Topic 6: Charges

Introduction
Types of security transaction:

● Charges- recognised as registrable dealing under NLC

● Lien- recognised as dealing under NLC

● Jual Janji (Malaysia)- Not recognised by NLC but courts as having effect
as a pure contract of sale
● Mortgage (English Law)

*Land Charge (Gadaian) is different from Company Charge

6.1 Definition
Generally, charge is a transaction whereby the registered proprietor of an
alienated land or a lease conveys it as a security for the repayment of any debt
or payment of sum other than debt; or any annuity or other periodical payment,
to a third party.
S 5, the definition of charge under NLC states that “charge” means a
registered charge. This section has to cross refer with S 243 of NLC where it
stated that every charge created under this Act shall take effect upon registration
so as to render the land or lease in question liable as security in accordance with
the provisions thereof, express or implied.
Chargor- the owner of land/ lease
Chargee- third party, such as bank

Types of charges
1) First party charge: The chargor is the borrower.
2) Third party charge: The chargor is not the borrower.

Charge constitutes an interest in land

MBF Finance Bhd. v Teguh Consolidated Sdn. Bhd.
 ● The court held that after a charge is being registered, the chargor was
required to comply with the charge. Besides, the chargee can also take
appropriate steps necessary to recover the sum due upon the failure of the
chargor to comply with the charge.

Charge (Gadaian) vs Mortgage (Cagaran)

Charge Mortgage (not recognised)
The chargee will have the interest but The mortgagor will convey the title of
not title of the land. land/ legal ownership to the
mortgagee.
Can apply for order for sale (auction) Can apply for order for sale (auction)
in the event of default of payment. in the event of default of payment.
Must follow the procedure in NLC. Just follow the contractual terms in
the contract agreed by parties.
Both the name of chargor and chargee Have equitable right. The mortgagee
will appear on the land title. The has to return the land upon the full
chargor will have the title of land payment of loan by the mortgagor.
whereas the chargee will have interest
of the land. After full payment, the
chargor will have to issue a discharge
of charge the title will be return to
chargor.

Kimlin Housing Development Sdn. Bhd. v Bank Bumiputra Bhd.

● Mortgage in common law refers to a transaction where the rights and

powers of the mortgagee are those which are incidental to the legal or
equitable estate vested in him in his role as mortgagee.
● Statutory charge in NLC refers to a transaction where the rights and
power of the chargee is not derived from the charged land but from the
provisions in NLC. Such right is enforceable by proceedings in court to
obtain a judicial sale.

6.1.1 What can be charged

Powers of charging: S 241 of NLC
Restrictions: S 241(3) of NLC
Syariah principle must comply with NLC: S 241(5) of NLC
Financial institution: S 241(6) of NLC
Types of land which can be charge
1) Title owned by individual or company- S 43 of NLC
2) Land held under final title and qualified title- S 77
3) Land or parcel held under strata title- S 256(1)(c) & S 260(1)(c)- subsidiary
title
4) Land registered under Land Office or Registry- S 77 of NLC
5) Alienated land not more than 99 years- S 76 of NLC

6.1.2 Ways of creating a charge

● Form 16A; or Form 16B

● Creation of charge is subject to s 241(3) & (4)

6.1.3 Creation of second charge

S 241(6) of NLC allow the creation of second and subsequent charges.
The first registered charge shall take priority in term of repayment. The first
registered charge shall have the possession of IDT and meanwhile, S 244(2) of
NLC will allowed the Registry to use such IDT to register second and
subsequent charges.
First registered charge will have the priority over all later registered charges,
subject to a voluntary postponement of priority.
The priority of a charge can be postponed by using Form 16C.

● S 247(1) of NLC states that any charge may be postponed to any

subsequent charge by an instrument in Form 16C.
● S 247(2) of NLC states that the charges to which any instrument of
postponement relates shall rank, as between each other, in the order
therein specified as from the date on which the instrument is registered.
“Tracking” and “consolidation” will also have effect on the priority of charge.
“Tracking” and “consolidation” can only enforceable by complying with S 245
and S 246 of NLC.

● S 245 of NLC- Restriction on consolidation

● S 246 of NLC- Tacking of further advances

6.2 Effect of a Registered Charge

R & I Securities v Golden Castle Finance

● If a charge is not registered, the chargee will not be protected under NLC
and enjoyed the rights under Part 16 of NLC in the event of default of
payment by the chargor.
The chargee will enjoy indefeasibility of interest under S 340(1) of NLC.

