Topic 3 – Bankruptcy Petition

 Once there is a commission of an act of bankruptcy under S.3 of IA 2017 (e.g. non-
compliance with Bankruptcy Notice) the next step is to apply for issuance of petition
for bankruptcy
 There are two types of petition:
1. Creditor’s petition
2. Debtor’s petition
 Rule 98 IR 2017 – Form of Petition
 Rule 98(1) IR 2017 – every petition shall be dated, signed and witnessed
 Rule 98(2) IR 2017 – the creditor or debtor shall lodge with the registrar, sufficient
number of copies of the petition to be sealed and issued for service
 Rule 98(3) IR 2017 – the creditor/debtor shall submit a sealed copy of petition to the
DGI by post or otherwise

Types (Forms)
 Form 40 – Debtor’s Petition (Rule 98) – debtor may present a petition to make
himself a bankrupt, this is to protect the debtor from his creditor’s claims that he
knows he cannot satisfy. As the assets will go to DGI, the creditors will deal with the
DGI directly for their claims. By debtor filing bankruptcy petition, he has committed
an act of bankruptcy (S.3(1)(f) IA)
 Form 41 – Creditor’s Petition (Rule 99) – if the debtor does not present a debtor’s
petition, the creditor may do so
 The petition may be presented either by the debtor himself or the creditor
 Petition requests the court to make a Bankruptcy Order for the protection of the
debtor’s estate

Conditions For a Creditor’s Petition

 S.5(1) IA – a creditor shall not be entitled to present a bankruptcy petition against a
debtor unless
a) Debt owing by the debtor to the creditor(s), amounts to not less than
RM100,000 (Covid amendment)
b) Debt is liquidated sum payable immediately or at some certain time in future
time
c) Petition must be based on act of bankruptcy which occurred within 6 months
before the presentation of the petition
 Kewangan Utama Bhd v Muhibah Hj Ali – creditor’s petition must be
presented before the expiry of 6 months from the date of bankruptcy,
otherwise it would be out of time
d) Debtor must be domiciled in Malaysia or ordinarily resident in Malaysia
within 1 year before date of presentation of petition or has a dwelling house or
place of business in Malaysia or carried on business in Malaysia personally or
by means of an agent or has been a member of firm/partnership/agent/manager
 Fung Beng Tiat v Marid Construction Co. (suing as a firm) – the Article 121
of Fed Cons allows for transfer of cases within territorial jurisdiction.
However, this does not mean that the High Court of KL may transfer cases to
High Court of Sabah and Sarawak. The transferring power in S.93(7) of BA
1967 is referring to power to transfer from one state to another within its
territorial jurisdiction of respective High Court
  Re Lee Boon Hooi – these four conditions must be met before the creditor may
present a creditor’s petition

No Social Guarantor
 S.5(3) – a petitioning creditor shall not be entitled to commence any bankruptcy
action against:
a) A social guarantor
b) Against a guarantor other than a social guarantor, unless the creditor has
obtained leave of court, that the creditor has exhausted all means to recovered
debts owed
 S.5(4) – before granting leave of court, the creditor must prove and satisfy the court
that the creditor has exhausted and tried all means to recover the debts
 S.2 – defines social guarantor as someone who provides and not to make profit, a
guarantee for loan for education, guarantee for hire purchase and guarantee for
housing loan

Must Have Affidavit

 Rule 105(1) and Rule 105(2) – creditor’s petition must be verified by an affidavit by
creditor or some other person who can depose all the statements as facts that is
contained in the petition
 Rule 106 – for joint petitioners where there are 2 or more creditors, jointly present a
petition, it is not necessary for each to depose an affidavit, but each statement in the
petition must be deposed by a person having full knowledge

