Court allows firm to challenge MCO debt-repayment extension

GEORGE TOWN: The High Court here yesterday allowed an application by a construction company to move a judicial review against several parties in its bid to challenge a by-law granting a six-month extension for companies to settle their debts.

Judge Datuk Rosilah Yop ruled that Wabina Construction & Engineering Sdn Bhd’s leave application was allowed.

She agreed that the company had a prima facie case to challenge the by-law.

She also agreed with the company, represented by counsel Ong Yu Shin, that the by-law was invalid, unreasonable and disproportionate.

Wabina had named the government, Domestic Trade and Consumer Affairs Minister Datuk Alexander Nanta Linggi, the ministry, the Companies Commission of Malaysia and Seal Properties (KL) Sdn Bhd in its suit.

In its judicial challenge, Wabina had claimed that the Companies (Exemption) Order 2020 was gazetted without going through the Dewan Rakyat for debate, which rendered it inconsistent with the Companies Act. The order was gazetted on April 23 in the second month of the Movement Control Order (MCO).

According to the by-law, companies with outstanding debts can defer them up to six months even if they are slapped with the 21-day settlement notice.

Under Section 466(1)(a) of the Companies Act, however, a company that fails to pay its debt may risk a winding-up petition within six months of the deadline.

Wabina also claimed that it was one such creditor affected by this Order.

Ong requested the court to refer the matter to the Federal Court under Section 84 of the Courts of Judicature Act 1964.

“Under the section, we are asking for this case to be moved to the Federal Court as it concerns constitutional issues,” he said.

Senior federal counsel representing the attorney-general, Rahazlan Affandi Abdul Rahim, said they had no objection but asked that the company submit a formal application.

Rosilah fixed July 14 for case management.

Speaking to reporters outside the court, Ong said they could now move to the second stage of the matter, where the court would decide substantively on all the issues.

“The issues include whether the by-law of the exemption order is valid or not.

“We are saying it’s illegal and invalid because it didn’t pass Parliament. It was just by way of a circular by the minister.

“There was no explanation given. No reasoning given.

“And immediately, a company that is supposed to pay its debt within 21 days can pay in six months. So we are saying that law is illegal.

“The court has granted us permission and the attorney-general did not object to move the matter substantively,” he added.

Ong said the company was also of the view that by extending the period, it did not help the economy at all.

He said they would file for the matter to be referred to the Federal Court before the case management.

Wabina had obtained an adjudication award of over RM7 million against Seal Properties (KL) Sdn Bhd in February.

However, Wabina is now prevented from issuing its statutory demand for payment within the usual 21 days.

Ordinarily, upon failure of Seal to pay the award sum within 21 days, Wabina could present a winding-up petition against it.