6.2.1 Rights of the parties

1) Real right and personal right for chargee

● Order for sale

● Taking possession of land

● Appointing receiver (chargor-corporation)

2) Express agreement between chargor and chargee

3) Implied

● S 249, 250, 251 & 218(2) of NLC

4) Other relevant provisions

● S 218(2), 215 & 216, 244 of NLC

6.3 Effect of an Unregistered Charge – Equitable
Charge
Every charge must be registered and the general rule is that an unregistered
charges is invalid. If a charged is not registered, the rights and liabilities of the
chargor and chargee, including the remedies of sale and repossession cannot be
enforced.
However, equitable charge is an exception.
Oriental Bank v Chup Seng Restaurant (Butterworth) Sdn. Bhd.

● The court held that a charge must be registered in its prescribed form
before a chargee can enforce his right of foreclosure.
● In regards to equitable charge, the court held that a charge instrument
which has been executed but not yet presented for registration is
regarded as an equitable charge. It was also held that NLC does not
prohibit the creation of an equitable charge.
Malayan Banking Bhd. v Zahari bin Ahmad [1988] 2 MLJ 135

● The court held that in the situation where there is no separate title and
charge being issued, a loan agreement and a deed of assignment are
entered into to secure a loan will be regarded as an equitable charge.
Bank Pembangunan dan Infrastruktur Malaysia Bhd. v Omar Hj Ahmad

● The court held that since there was an antecedent agreement between the
bank and the chargor to have the land charged to the bank as security, the
wrong attestation thereof would not ipso facto negate the creation of an
equitable third-party charge over the land in favour of the bank.

6.4 Default and Remedies

Real right and personal right for chargee:

● Order for sale

● Taking possession of land

 ● Appointing receiver (if chargor is a corporation)

6.4.1 Order for sale

● ss 253-269 NLC

● Form 16D pursuant to s 254; or Form 16E pursuant to s 255

● Two sets of procedures for the chargee to enforce his remedy by way of
sale on the ground of the chargor’s default depending on the type of title.
● RT: ss 256, Order 83 Rules of Court 2012 (formerly RHC) – High Court

● LOT: s 260 Land Administrator

6.5 Order for sale

Foreclosure
 ● An act of chargee to sell land by the way of auction in order secure
payment which is due from chargor in satisfaction of debt owing to
chargee.
S 253 of NLC states that
(1) The provisions of this Chapter shall have effect for the purpose of enabling
any chargee to obtain the sale of the land or lease to which his charge relates
in the event of a breach by the chargor of any of the agreements on his part
expressed or implied therein.
(2) The powers conferred by this Chapter shall be additional to those
conferred by Chapter 4, and no chargee shall be debarred from exercising
them by reason of the fact that he has already taken action under that
Chapter.
(3) In this Chapter—
“bidder” means only one natural person, one corporation or one
single body and does not include the chargor; “chargee” includes a
financial institution;
“financial institution” means any licensed bank, licensed finance
company or licensed merchant bank as defined in the *Banking and
Financial Institutions Act 1989 [Act 372], a bank under the **Islamic
Banking Act 1983 [Act 276], any co-operative society carrying on the
business of financing and any statutory body established under any
Federal or State law acting as chargee under this Act; and
“purchaser” means the successful bidder.
(4) For the purposes of this Chapter, the chargor or chargee may appoint any
person or body to perform his duties or take action on his behalf and notice of
any such appointment shall be given in writing to the Registrar of the Court or
the Land Administrator, as the case may be.
Kandiah Peter v Public Bank Bhd.