Must Serve – Personal Service/Substituted Service

For Personal Service
 Rule 108 – a creditor’s petition must be personally served and must be effected by
delivering a sealed copy of petition to the debtor
 Lim Boon Kiak v Affin Bank Bhd – creditor’s petition against judgment debtor
cannot be serve on a firm of solicitors, must serve personally
 Re Tan Hwee Earn, ex parte The People’s Insurance Company (M) Sdn Bhd – the
court held that service of the petition also includes service of verifying the affidavit.
In practice, those two are generally served together

For Substituted Service

 Rule 109 – SS may be ordered by court if it is satisfied by an affidavit or other
evidence on oath that prompt personal service cannot be effected. The court will order
as below:
 Advertising in local newspaper
 Placing on the notice board of the court’s premises
 Any other means that the court thinks fit
 Samuel Pakianathan v Perwira Habib Bank Malaysia Bhd – the court held that the
creditor’s petition through substituted service which was not served on the debtor, but
served on someone on his premises who acknowledged that the debtor lived in said
premises, is good service, as long as it was brought to the notice of the debtor

Must be Verified by Affidavit

 Rule 105 – a creditor’s petition shall be verified by an affidavit and shall file the
affidavit to the person who can depose to them
  Re Ho Weng Keong ex parte Marketlink – the creditor’s petition and the affidavit was
filed and affirmed on the same day. The judgment debtor filed to strike out the
creditor’s petition on the ground that the 1st affidavit was defective as it was affirmed
before the creditor’s petition. 6 months later, the creditor filed a 2nd affidavit to
remedy the 1st affidavit. The court held that there is no requirement that the affidavit
be affirmed and filed after creditor’s petition. There is also no statutory limitation of 6
months to file affidavit to verify the creditor’s petition
 Re Mohd Sharif Sapie, ex parte Malayan Banking Bhd – petitioner’s agent signed and
affirmed the affidavit several days before filing of the creditor’s petition. The court
held that this was a mere formal defect that is curable under S.131 of BA. The court
held that there was no time frame provided in the BA for swearing and filing of
affidavit to be done after creditor’s petition was filed
 Arul Das a/l Machale – creditor’s petition issued when the Senior Assistant Registrar
signed and sealed it, not when the physical copies were sent out of the registry
 Loo Cheng Lian v Ban Hin Lee Bhd – the court held that when the signing and
sealing is carried out without affidavit verifying the creditor’s petition, it was a nullity

Where to File the Petition

 Rule 100 – must be filed in Form 41, to be filed at the High Court where it is
presented
 Chin Kwan Kee ex parte Paper (M) Sdn Bhd – the petition should be filed in the state
in which the debtor resides
 S.93(7) IA – if it was not filed in the state the debtor resides, the irregularity may be
cured by transferring to the proper court
 Alliance Bank Bhd v Suhaili Abdul Rahman – judgment debt was obtained at High
Court of KL where the debtor carried on business. However the debtor lived in
Labuan. The bankruptcy notice was filed at the High Court of Labuan. The debtor
raised prelim objection that the High Court KL had no jurisdiction. The court held
that where the debtor has for a greater part of one year immediately preceding the
presentation of the petition, carried on business in one state and lived in another, the
petition may be filed in the court of the state in which he carried on his business
 Pantai Bayu Emas Sdn Bhd & Ors v Southern Bank – the Federal Court held that as
per S.23(1) of Courts of Judicature Act, a vesting order made by the High Court of
Malaya has legal effect in Sabah and Sarawak. By virtue of S.7(2) of CJA and Art.
121(3) of Federal Constitution, an order made under the authority of court can be
executed anywhere in Malaysia

