Re Punj Lloyd Pte Ltd and another matter

CourtHigh Court (Singapore)
JudgeAedit Abdullah JC
Judgment Date16 December 2015
Neutral Citation[2015] SGHC 321
Citation[2015] SGHC 321
Docket NumberHC/Originating Summons No 857 of 2015 (HC/Summons No 5100 of 2015) and HC/Originating Summons No 859 of 2015 (HC/Summons No 5460 of 2015)
Hearing Date03 December 2015
Plaintiff CounselPatrick Ang, Low Poh Ling, Chew Xiang and Ng Kexian (Rajah & Tann Singapore LLP)
Defendant CounselMark Yeo & Jessie Huen (Engelin Teh Practice LLC),John Lim and Eric Ng (Malkin & Maxwell LLP)
Subject MatterCompanies,Schemes of arrangement
Published date22 December 2015
Aedit Abdullah JC: Introduction

These grounds address arguments made by separate sets of creditors to set aside orders I had given earlier ordering that meetings be held under s 210(1) of the Companies Act (Cap 50, 2006 Rev Ed) (“the Companies Act”) to consider proposed schemes of arrangement in respect of Punj Lloyd Private Limited and Sembawang Engineers and Contractors Pte Ltd, which are related companies ultimately under Punj Lloyd Limited, an Indian company.

I declined to grant the applications, but indicated that I would give brief grounds of decision to allow the creditors to consider their next course of action, and also for the benefit of other creditors not involved in the arguments.


The two companies in question are Punj Lloyd Private Limited (“PLPL”) and its subsidiary, Sembawang Engineers and Constructors Pte Limited (“SEC”). SEC is a subsidiary of PLPL, which in turn is a wholly-owned subsidiary of Punj Lloyd Limited (“PLL”), a company listed on exchanges in India. The PLL group is primarily concerned with engineering and construction in energy and infrastructure.

Both PLPL and SEC have run into financial difficulties. PLPL incurred losses in SEC and SEC’s previous subsidiary, Simon Carves Limited, a UK company (“Simon Carves”), as well as in its own projects. SEC was affected by the position of Simon Carves, losses in its own projects, and its inability to obtain new work from the end of 2012. SEC is a creditor of its parent, PLPL.

Both PLPL and SEC sought orders from the Court under s 210(1) of the Companies Act for meetings of creditors to be called to consider restructuring of its debts by way of schemes of arrangements. Among other things, PLPL’s scheme would be dependent on SEC’s scheme being approved. Both companies’ schemes would ultimately be dependent on PLL assuming liabilities, subject to it obtaining approvals from its creditors and other entities.

I had on 18 September 2015 granted the orders for the meetings to be held. Brief oral grounds were issued to record the reasons for rejecting opposition by one creditor of SEC: Re Sembawang Engineers and Constructors Pte Ltd [2015] SGHC 250. It was subsequently conveyed to me that some creditors wished to apply to set aside that order. The matter eventually came up for hearing on 3 December 2015. For ease of reference, I refer to the two sets of creditors collectively as the Creditors, and if it is necessary to distinguish them, by their lead creditor, as follows: those who opposed the PLPL meeting, as the PLPL Creditors; and those opposing the SEC meeting as the SEC creditors. I refer to PLPL and SEC collectively as the Applicants, as they were the original applicants, and no real distinction was made in their respective positions.

Concerns were raised by the Creditors in respect of the following transactions and events within the Punj Lloyd Group. It was argued that these transactions were not sufficiently disclosed. These transactions were: A debt of S$91.8m owed by PLPL to SEC. The SEC Creditors contended that there was no explanation of how this amount came to be. As the amount was very substantial and constituted three times the value of other money owed by the unrelated and unsecured creditors, SEC would be the dominant creditor and this would affect the outcome of any meeting. The explanation given by the Applicants was that this represented money owed to SEC by PLPL in respect of Simon Carves. Preference shares held by PLL were redeemed by PLPL for $50m in December 2014. A transaction involving a Malaysian subsidiary of PLPL, Punj Lloyd Oil & Gas Malaysia (“PLOG”), which seemed to have undistributed reserves of RM 135m. It was eventually disclosed by the Company that PLOG was divested by PLPL, and that PLOG was to be transferred to Punj Lloyd Infrastructure Pte Limited (“PLIPL”), an entity owned by PLL. That transfer was pending approval. In return for the PLOG transaction, PLIPL assumed PLPL’s liabilities to the sum of $188,571,873.

The meetings ordered under s 210(1) were to be held in mid-January 2016.

