via the 3 SPAs is 515.082 acres at the Total
Sale Price of RM25 Million
Compliance with Section 223
of Companies Act 1965
After
Most Unfortunate Development
Sdn Bhd was wound-up in 2007, the disposition (sale) of the Company’s Assets
has to comply with the requirements in Section 223 of the Companies Act 1965.
Section
223 on avoidance of disposition of
property reads:
“Any disposition of the property of the company including things in
action and any transfer of shares or alteration in the status of the members of
the company made after the commencement of the winding up by the Court shall unless the Court otherwise orders
be void.” (emphasis added)
Section 223 of the of the Companies Act 1965 stipulates that
the assets of a wound-up company like Most Unfortunate Development Sdn
Bhd can only be sold with a Court Order from the High Court.
Non-Compliance with Section
223 of Companies Act 1965
There is no evidence to suggest that Most Cooperative
Liquidator obtained an Order from the High Court that authorized the Sale of
the 520 acres undeveloped land owned by Most Unfortunate Development Sdn Bhd to
Most Lucky Company Sdn Bhd.
It
appears that Most Cooperative
Liquidator did not comply with the requirements stipulated in Section
223 of the Companies Act 1965.
The
consequence of Most
Cooperative Liquidator’s failure to comply with the requirements stipulated in Section
223 of the Companies Act 1965 is that the Sale
Non-Compliance with Section
233 of Companies Act 1965
Most Cooperative Liquidator
failed to perform and shirked his duty as the Appointed Liquidator as
stipulated in Section 223 of the Companies Act 1965 when he did not take into
custody the 520 acres undeveloped land owned by Most Unfortunate Development
Sdn Bhd and instead without Court Authorization, he sold the 520 acres land to
Most Lucky Company Sdn Bhd at the Sale Price of RM25 Million that represented a
massive discount from the 520 acres land’s estimated Market Value as follows:-
Estimated Market Value RM112 Million 100%
Sale Price RM25 Million
22% (78% discount)
Estimated Market Value RM224 Million 100%
Sale Price RM25 Million
11% (89% discount)
Violation of Penal Code
Most Cooperative Liquidator by
agreeing to sell and subsequently sold the 520 acres undeveloped land owned by Most
Unfortunate Development Sdn Bhd to Most Lucky Company Sdn Bhd at the Sale Price
of RM25 Million that represented variously from 11% to 22% of the 520 acres land’s
estimated Market Value of RM112 Million to RM224 Million has violated and
committed an offence against the Penal Code for Fraudulent Deeds and
Disposition of Property, Criminal Misappropriation of Property and Criminal
Breach of Trust.
Non-Compliance with Section
293 of Companies Act 1965 on Undue Preference
The RM25 Million proceeds from the Sale
Most Cooperative Liquidator’s
action to pay exclusively to Most Ingenious Bank Berhad the RM25 Million from
the sale of the 520 acres land to the total exclusion of the rights of other
creditors of the Company is an act of non-compliance with Section 293 of the
Companies Act 1965 that forbids “Undue
Preference” by the Liquidator towards any creditor of the wound-up company.
Violation of Banking and
Financial Institution Act 1989
Most Ingenious Bank Berhad has
a subsidiary company called Most Ingenious Nominees Sdn Bhd. There are
Directors and Shareholders of Most Ingenious Nominees Sdn Bhd who are also
Directors and Shareholders of Most Lucky Company Sdn Bhd, the Purchaser of the
520 acres undeveloped land owned by Most Unfortunate Development Sdn Bhd from Most
Cooperative Liquidator.
Due to the presence of common
Directors and Shareholders in Most Ingenious Nominees Sdn Bhd and in Most Lucky
Company Sdn Bhd, Most Ingenious Bank Berhad has violated and committed an
offence against the Banking and
Financial Institution Act 1989.
Estimated Costs to Revive
and Complete Miserable Valley Project
It is
estimated the total costs to revive and complete the 800 residential properties
(housing lots only) in the Miserable
Valley Project is between RM90 Million to RM100 Million.
Who should pay for Costs of
Revival and Completion
Now
that Most Cooperative
Liquidator had sold the 520 acres undeveloped land to Most Lucky Company Sdn
Bhd at a Sale Price of RM25 Million that represented a massive 78% to 89%
discount on the 520 acres land’s estimated Market Value, there is now no more
asset or money left in Most Unfortunate Development Sdn Bhd to revive and
complete the 800 residential properties
(housing lots only) in the Miserable
Valley Project.
Massive Failure of Government Regulatory
and Enforcement Authorities
There are sufficient Laws in Malaysia to supervise and
control the activities of Property Developers, Banks and Liquidators. Some of
these Laws I cited above like the Companies Act 1965 and the Banking and Financial Institution Act 1989.
We do not need more Laws.
We need more vigorous, fair
and unbiased enforcement of existing Laws.
The manner in which Most Ingenious Bank Berhad, Most
Cooperative Liquidator and Most Lucky Company Sdn Bhd managed to manipulate and
circumvent the Law to the extent they can with impunity and without Court
Sanction openly violate the Provisions of Section 223 of the Companies Act 1965
to dispose of the 520 acres undeveloped land of Most Unfortunate Development
Sdn Bhd at a massive 78% to 89% discount represents a “Massive Failure of Government Regulatory and Enforcement Authorities” to enforce the Law and to protect the
hapless purchasers of the Miserable Valley Project.
Justice for Purchasers of
Miserable Valley Project
Now
that there is no asset and no money left in Most Unfortunate Development Sdn Bhd to pay for the RM90 Million to RM100 Million costs required to
revive and complete the 800 residential
properties (housing lots only) in the
Miserable Valley Project, where and to whom can the Purchasers of the Miserable
Valley Project turn to for help to revive and complete the properties
they purchased in the Miserable Valley
Project more than 10 years ago?
Most of
these Purchasers had fully paid for the properties they purchased. There are
still some Purchasers who are still paying the Banks for the Loan taken to pay
for the properties they purchased
more that 10 years ago.
Where can these hapless victims of the misdeeds of Most Ingenious Bank Berhad, Most
Cooperative Liquidator and Most Lucky Company Sdn Bhd go to for Justice?
Tip of the Iceberg
The incidences cited in above Case Study and the
experiences of the victims are just the tip of the iceberg.
To give justice to Malaysians who are victimised and
even defrauded by lawless Employees and Officers of Malaysian Banks and
dishonest Lawyers and Liquidators, Law Enforcement and Regulatory Authorities
in Malaysia including Bank Negara Malaysia, the Malaysian Bar Council, the
Attorney General and Malaysian Police need to look into and investigate
unlawful activities within the Malaysian Banking System so that confidence and
trust in the Malaysian Banking System can be restored after ALL
the bad apples are removed.
On-Line Property Price Search Websites in Malaysia
Before you purchase your next property, you may want visit http://www.ipropertydata.com and check out for yourself latest prices of the types of properties you intend to purchase.
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