Authority to Present the Petition

 Rule 215(1) – where corporation presents a petition, the officer of the corporation
may act in his own name, stating that he is duly authorized under the seal. A petition
may be presented by the corporation and signed by the officer on its behalf
 Rule 215(2) – any person chosen by the corporation to act for it as an agent, is an
officer within S.133 of IA 2017 and if authorized under the seal, he can act for the
corporation
 S.133 IA – acts of corporation, firms and mentally disordered person:
a) A corporation may act on behalf by authorized person under seal of
corporation
b) A firm may act by any of its members
c) A mentally disordered person may act by his committee or curator bonis
  UMW Industries Bhd v Lim Chee Hian – in this case, a creditor’s petition was signed
by its legal officer as its duly authorized agent under the seal. However, the debtor
sought to strike out the petition claiming that the legal officer had no authority to do
as such. During the hearing, the creditors was not able to provide the any evidence
showing authority given to the legal officer due to “time constraint”. The court held
that the reason given i.e. time constraint cannot be accepted as it deems the legal
officer person unknown without authority to act for the creditor. This had the effect of
causing injustice which cannot be cured. This petition was invalid
 (CONTRAST WITH UMW) Re See Joon Siong ex parte Mayban Securities Sdn Bhd
– in this case, similarly a legal officer had acted as the creditor’s duly authorized
agent under the seal. During hearing, the legal officer was only able to show affidavit
showing resolution of the company authorizing him to affirm affidavits and other
legal documents. The court in this case held that did not state that the requirement of
being “under seal” must be strictly complied with. The court in this affirmed modern
company law concept of implied authority. Therefore, this petition was valid
 The issue of requirement under S.133 and Rule 215 has been contributing to issues of
authority in court of whether the authorized officer has to be authorized by seal of
company i.e. by a resolution passed by the board. Presently, a simple POA is
sufficient
 Kay Hian Pte Ltd v Ma Boon Lan – the judgment creditor had obtained judgment
against judgment debtor for an amount in Singapore currency. The judgment was
obtained under the creditor’s old name and since he had changed his name. The
creditor then filed execution of proceedings against the debtor using its new name,
without leave of court. The creditor failed to quantify the exact amount in Malaysian
Ringgit. The court held that the petition was set aside for non-compliance with O.46
r.2(1)(b) Rules of High Court for the change of name. The court also held that the
creditor failed to quantify the exact amount owing to debtor as the wrong exchange
rate was used, rendering the bankruptcy notice void and null. The creditor must know
the exact amount due at the date of notice.

Attestation of Petition
 Rule 101(1) – every bankruptcy petition shall be attested
 Rule 101(2) – attested by:
a) If it is attested in the Federation, the witness must be a solicitor or federal
counsel or magistrate or DGI or Registrar
b) If it is attested out of Federation, witness must be a judge or magistrate or
consul or vice-consul or Notary Public
 Solicitors in Peninsular are not allowed to attest a petition from Sabah & Sabah and
vice versa
 Lie Kok Keong v Tang Container & Services Sdn Bhd – judgment debtor in this case
appealed on the ground that the signature on the creditor’s petition was not attested
according to Rule 102 (in pari materia Rule 101 IR 2017), the court allowed the
appeal and held that there was no evidence to support the judgment creditor’s claim
that the signature on the creditor’s petition was attested by a solicitor in Kuching,
Sarawak. Neither the creditor nor his solicitor filed any affidavits to verify the claim.
Thus the court held that no attestation of if attestation is bad in law is void
 V David, Re Ex Parte United Asian Bank Bhd – two issues were raised in that the
petition was not signed in the presence of witness and the attorney was not authorized
by respondent to sign the petition. The court held that the petition was signed by a
 person authorized by the creditor and the petition was not signed in the presence of a
witness are serious defects and substantial injustice would follow. This cannot be
remedied

Authenticity of the Signature

 The signature of the officer signing the petition and affirming the affidavit should be
consistent
 Re Lim Chooi Sang, ex parte Soon Fay Sdn Bhd – the petition was applied to be set
aside by the debtor for discrepancy in the signatures. The court allowed the petition to
be set aside as no explanation was given for discrepancies in the signatures in the 2
documents