● The court held that a chargee who makes an application for an order for
sale in foreclosure proceedings does not commence an action. Rather, the
chargee is merely enforcing his right by exercising his statutory remedy
against the chargor in default.
Kimlin Housing Development Sdn. Bhd. v Bank Bumiputra
● The court held that the chargee will not have power of sale by way of a
debenture or power of attorney or otherwise. Instead, the chargee must
brought a proceeding to obtain a judicial sale in accordance with the
procedure laid down in the NLC.
● The court had also stated the 9 rights of the chargor:
o 1) Notice must be given in Form 16D within a month / Form 16E
where principle is payable on demand.
o 2) Order of sale will only be granted if the statutory requirements
have been met.
o 3) The chargor has an opportunity to show the ‘cause to the
contrary’
o 4) Order of sale must include sale by public auction within a month
from the order, at a reserve price fixed by Registrar of the Court;
and the total sum payable under the charge at the date of the order.
o 5) Chargor has the right to be served with a copy of order for sale
for advertisement. The charge is obliged to prepare condition of
sale and to deliver IDT to the court.
o 6) Chargor has the advantage of the sale being effected under the
direction of an officer of the court who may seek the assistance of a
licensed auctioneer.
o 7) Chargor can stop the sale by tendering sum due under the charge
to the Registry/ Land Office before the fall of hammer.
o 8) If the purchaser did not complete the contract on the due date
and seek for extension from court, the chargor have the right to be
heard.
o 9) Chargor has the right to set aside the order for sale if the sale has
been conducted fraudulently/ collusively/ improperly to the
prejudice of chargor.
6.5.1 Notice of Demand

Service of default notice, and effect thereof (Form 16D)

S 254 of NLC states that
(1) Where, in the case of any charge, any such breach of agreement as is
mentioned in subsection 253(1) has been continued for a period of at least
one month or such alternative period as may be specified in the charge which
shall not be less than one month, the chargee may serve on the chargor a
notice in Form 16D—
(a) specifying the breach in question;
(b) requiring it to be remedied within one month of the date on which
the notice is served, or such alternative period as may be specified in
the charge which shall not be less than one month; and
(c) warning the chargor that, if the notice is not complied with, he will
take proceedings to obtain an order for sale.
(2) Where, after the service of any such notice, the charged land or lease
becomes vested in any other person or body, the notice shall be as valid and
effectual against that person or body as it was against the person or body on
whom it was served.
(3) If at the expiry of the period specified in any such notice the breach in
question has not been remedied—
 (a) the whole sum secured by the charge shall (if it has not already done
so) become due and payable to the chargee; and
(b) the chargee may apply for an order for sale in accordance with the
following provisions of this Chapter:
Provided that paragraph (a) shall not apply to any charge to secure the
payment of an annuity or other periodic sum.
Special provision with respect to sums payable on demand (Form
16E)
S 255 of NLC states that
(1) Where the principal sum secured by any charge is payable by the chargor on
demand, the chargee may make the demand by a notice in Form 16E and in that
event, if the sum in question is not paid to him within one month of the date on
which the notice is served, may apply forthwith for an order for sale without
being required to serve a notice in Form 16D under subsection 254(1).
(2) Subsection 254(2) shall apply to notices in Form 16e as they apply to notices
in Form 16D.

Cases on content of notice

Co-operative Central Bank Ltd v Meng Kuang Properties Bhd

● The court held that a notice of demand which does not state the precise
sum owing can still be valid provided that the chargor is given a
reasonable opportunity to comply with the notice and if the notice does
not demand payment of something to which the charge is not entitled.
Standard Chartered Bank Malaysia Bhd v Tunku Mudzaffar Bin Tunku
Mustapha

● The court held that the service of notice is mandatory and it must be
served to the correct person and correct address.

Issue 1: Is one month notice a mandatory?

After NLC 2020, S 254(1) states that the notice can only be served after the
breach had continue for at least one month.
Issue 2: Will service of wrong notice be a bar to the chargee’s
application for order for sale?
Jacob v Overseas Chinese Banking Corp, Ipoh (wrong notice not fatal)

● The court after referring to S 62 of Interpretation Act 1967, held that the
intention of Parliament is to ensure that the chargor has the knowledge of
the notice which specify the breach. Therefore, the issuance of wrong
notice is not fatal and valid
● The court held that in the case where there was a demand for payment of
principal and interest, Form 16E as well as Form 16D can be used and the
demand may be made by either form.

Issue 3: Whether the chargee can impose other charges or

something which is not provided in the charge agreement?
Co-operative Central Bank Ltd. v Meng Kuang Properties Bhd.

● The court dismissed the application for order for sale since there was
negligence of the chargee to correctly demand for the payment of default
interest.
Perwira Affin Bank Bhd v Saad Bin Abdullah & Anor

● The court held that the accuracy of amount in the notice in Form 16D can
be an evidence to show whether the Form 16D is valid.
● The court found that the chargee had failed to issue Form 16D based on
the term of the charge. As such, the notice in Form 16D is invalid.

