Bombay Talkies (S) Pte Ltd v United Overseas Bank Limited

• Jurisdiction: Singapore
• Judge: Sundaresh Menon CJ
• Judgment Date: 27 November 2015
• Neutral Citation: [2015] SGCA 66
• Plaintiff Counsel: Madan Assomull (Assomull & Partners)
• Docket Number: Civil Appeal No 69 of 2015
• Date: 27 November 2015
• Hearing Date: 27 November 2015
• Subject Matter: Companies - Winding Up
• Published date: 25 June 2016
• Citation: [2015] SGCA 66
• Defendant Counsel: and Chew Ming Hsien Rebecca and Yeo Jianhao Mitchell (Rajah & Tann Singapore LLP)
• Court: Court of Appeal (Singapore)
• Year: 2015

Sundaresh Menon CJ (delivering the judgment of the court ex tempore):

A winding-up order was made against the appellant company. The order was made on the basis of the appellant’s deemed insolvency, a statutory demand for payment having been made without being honoured. The underlying debt is not disputed; the only dispute as to quantum concerns the computation of additional charges and costs which have accrued since the issuance of the statutory demand.

In this appeal, the appellant challenges the winding up order that was made below by a High Court judge (“the Judge”) whose decision is published as United Overseas Bank Ltd v Bombay Talkies (S) Pte Ltd [2015] SGHC 142. The main argument canvassed by the appellant’s counsel, Mr Madan Assomull, centred on whether the debt had been compounded to the reasonable satisfaction of the respondent by dint of an arrangement that was entered into between the parties for monthly instalments to be paid to the respondent (“the Repayment Agreement”).

The statutory demand was issued on 21 February 2014 and served on the appellant on 24 February 2014. The Repayment Agreement was set out in a letter from the respondent’s solicitors to the appellant’s solicitors dated 30 April 2014.

The salient parts of the Repayment Agreement provide as follows:

3. Having regard to the foregoing, for the avoidance of doubt and without prejudice to any of our clients’ rights, our clients [ie, the respondent] are prepared to withhold for the time being winding up and/or bankruptcy proceedings and/or execution proceedings under the Consent Judgment [in Originating Summons No 221 of 2014] subject to the following terms: … (f) Your clients shall make monthly repayments of the sum of S$33,000 from March 2014 to August 2014 to our clients, the cheques for the first such payment was received on 14 March 2014, and thereafter, payments shall be received by our clients on the last working day of each month; (g) Our clients shall be entitled in their sole discretion to apply the monthly payments of S$33,000 received from March 2014 to August 2014 towards the repayment and satisfaction of any of the amounts due and owing by your clients to our clients; (h) Your clients are to submit by no later than 31 August 2014 a fresh repayment proposal in respect of the balance outstanding amount as at 31 August 2014 (including all accrued and accruing interest, costs and expenses incurred on a full indemnity basis) for our client’s consideration; and …

4. In the event of any failure on the part of your clients to comply with any of the terms as set out in paragraph 3 above, our clients shall proceed to enforce their rights against your clients, including but not limited to enforcing their rights under the Consent Judgment and instituting winding up and/or bankruptcy actions against your clients without further reference to you or your clients.

Section 254(2)(a) of the Companies Act (Cap 50, 2006 Rev Ed) provides as follows:

Definition of inability to pay debts

(2) A company shall be deemed to be unable to pay its debts if — (a) a creditor by assignment or otherwise to whom the company is indebted in a sum exceeding $10,000 then due has served on the company by leaving at the registered office a demand under his hand or under the hand of his agent thereunto lawfully authorised requiring the company to pay the sum so due, and the company has for 3 weeks thereafter neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor …

It follows that the debtor may do any of the following in response to a statutory demand: pay the sum demanded; secure the sum demanded to the reasonable satisfaction of the creditor; or compound the sum demanded to the reasonable satisfaction of the creditor.

There is no dispute that the debt in this case was...