Validity of the Debt

 Affin Credit Sdn Bhd v Dato Hj Raun D Jalil Atmasumarto – the creditor obtained a
JID against the debtor in respect of a computer mainframe. It was executed in a writ
of seizure and sale. Thus the seized items were auctioned off and sold. However, the
proceeds were not enough to satisfy the debt and as such the creditor commenced
bankruptcy proceedings against the debtor. On appeal on the ground that the
belongings were sold at gross undervalue and appellants failed to repossess the
computer mainframe and sell it at the right time. The Court of Appeal held that the
court, now at the bankruptcy petition stage, cannot inquire into the validity of public
auctions held and thus no proof that auction not carried out according to law. This
issue should have been raised during the execution stage earlier. Secondly, the court
held that the debtor should’ve raised counter claim/set off to the writ on the issue of
non-repossession of the computer main frame, since the debtor has allowed the JID,
he cannot raise the claim now. The creditor’s appeal was allowed
 It is important to take notice that a challenge or show cause against petition cannot be
made based on the ground of counterclaim, set off or cross demand, as this must be
raised during the bankruptcy notice process. When that has passed, the judgment
debtor cannot raise such grounds during bankruptcy petition, only can during
bankruptcy notice
 However, this position is different if there was evidence of fraud (above no proof of
not according to law)
 J Raju Kerpaya v Commerce International Merchant Bankers Bhd – Court of Appeal
held that debtor who wished to show cause against the petition must act according to
Rules 116, 117 and 118 of IR 2017. The court in its wide powers may go behind the
judgment to enquire if there is sufficient evidence of fraud/collusion/miscarriage of
justice, notwithstanding the debtor failed to set aside the JID

Can a Judgment Debtor Make Payment After Commencement of Bankruptcy

Proceedings
 Moscow Narodny Bank Ltd v Ngan Chin Wen – the debtor paid about RM500,000 to
the creditor through the Official Assignee since bankruptcy proceedings has begun.
The issue was whether acceptance of the payment constituted satisfying the debt. The
Federal Court held that the acceptance of payment did not change the intention of the
creditor to claim for debt owed in the bankruptcy proceedings, it was only a mere part
payment of the debt. Acceptance of payment even after commencement of bankruptcy
proceedings does not render the proceedings abuse of process of court
 Azlin Azrai Lan Hawari v United Overseas Bank (Malaysia) Bhd & Other Appeals –
the Court of Appeal held that the acceptance of part payment does not nullify the
 bankruptcy notice, as the outstanding balance after the payment was still over the
minimum the statutory limit i.e. now is RM100,000

Showing Cause Against a Petition

 Rule 116 – debtor must file notice in Form 45, with the Registrar, specifying the
statements in the petition that he intends to deny or challenge and submit by post to
the petitioning creditor and the petitioner’s solicitor, if known, at least 4 days before
the petition is to be heard
 Rule 117 – requires the debtor to prove the issues notified under Rule 116, including
calling of witnesses or any new evidence, the court has discretion to grant further time
if it thinks reasonable to do so
 Dato Sri Teong Teck Leng v Jupiter Securities Sdn Bhd – the court held that
bankruptcy has 2 stages i.e. the Bankruptcy Notice and Creditor’s Petition
 Rule 18(1) (which is now Rule 17 of IR 2017) provides a challenge to
bankruptcy notice, to set aside the bankruptcy notice, he must proceed by
summon in chambers supported by affidavit (must satisfy S.3(1)) that the
debtor has a valid counter claim/set off/cross claim
 Rule 117 (which is now Rule 116 of IR 2017) provides that where application
is to show cause against a creditor’s petition, other than counter claim/set
off/cross claim, either at the Receiving Order or Adjudication Order stage, he
must file a notice in Form 16 (now Form 45), specifying the statements in the
petition which he intends to deny or dispute
 Distinction must be made “to challenge a petition/notice” is the initial stage of
setting aside a bankruptcy notice and secondly “to show cause against a
petition” which refers to the second stage of the RO or AO (now known as
Bankruptcy Order)