Order for sale can be made to:

● If registry title, the High Court- S 256(1)(a)-(c)
o S 256(1) of NLC states that this section applies to land held under
—
(a) Registry title;
(b) the form of qualified title corresponding to Registry title;
or
(c) subsidiary title,
 and to the whole of any undivided share in, or any lease of, any
such land.

● If land office title, the Land Office- S 260(1)(a)-(c)

o S 260(1) of NLC states that this section applies to land held under
—
(a) Land Office title;
(b) the form of qualified title corresponding to Land Office
title; or
(c) subsidiary title,
and to the whole of any undivided share in, or any lease of, any
such land.
1) High Court

● Order 83 of Rules of Court 2012 (cases not compliance with this

order will be strucked off)
● S 256(2) of NLC states that any application for an order for sale under
this Chapter by a chargee of any such land or lease shall be made to the
Court in accordance with the provisions in that behalf of any law for
the time being in force relating to civil procedure.
2) Land Office

● Form 16G

● S 260(2) of NLC states that any application for an order for sale under
this Chapter by a chargee of any such land or lease shall be made to the
Land Administrator in Form 16G.

6.5.2 Powers of Court

If a land is under Registry title, then the application for an order for sale shall be
made to the court by virtue of S 256 of NLC as well as Order 83 of Rules of
Courts 2012.
UAB v Elgi Marka Sdn Bhd
 ● It was held that the court has no concurrent jurisdiction to approved an
application for an order for sale if the and is under Land office title.
Matters decided by the courts- S 257 of NLC
Other matters in respect of sale- S 258- S 259
Notice of application- Order 32 of ROC
(a) Circumstances under which an Order for Sale will not be
Granted – cause to contrary: s 256(3)
S 256(3) of NLC states that on any such application, the Court shall order the
sale of the land or lease to which the charge relates unless it is satisfied of the
existence of cause to the contrary.
Low Lee Lian v Ban Hin Lee Bank Bhd. [1997] 1 MLJ 77 FC

● Gopal Sri Ram CAJ has listed the three circumstances where there is an
existence of “cause to the contrary”,
o (i) When a chargor was able to bring his case within any of the
exceptions to the indefeasibility doctrine in s 340 NLC 1965.
(defeasibility)
o (ii) When a chargor could demonstrate that the chargee had failed
to meet the conditions precedent for the making of an application
for an order for sale (defect in procedure- must have major
defect); and
o (iii) When a chargor could demonstrate that the grant of an order
for sale would be contrary to some rule of law or equity. (contrary
to rule of law or equity)
Murugappa Chettiar v Letchumanan Chettiar

● If no cause to the contrary could be shown, the court would be obliged to

make an order for sale.
Ambank Bhd (successor in title ‘Arab-Malaysian Finance Bhd’) v
Chidambara Nathan a/l MST Muthusamy & Anor

● The chargor shall be the one who owe the burden to prove the existence
of cause to the contrary.
1) Defeasibility
*Use back topic 2 cases
AmFinance Bhd v Lebik bt Haji Ali & Ors (forgery)

● In this case, the plaintiff applied an order for sale under S. 256 of NLC
but the court refuse to grant such application as the defendant had
successfully proven that the charge document was tainted with forgery.
2) Fail to meet condition precedent
Standard Chartered Bank Malaysia Bhd v Mohd Nazro bin Zulkipeli and
another appeal

● It was held that an order of sale can be stopped when the chargor is able
to show cause to the contrary by proving that the chargee had failed to
meet the conditions precedent as required by NLC
● Here, the failure on the part of the chargor to serve notice in Form 16D
would constitute cause to the contrary.
Co-operative Central Bank Ltd. v Meng Kuang Properties Bhd.

● The court dismissed the application for order for sale since there was
negligence of the chargee to correctly demand for the payment of default
interest.
3) Contrary to rule of law or equity
Limited application.
Example: Where a purchaser has paid the full purchase price to the chargee and
has taken possession, thus bringing into existence an equitable estate in his
favour, and the chargee has recognized his rights and equitable estate, it is
unconscionable for the chargee to enforce the security. As such, the order for
sale would not be granted.
Kuching Plaza Sdn Bhd v Bank Bumiputra Malaysia Bhd and Another
Appeal

● The Supreme Court rejected the application for order of sale on the
ground that the sale was against the rule of equity. If the order of sale was
granted, there will be unfairness towards the parties who had the interest
on land.
Keng Soon Finance Bhd. v MK Retnam Holdings Sdn. Bhd. & Anor [1989]
1 MLJ 457

