HONG KONG JIN SHENG INDUSTRIAL GROUP LTD

2.    The Company and the petitioner entered into a subscription agreement on 19 June 2006, by which the Company agreed to issue and the petitioner to subscribe for a convertible note for the principal amount of HK$3,850,000.  Pursuant to the agreement, the Company on the same date issued a convertible note for the said amount subscribed for by the petitioner on the terms and conditions set out in a further note instrument entered into between, inter alia, the Company and the petitioner (“the Note Instrument”).

3.    By clause 2.1 of the Note Instrument, the Company agreed to pay the outstanding principal amount with such additional amounts as may be payable upon maturity, being 12 months from the date of issuance of the Note Instrument, i.e. 19 June 2007 (“the Maturity Date”).  Interest is payable on the convertible note from the date of the Note Instrument to the Maturity Date at 8% per annum, payable in advance on the first day of each quarter.  By clause 8.1(a), the Company and its shareholders or directors jointly and severally represented, warranted and undertook to use their best endeavours to procure the listing of the ordinary shares of the Company on Singapore Exchange Securities Trading Limited as soon as practicable and once procured to maintain such listing.  There shall be an event of default if there is material breach of any of the representations, warranties, and undertakings by the Company, or if the Company withdraws its application to be listed on the Singapore Exchange, by virtue of clauses 9.1(f) and (g).  If an event of default should arise, the petitioner shall have the right to demand the Company to forthwith redeem the Note Instrument in full in cash.

4.    Between 19 June 2006 and 15 February 2007, the Company issued further convertible notes to other parties (“Other Noteholders”) for the aggregate principal amount of HK$26.15 million on similar terms and conditions as in the Note Instrument.

5.    By a letter dated 22 June 2007, the Company informed the petitioner of its voluntary withdrawal from the proposed listing on the Singapore Exchange and unilaterally cancelled the Note Instrument with immediate effect.  The Company further proposed to repay the petitioner the principal amount due under the Note Instrument with interest by 31 October 2007, in consideration for the petitioner’s acceptance of such cancellation of the Note Instrument and its agreement to waive any right to claim against the Company or its shareholders and directors.

6.    The proposal of the letter dated 22 June 2007 was rejected by the petitioner.  The petitioner made a demand for full payment of the principal amount of the convertible note, by a letter dated 29 June 2007, on the basis that an event of default had arisen.  In any event, the principal amount with interest had become due upon the expiry of the Maturity Date on 19 June 2007. 

7.    On 25 July 2007, the petitioner and Other Noteholders through their solicitors issued and served on the Company a statutory demand in respect of the aggregate sum of HK$30,694,756 due from the Company to the petitioner and Other Noteholders, including the sum previously demanded by the petitioner on 29 June 2007.  This petition was presented on 16 October 2007.

8.    The Company has not filed any evidence to dispute the debt owed to the petitioner and Other Noteholders.  There is nothing in the submission of the Company’s counsel today to suggest to this court that an event of default has not arisen under the terms of the Note Instrument. 

9.    Mr Wou for the Company submitted that for some of the Other Noteholders, the maturity date of their convertible notes has not arrived.  It would appear from the written confirmations signed by the Other Noteholders and the schedule exhibited in the verifying affidavit filed by the petitioner that of the thirteen Other Noteholders, for five of them the maturity date of their convertible notes had arrived in that their notes were issued between 19 June 2006 and 25 August 2006.  For another five of these Other Noteholders, the maturity date would arrive on 15 January 2008.  For the remaining three of them, the maturity date of their convertible notes would arrive in the first half of February 2008.

10.    Mr Wou sought an adjournment to enable the Company to seek advice on Singapore law as it was provided in clause 16.1 of the Note Instrument that the instrument should be construed in accordance with Singapore law.  He submitted there might be a jurisdictional issue on account of this.  As I have indicated to him, unless he is able to advance a valid basis for disputing liability to pay the convertible notes under the Note Instrument, I cannot see how any advice on Singapore law is to assist the Company, and I am not minded to grant any adjournment for that purpose.

11.    Mr Wou also informed the court that the Company is prepared to pay in full to the petitioner the amount due to the petitioner in the sum of HK$3.85 million.  There is, however, no offer in respect of the debt due to Other Noteholders in the aggregate sum of over HK$26.15 million.  For that reason, Mr Chan, counsel for the petitioner, has declined to accept the offer of the Company as he is also looking after the interests of Other Noteholders.