Member Article

IN THIS ARTICLE PARVATHY DEVI RAJA MOORTHY DISCUSSES WHETHER AN INDUSTRIAL COURT ACTION CAN PROCEED WITHOUT COMPLYING WITH SECTION 226(3) OR SECTION 263(2) OF THE COMPANIES ACT 1965.

 

Introduction

In the civil court, any action or proceeding pending against a company after the presentation of a winding-up petition may be stayed by the court. After a winding-up order has been made or a liquidator has been appointed, no action shall be proceeded with or commenced against the company except by leave of the High Court and subject to such terms as the Court imposes[1].

The Industrial Court, however, in the case ofDNT (Malaysia) Sdn Bhd v Zamri Said(“DNT”)[2]differed from this position by holding that “the Industrial Court is a tribunal and not a civil court” and “accordingly, the requirement on having to obtain the prior leave of the High Court under s. 263(2) of the Companies Act 1965does not apply here”. A similar position was also taken inDesaru Impian Resort v Nora Ibrahim(“Desaru”)[3]andTT Electrical Electronics Corp (M) Sdn Bhd v Yong Peng Kean(“TTEE”)[4].

Conversely, the Industrial Court inMohd Rashid Mohd Ibrahim v Uncang Emas Sdn Bhd(“Rashid”)[5]departed from the position inDNT,DesaruandTTEE, and found that although “section 226(3) of the Companies Act seems to be in conflict with the aspirations of the Industrial Court to expeditiously dispose of disputes between the companies and their employees. The provision of Section 226(3) applies to all companies. No exception has been enacted to exempt companies in proceedings in the Industrial Court from that effect.” In arriving at the foregoing decision, the Industrial Court considered the case ofTheCo-operative Central BankLtd v The Industrial Court of Malaysia[6]which held that leave of the High Court is required to proceed against the receivers of The Co-operative Central Bank Ltd (“CCB”). In this connection, the Court took into consideration the fact that cases involving the CCB were under the provisions of the Essential (Protection of Depositors) Regulations 1986 and, therefore, fell outside the provisions of the Companies Act 1965.

The two conflicting views were subsequently considered by the High Court in the case ofIsuta International Sdn Bhd & Ors v Industrial Court Malaysia and Ors[7](“IISB”) when it had the opportunity to determine whether:

1. leave from the High Court is required; and
2. it is justified to join the liquidators as parties.

InIISB, the claimant, Loo Tong Seng (“Loo”), lodged a representation[8]that he was dismissed on 9 October 2008 by Isuta International Sdn Bhd (“Isuta”). The matter was subsequently referred to the Industrial Court for adjudication on 25 October 2010[9]. Prior to the reference, on 17 June 2010, Isuta resolved to be wound up by way of a creditors’ voluntary winding-up process and the liquidators for Isuta (“Liquidators”) were appointed.

The Liquidators, upon being notified of the reference, highlighted to the Industrial Court that leave from the High Court is required in order for the case to proceed[10]. The Industrial Court, however, did not agree with the Liquidators and held that no leave was required and scheduled the matter for further mention.

Consequently, Loo applied to add/join the Liquidators as further parties to the case. Despite the Liquidators’ objection, the Industrial Court held in favour of Loo and added the Liquidators as parties. Thereafter, Isuta and the Liquidators filed a judicial review application to quash the interim decision of the Industrial Court.

The High Court in scrutinising the intention behind section 226(3)[11]held that “the words ‘action or proceeding’…had a wide reach to encompass and cover all types of processes before a court, or a tribunal or similar adjudicatory bodies vested with judicial and quasi-judicial powers. The common denominator that had to be applied was whether that forum in question, handling such action or proceeding, was discharging duties to settle disagreement or complaints properly brought or laid before it in accordance with relevant law.” Accordingly, the Industrial Court was found to be an adjudicatory body statutorily entrusted to deal with industrial relations complaint[12].

On the same note, the High Court opined that, unlikeRashid’s case, the Industrial Court in the other cases[13]had failed to address the meaning of the words “action or proceeding” in section 226(3) or 263(2)[14]. As a result, the High Court held that the Industrial Court in merely following the other cases[15]had misinterpreted the statutory provision in question.

In respect of the second issue, it was noted that the general test for adding other parties in an Industrial Court case was “whether such parties would make ‘adjudication effective and enforceable’”[16]and “whether such party or parties was/were ‘necessary for the representation of the employee or employer to complete or adequate at the trial’”[17].

In this connection, the High Court held that in order for the Liquidators to be joined as parties, they had to have employed Loo, or Loo must have been dismissed during the tenure of office of the Liquidators. This, however, was not the case inIISB.

Subsequently, the High Court considered the application of section 30(5)[18]in respect of the issues before it and held that section 30(5)[19]is not a licence to breach or neglect provision of the Companies Act 1965[20].

 

Conclusion

In conclusion, it is now settled that in the event a winding-up order has been made against a company or a liquidator has been appointed, the claimant is required to obtain leave from the High Court to continue proceedings against that company before the Industrial Court is able to adjudicate on the matter.

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• N. Sivabalah : [email protected]
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[1]Section 226(3) of the Companies Act 1965 states that “When a winding up order has been made or a provisional liquidator has been appointed no action or proceeding shall be proceeded with or commenced against the company except- (a) by leave of the Court; and (b) in accordance with such terms as the

Court imposes.”

Section 263(2) of the Companies Act 1965 states that “After the commencement of the winding up no action or proceeding shall be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court imposes.”

[2][2002] 2 ILR 240.

[3][2001] 3 ILR 27.

[4][2005] 2 ILR 169.

[5][2007] 2 LNS 2444.

[6][1994] 2 CLJ 310.

[7][2013] 4 ILR 246.

[8]Section 20(1) of the Industrial Relations Act 1967.

[9]Section 20(3) of the Industrial Relations Act 1967.

[10]Section 226(3) of the Companies Act 1965.

[11]Companies Act 1965.

[12]Subject to the provisions of the Industrial Relations Act 1967.

[13]DNT (Malaysia) Sdn Bhd v Zamri Said[2002] 2 ILR 240;Desaru Impian Resort v Nora Ibrahim[2001] 3ILR 27;TT Electrical Electronics Corp (M) Sdn Bhd v Yong Peng Kean[2005] 2 ILR 169.

[14]Companies Act 1965.

[15]DNT (Malaysia) Sdn Bhd v Zamri Said [2002] 2 ILR 240; Desaru Impian Resort v Nora Ibrahim [2001] 3 ILR27; TT Electrical Electronics Corp (M) Sdn Bhd v Yong Peng Kean [2005] 2 ILR 169.

[16][2013] 4 ILR 246 at [7].

[17][2013] 4 ILR 246 at [29].

[18]Section 30(5) of the Industrial Relations Act 1967 states that “The Court shall act according to equity, good conscience and the substantial merits of the case without regard to technicalities and legal form.”

[19]Industrial Relations Act 1967.

[20]In support, the High Court relied upon the Federal Court inRanjit Kaur S Gopal v Hotel Excelsior (M) Sdn Bhd[2010] 8 CLJ 629; [2011] 3 AMR 38 and explicitly held that section 30(5) of the Industrial Relations Act 1967 cannot be used to override or circumvent the basic rules of pleadings.