● It was held that the principle of “contrary to some rule of law and equity”
does not extend to cases where the court merely feels sorry for the
borrower or because it regards the lender as arrogant, boorish or
unmannerly or because of the existence of prior unregistered claims. This
means that order for sale cannot be rejected based on such grounds.
Arab-Malaysian Merchant Bank Bhd. v Silver Concept Sdn. Bhd. [2005] 5
MLJ 210

● The court held that the application of “cause to the contrary” under S
256(3) of NLC is different from the Islamic financing.
(b) Other important issues
S 253(2) of NLC allows the chargee to apply for order for sale although the
chargee has taken possession of the land.
Kandiah Peter v Public Bank Bhd

● The court held that the failure of chargee to obtain for sale does not
prohibit the chargee from taking action in personam against the chargor.

6.5.3 Powers of Land Administrator

If a title is Land office title, then the application for an order for sale shall be
made to the Land Administrator. However, the power given to the LA is limited
whereby LA can only grant order for sale when the charge is a registered charge
and there is a default in payment.
Form 16G- S 260(2) of NLC
Enquiry- S 261, 262
Gurpal Singh v Kananayer

● The court held that LA, during the inquiry shall not go behind the charge
in view of S 340(1) of NLC which is related to indefeasibility of title and
interest. Instead, LA shall only oblige to determine whether there is a
default in payment in order for an order for sale to be granted.
(a) Cause to the contrary
S 261(c) of NLC: the Land Administrator shall cause a summons to be
served on the chargor, requiring him to appear at the enquiry and show cause
why the order should not be made.
S 263(1) of NLC: the Land Administrator shall order the sale unless he is
satisfied of the existence of cause to the contrary.
Government of Malaysia v Omar in Haji Ahmad

● It was held that after the enquiry had been concluded and the LA satisfied
that there is no cause to the contrary, then an order for sale shall be
granted.
(b) Limited power of LA
Powers of LA- S 23- S 39
1) S 33 of NLC states that save in the special circumstances specified in
section 34, a decision or order of the Land Administrator in any enquiry
shall not be altered or added to except for the purpose of correcting verbal
errors or remedying some accidental defect or omission not affecting a material
part of the enquiry.
2) Not allow to grant an order other than order for sale
3) No power to hear appeal/ objection on facts
4) Cannot fix reserved price arbitrarily when order for sale receive no bid/ offer.
Must fix reserved prie lower than or similar to first reserved price.

6.5.4 Other matters pertaining to order for sales 263 of NLC-

Order for sale, and matters to be dealt thereby
● S 264 of NLC- Procedure prior to sale

● S 264A- Postponement or cancellation of an order for sale by LA

● S 265- Procedure at sale

6.5.5 Powers of Court/ Land Administrator after the
Granting of an Order for Sale
Court
S 257(1) of NLC states that every order for sale made by the Court under
section 256 shall be in Form 16H and shall
(a) provide for the sale to be by public auction;
(b) require the sale to be held on, or as soon as may be after, a date
specified therein, being a date not less than one month after the date
on which the order is made;
(c) specify the total amount due to the chargee at the date on which the
order is made;
(d) require the Registrar of the Court to fix a reserve price for the
purpose of the sale, being a price equal to the estimated market value of
the land or lease in question;
(e) specify that no bidder shall be allowed to bid in the sale unless the
officer of the Court is satisfied that the bidder possesses, at the time of
the sale, the sum equivalent to ten per centum of the reserve price
specified under paragraph (d);
(f) specify that where the full amount of the purchase price is not
paid after the fall of the hammer by the successful bidder, the sum
specified in paragraph (e) shall be paid as deposit to the chargee and
forthwith credited into the account of the chargor pending the settlement
of the balance of the purchase price;
(g) specify that the balance of the purchase price shall be settled on a
date not later than one hundred and twenty days from the date of the
sale and that there shall be no extension of the period so specified; and
(h) specify that where the balance of the purchase price is not settled
on a date specified under paragraph (g), the sum paid as deposit under
paragraph (f) to the chargee shall be forfeited and disposed of in the
manner specified under section 267A.
LA
S 263(1) of NLC
Can court vary an order for sale after such order is made?
MUI Bank Bhd v Cheam Kim Yi (Beh Sai Ming, Intervener)

