Re Cosmotron Electronics (Singapore) Pte Ltd

• Jurisdiction: Singapore
• Judge: Chan Sek Keong J
• Judgment Date: 10 February 1989
• Neutral Citation: [1989] SGHC 12
• Docket Number: Originating Petition No 5 of 1989
• Date: 10 February 1989
• Year: 1989
• Published date: 19 September 2003
• Plaintiff Counsel: K Bala Chandran (Mallal & Namazie)
• Citation: [1989] SGHC 12
• Defendant Counsel: Ng Kai Ming (PK Wong & Advani),April Jacqueline Loh (Cheow Hin & Partners)
• Court: High Court (Singapore)
• Subject Matter: Company entering into relocation agreement to sell off its plant and machinery,Whether public interest under s 227B(10) has to be proved in addition to other requirements under s 227B(1) of Companies Act for petition to succeed,Whether petition for purposes set out in s 227 B(1) of companies Act,ss, 227B(1) & 227B (10) Companies Act (Cap 50, 1988 Ed),Creditors opposing petition,Whether public interest requires company placed in judicial management,Companies,Company unable to pay its debts

Cur Adv Vult

This is a petition by Cosmotron Electronics (Singapore) Pte Ltd (the company) for an order that the company be placed under judicial management.

The company was incorporated on 17 October 1986 with an authorized capital of $5m divided into five million shares of $1 each. At the date of this petition, the company had a paid-up capital of $2,314,000.

The company carries on the business of manufacturing single and double-sided printed circuit boards in Singapore. It has a manufacturing plant which together with its undertaking and other assets has been charged by way of fixed and floating charge to the Indian Bank under a debenture dated 29 October 1987 to secure banking facilities of $900,000. The plant is subject to a fixed charge.

The company is unable to pay its debts. It currently has three outstanding contracts with an aggregate value of $305,000 to fulfil within two to six months from the date of this petition. Its liabilities (both secured and unsecured) as at 31 December 1988 amounted to about $901,650. The creditors have been pressing for payment for some time. Indian Bank had given notice of its intention to appoint receivers and managers under their debenture prior to the presentation of this petition but refrained from doing so in response to promises to pay by the principal shareholder and/or to find new investors for the company. The company`s plant is located in a factory rented at a monthly rent of $13,000 from a creditor, viz Mayertro Industrial Pte Ltd (a company which is in receivership). Rent has not been paid since July 1988 and Mayertro has on 13 January 1989 obtained judgment against the company for the arrears of rent as well as possession of the premises.

To alleviate its financial difficulties, the company has sought temporary finance from a company called South Asian Exports Pte Ltd which, it was alleged, had agreed to grant a loan of $200 000 in four instalments of $50,000 to be disbursed on 14 and 25 November 1988 and 5 and 15 December 1988 subject to certain terms and conditions set out in a letter dated 6 November 1988. This letter also referred to negotiations to sell the plant to one BT Doshi of Bombay at the price of US$1.6m subject to governmental approvals in India. The said loan was to be repaid by 30 June 1989 in the event that Doshi was unable to buy the plant. As at the date of hearing, the loan has not yet been disbursed.

On the same day, ie 6 November 1988, the company entered into an agreement (the relocation agreement) to sell the company`s plant and machinery to Doshi at US$1.6m subject to various conditions, amongst which were (a) the obtaining of governmental approvals and the provision of technical assistance by the company; (b) payment of the purchase price by irrevocable letter of credit to be opened prior to dismantling of the plant but not later than 15 March 1989 to be opened by such reputable bankers and such form and substance acceptable to the company.

The relocation agreement was signed without the consent of Indian Bank which had stipulated as a condition for its consent (the plant and machinery being subject to a fixed charge) that a deposit of US$100,000 or Indian rupees 2.5m be paid by Doshi to the bank. After the relocation agreement was signed, the bank was still prepared to grant its consent and extend the repayment date of its outstandings to June 1989 provided 10% of the purchase price was paid to the bank. This requirement was notified to the company on 17 November 1988 with a warning to appoint receivers and managers. This condition has not been complied with.

The company`s case is that unless the company is able to `see through the relocation of its manufacturing assets and complete the outstanding contracts there is no money ... now or in the future to pay off even part of its said aggregate debts ...` (para 7 of the petition). For this reason, the company is of the view that placing the company under judicial management would `achieve the survival of the company on the whole or part of its undertaking as a going concern and a more advantageous realization of the company`s assets would be effected than through a winding up and the interest of the creditors would be better served` (para 20 of the petition).

This petition is opposed by Indian...