Hearing of the Bankruptcy Petition

 Rule 121 IR 2017 – petition must not be heard until the expiration of 8 days from the
service, unless good cause is shown for the earlier hearing
 S.6(2) IA – at the hearing, the court must be satisfied of:
a) The creditor’s debt is in existence
b) The act of bankruptcy is alleged in the petition
c) If the debtor doesn’t appear, proof of service of the petition on the debtor
 If the court is satisfied, the court will allow the petition and the creditor may make a
Bankruptcy Order against the judgment debtor in pursuance of the petition
 S.6(3) – if the court is not satisfied, the court may dismiss the application
 S.6(4) – when the act of bankruptcy relied on non compliance with bankruptcy notice
to pay for judgment debt, the court may, if it thinks fit, to stay or dismiss the petition
on the ground that an appeal is pending from the judgment

Adjournments of Hearing
 Rule 126 – no adjournment of the hearing of the creditor’s petition for bankruptcy
after 1 month of the given date, unless the debtor has given prior notice that he
intends to show cause against the petition
 S.93(2) – the court may at any time adjourn any proceedings before it, upon such
terms, if any as it thinks fit to impose (i.e. technicalities)
 Tan Eng Niang v Eng Choo Kwan & Sons Hardware Sdn Bhd – for the purposes of
obtaining adjournment of hearing of petition, the judgment debtor must follow Rule
 127, where judgment debtor intends to show cause against petition, he must follow
Rule 117. The court held that Rule 127 doesn’t impose absolute prohibition against an
adjournment just due to mere absence of prior notice of intention to show cause, so
long as there is reasonable or sufficient ground to grant such adjournment
 Dato Mohd Pilus Bin Yusof, Re: Ex Parte Southern Bank Bhd – the court held that
the discretion to grant an adjournment should not cause injustice to the parties
concerned
 Pembinaan KSY Sdn Bhd v Lian Seng Properties Sdn Bhd – a judgment, be it a
judgment/JID/summary judgment or judgment obtained after full hearing, is a good
enforceable and valid judgment, unless and until it is set aside, or execution thereof
has been stayed

Reinstatement of Creditor’s Petition

 The issue is whether Senior Assistant Registrar has the jurisdiction to reinstate a
Creditor’s Petition, which was struck out due to failure of the creditor to attend the
hearing
 R 118 – non appearance of debtor, court may dismiss the petition
 R 119 – non appearance of creditor, no subsequent petition against same debtors can
be presented, without leave of court
 Therefore, must apply for reinstatement under S.92(1) IA or file afresh. If file afresh,
must get leave of court
 S.92(1) IA – the court may review, rescind or vary any order made by it under its
bankruptcy jurisdiction
 Mariam b Sasiman v BBMB Factoring Bhd – creditor’s petition was dismissed by
SAR for failure to attend. Creditor then applied for reinstatement. Judgment debtor
argued that Rule 120 requires a fresh petition be filed. The SAR nonetheless granted
the reinstatement and thus JD appealed. The court held that registrar had wide
jurisdiction under S.92(1) to order reinstatement. The court held that there was no
error made in which the discretion was exercised. The reinstatement was allowed
 BBMB Factoring Sdn Bhd v Mariam Sasiman & Anor – the decision was affirmed by
Gopal Sri Ram here. He held that a creditor who wishes to reinstate a creditor’s
petition that was dismissed due to non-appearance has two options: apply for
reinstatement under S.92(1) or file a fresh petition. If the latter is chosen, must obtain
leave of court
 O.2 Rule 3 of ROC 2012 – the court should not allow any prelim objection based on
non compliance unless the said non compliance has caused miscarriage of justice
 Kasiah Kasban v Sime Bank Bhd – where the court had to consider the validity of
both the bankruptcy notice and the creditor’s petition which both contained a serious
of technical errors. The judgment debtor applied to strike out for non compliance. The
court held that the submission presented to the debtor does not caused any prejudice
or miscarriage of justice and thus the court should not allow this prelim objection
based of non compliance since it did not cause injustice