● It was held that once an order for sale has been granted, drawn up and
perfected, the court is functus officio. This means that the court will no
longer have the power to re-examine the decision made.
M & J Frozen Food Sdn Bhd v Siland Sdn Bhd

● In this case, the purchaser wanted to apply for extension of time to pay
chargee but he had failed to notify the chargor and chargee.
● It was held that the court has the power to vary the order for sale or the
terms and conditions made thereunder, as long as the court had taken into
consideration of the interests of the chargee and chargor and it thinks fair
to do so.
● However, such power shall not be exercised when there is absence of and
without service of the required notice on the chargor.
Can LA make amendment to an order for sale?
Siland Sdn Bhd v M & J Frozen Food Sdn Bhd

● The court held that LA has no power to amend any order given after the
sale.

6.6 Rights /Relief for the Chargor and Third Parties

Right of chargor to tender payment at any time before sale
S 266(1) of NLC states that any chargor against whom an order for sale has
been made under this Chapter may, at any time before the conclusion of the
sale, tender the amounts specified in subsection (2) to the Registrar of the
Court or, as the case may be, Land Administrator (or, if the tender is made on
the day fixed for the sale, to the officer having the direction thereof), and the
order shall thereupon cease to have effect.
*The chargor must make payment before the fall of hammer. If the hammer had
fallen, then the chargor can no longer claim back his land since the bona fide
purchaser’s interest shall be safeguard.
M & J Frozen Food Sdn Bhd v Siland Sdn Bhd

● The court held that the chargor may always have the proprietary right and
right to pay up all moneys due under the charge and all expenses incurred
before the conclusion of sale and registration of purchaser.
● The chargor has the right to intervene to set aside any sale of land on the
ground of fraud, impropriety or any breach of any statutory or contractual
terms of the sale. Upon the chargor successfully prove his case and pay
all the sum, the order for sale shall cease to have effect.
Kimlin case has criticised Chartered Bank v Packiri Maideen which held
that the chargor’s right to redeem the debt stopped when the application for
auction is made to the court.

Court can order cancel of sale made by LA if not comply

with S 257(1)
Maimunah Bt Megat Montak v Maybank Finance Bhd

● The court will always have the power to cancel the auction made by LA if
the auction does not comply with S 257(1) of NLC.

Right of chargee
BBMB v Sun Chong Land Devt Sdn. Bhd.

● The chargee is entitled to apply for an order for sale based on the
provisions in NLC. IF there is no existence of cause to the contrary, then
the court may always order an order for sale for the charged land to be
sold by way of public auction.

Rights of third party (successful bidder/purchaser)

Perdana Properties Bhd. v Yong Chon

● The court held that after the purchaser had been granted the certificate of
sale, the sale shall be registrable and the certificate shall free the
purchaser of any more liability.
 ● This means that after the purchaser had bought the land, the chargor shall
no longer has the right in the land.

6.7 Effect of order for sale

Certificate of sale
Certificate of sale in Form 16F- ordered by High Court: S 259(3)(a) of NLC
Certificate of sale in Form 16I- ordered by LA: S 265(4)(a) of NLC
Statement of payment due
S 266A of NLC

Effects of sale
S 267(1) of NLC states that any certificate of sale given to a purchaser under
subsection 259(3) or 265(4) in respect of any charged land or lease shall be
treated for all the purposes of this Act as an instrument of dealing, and shall
be registrable accordingly under Part Eighteen; and, upon the registration
thereof—
(a) the title or interest of the chargor shall pass to and vest in the
purchaser, freed and discharged from all liability under the charge in
question and any charge subsequent thereto; and
(b) subject to paragraph (2)(a), the relevant provisions of Part Fourteen
shall apply as if the chargor had transferred the land or lease to the
purchaser in accordance with the provisions of that Part.
S 267(2) of NLC states that notwithstanding that it was granted with the
consent in writing of the chargee, as required by subsection 226(1), no tenancy
exempt from registration granted by the chargor after the date of registration of
the charge shall be binding on the purchaser unless, prior to the date of
registration of the certificate of sale, the tenancy had become protected by
an endorsement on the register document of title to the land pursuant to
Chapter 7 of Part Eighteen.
S 267(3) of NLC states that subsection (2) shall have effect in addition to those
of subsection 213(3), under which, by virtue of the fact that he claims through
the chargee, the purchaser will not be bound by any tenancy granted by the
chargor before the date of registration of the charge unless it had become
protected by endorsement prior to that date.
Effect on the tenancy without endorsement
Hotel Ambassador (M) Sdn Bhd v Seapower (M) Sdn Bhd

● The court held that the tenancy between the tenant and chargor is not
binding on the purchaser who successfully purchase the land under an
order for sale unless the tenancy is being protected by an endorsement
made under s 316(1) of NLC prior to the date of registration of the
charge.