At the start of the hearing, I invited parties to consider The Royal Bank of Scotland NV (formerly known as ABN Amro Bank NV) and others v TT International Ltd and another Appeal [2012] 2 SLR 213 (“RBS”) and Re Ng Huat Foundations Pte Ltd [2005] SGHC 112 (“Ng Huat”) in the course of their oral arguments.

The Arguments The Arguments of the PLPL Creditors

The primary arguments were that there was no full and frank disclosure, and that the transactions in question were not intended to benefit the creditors, but instead were really intended to dissipate assets and put assets out of their hands.

The company was obliged to give full and frank disclosure of all material facts relevant to the exercise of the court’s discretion. It failed to do so in respect of the various transactions in the 12 months leading up to its application.

The $91m debt to SEC was not explained till late in the day, and only after the setting aside application was launched. The PLPL Creditors did not take substantive issue with the transaction but noted that the losses would have crystallised earlier.

As for the redemption of the preference shares, its effect was hidden by PLPL. As PLPL had already suffered large losses, it should not have redeemed these shares for $50m in cash. A solvency statement published by PLPL in 2014 indicated that it would be able to pay its debts over the next one-year period. PLL’s ability to support PLPL moving forward was also put in doubt by the fact that PLL did not support the redemption. This transaction simply moved funds out to PLL and was liable to be set aside as the giving of an undue preference to PLL.

Information about the PLOG transaction was not disclosed earlier, including its very existence, the value of the assets standing as security for the syndicated facility, reserves held by PLOG and how the value of the PLOG transaction was determined. While the Company claimed that the PLOG transaction and its impact were sufficiently disclosed, it could not be determined from the financial statements and accounts that the transaction had taken place. The non-disclosure was intentional. It took place only 10 weeks before the approval of the s 210(1) application; it was not disclosed in the supporting affidavit for that application, or other supporting affidavits. The matter only arose after queries were made about the reserves. The PLOG transaction would be an unfair preference liable to be set aside under the Companies Act. Alternatively, it was an attempt to ringfence assets from PLPL’s creditors. There were doubts whether the transaction was genuine, and whether it did take place at the material time. Because of the transaction, PLL was paid or secured in full in respect of S$114m owed to it by PLPL.

PLPL’s intention behind the scheme application was simply to avoid or delay a winding up, and avoid any setting aside of the impugned transactions. At the very least, the PLOG transaction and share redemption were not done in the interest of PLPL’s creditors. That these transactions were not beneficial to creditors and not intended to benefit them were relevant matters to be considered: Re Halley’s Departmental Store Pte Ltd [1996] 1 SLR(R) 81 (“Re Halley’s”).

Additionally, a carve-out from an interim stay order made previously under s 210(10) was sought in respect of an on-going matter.

The Arguments of the SEC Creditors

It was alleged that there was inadequate information about SEC’s state of affairs relating to the debt of $91.8m owed to it by PLPL. This debt arose from suspicious transactions, and there was an irresistible inference that the aim of SEC was to hinder the winding up applications filed against it and avoid investigations.

The reference to the debt in SEC’s affidavit was very cursory. It was odd that no reason was given for SEC holding a debt in its parent. An adverse inference should be drawn by the Court. Contrary to what was asserted by SEC in its reply to a query about the debt, this issue was not a legal one, but a factual one. The issue was also one that went to the root of the current proceedings. The obligation to provide adequate information was underlined in various cases such as Re Halley’s and Wah Yuen Electrical Engineering Pte Ltd v Singapore Cables Manufacturers Pte Ltd [2003] 3 SLR(R) 629. No informed decision could be made without an explanation being given, and SEC’s assertions could not be verified. The return forecast for the scheme was not a better alternative. The matter should be independently investigated by liquidators.

The cases also showed that the Court would support the investigative function of winding up, and scrutinise the bona fides of any proposed scheme, especially if its aim is to avoid investigations: Re Halley’s. Aside from the questions about the $91.8m debt, there was also the issue of what happened to the net assets of $126,829,000 that was in SEC. In the circumstances fraudulent trading under s 340 Companies Act, the aim of which may be to put any liquidator out of the ability to rely on the statutory presumption to recover the $91.8m debt, might be made out. SEC was also not really insolvent—the evidence pointed to it being simply unwilling to recover the $91.8m from PLPL. Section 210 is dependent on the company being liable to be wound up.

The affidavit put in by SEC on 30 November also indicated that SEC was making advances to fund Simon Carves after it had become a wholly owned subsidiary of PLPL, without any benefit to itself. There were doubts about the transactions within SEC which merited further investigations.

The Arguments of the Applicants

In written arguments, the Applicants addressed the issues raised by the PLPL Creditors only. The primary point made was that the present application was under s 210(1); however, the issue of non-disclosure would...

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