6.7.1 Purchase price obtained from the sale

S 268 of NLC provides the application of purchase money.

S 268A of NLC provides the application of purchase money by chargee who

is a financial institution.

S 269 of NLC provides the protection of purchasers.

6.7.2 Sale – Private Treaty

Sale by private treaty is a sale made by the chargor in order to raise the sum to
repay the charge.
In NLC, the sale by private treaty is not prohibited. However, if the chargor
wanted to proceed with sale by the way of private treaty, he must notify the
bank in order to prevent the bank to make an order for sale.
1) The chargor will always have the right to sell his property by himself,
provided that proceeding under NLC has yet to be commenced (order for
sale, public auction).
Chartered Bank v Packiri Maideen

● The chargor has the right to sell the charged land by the way of private
treaty sale with sufficient sale price to pay the arrears and costs.
 However, this must be done before the sale of land is being granted by
court and to be sold by public action
2) Even when an order for sale had been granted and a public auction had
been held, the chargor will still have the chance to sell his property by the
way of private treaty in the light of S 266 of NLC.
M & J Frozen Food Sdn Bhd v Siland Sdn Bhd

● The court held that the chargor may always have the proprietary right and
right to pay up all moneys due under the charge and all expenses incurred
before the conclusion of sale and registration of purchaser.
● Upon the chargor successfully pay all the sum, the order for sale shall
cease to have effect.
Kimlin Housing Development Sdn. Bhd. v Bank Bumiputra

● The chargor can stop the sale by tendering sum due under the charge to
the Registry/ Land Office before the fall of hammer.
● The court held that the chargee will not have power of sale by way of a
debenture or power of attorney or otherwise. Instead, the chargee must
brought a proceeding to obtain a judicial sale in accordance with the
procedure laid down in the NLC.

3) If public auction had been held twice to sell the land but there were no
successful bidders, the court may allow the chargee to sell the land by
private treaty.
Malayan Credit Finance Bhd v Yap Hock Choon & Anor

● The court allow the chargee to sell the land by the way of private treaty
after two unsuccessful public auctions.

6.8 Discharge of Charge

Discharge otherwise than by payment
S 278(1) of NLC states that any chargee may, by an instrument in Form 16N
discharge the land or lease to which his charge relates (or, if it relates to
more lands or leases than one, all or any of them) from all further liability
thereunder, and the discharge shall take effect as from the date on which the
instrument is registered.
S 278(2) of NLC states that in the absence of express provision therein to the
contrary, no instrument of discharge shall release the chargor from his personal
liability under the charge.

Discharge by payment to Registrar in cases of death, absence or disability

S 279(1) of NLC states that any chargor may apply to the Registrar for relief
under this section on the grounds that he is entitled to pay off the charge but—
(a) the chargee is dead, or cannot be found within the Federation, or
evades or refuses to accept payment thereof, or is under a legal disability,
and
(b) he is unable to trace any person or body authorized to receive
payments on the chargee’s behalf.
S 279(2) of NLC states that where the grounds specified in any such
application, and the precise amount due under the charge, are established to his
satisfaction, the Registrar shall authorize the chargor to deposit the amount in
question with him; and upon the making of the deposit, the land or lease to
which the charge relates shall be discharged from all liability thereunder.
S 279(3) of NLC states that the receipt of the Registrar for any moneys
deposited with him under this section shall, as respects the personal liability of
the chargor, be a sufficient discharge therefor; and any such moneys—
(a) shall be placed by the Registrar in the custody of such public officer
as he may think proper;
(b) may be claimed by the person or body entitled thereto at any time
within six years of the date of deposit; and
(c) if not so claimed, shall thereafter be paid into the Consolidated Fund
of the State.
Malayan United Finance Bhd v Tan Lay Soon

● The court held that the right to discharge is only restricted to chargee
only.
Eng Ah Mooi v Overseas Chinese Banking Corporation
● The court held that the chargor has to apply to the court for a discharge of
charge since there is no provision for the discharge of charge by the
chargor.