Bankruptcy Tutorial 1

1991 August Question 5

On what grounds may a bankruptcy notice be set aside?

Answer in page 133

1. Debtor has a counter claim, set off or cross demands -s 3(1)(i)

 He must show he has reasonable suspect and nature
2. Where debt has been settled
3. Irregularities
 No final judgment
 Meaning of final judgment: debtor has exhausted all his right for him to set
aside the appeal against the judgment
 Demands not in accordance with terms of judgment or order.

1991 December Question 9

a. Describe the requisites of a valid bankruptcy petition. (10 marks)

(a) Amount of debt must exceed RM50k

(b) The amount must be a liquidated sum. (quantified and payable)
(c) The petition must state the act of bankruptcy
 The act of bankruptcy: it forms the petition
 S3(1): non-compliance of bankruptcy notice, debtor doesn’t reply within 7 days
(d) Domicile requirement

b. Discuss the material differences between a Receiving Order and Adjudication Order. (10marks)

 Today we only have one order under s4 – the court may on a bankruptcy petition make
bankruptcy order.
 In practice, the RO and AO makes simultaneously.
 The RO is for the purposes of giving the debtor some breathing space, DGI comes in to re-
arrange the debts and see whether it can settle the debt. The ownership of the properties is not
shift from the debtor. DGI merely takes control (not ownership) of the properties.
 The function of AO is similar to BO:
 S8(1)(a): no creditor may bring an action against the debtor without the leave of court.
 S8(1)(b): all property shall become divisible among his creditors and shall vest in the DGI
– effect of bankruptcy order which is previously known as AO.
 S36: where a debtor is an adjudged bankrupt, he shall be disqualified
 S38: where a bankrupt has not obtained his discharge, the bankrupt shall be
incompetent to maintain any action
Supplementary 1998 (February)

Question 8

a. Advise Loya as to whether the bankruptcy notice as prepared by him is proper.

Flaws in BN:

1. Re Judgment Debtor (Denggi), Always Ex parte Judgment Creditor (Panas)

2. It should be 7 days after service of the notice
3. Calculate / Quantify the interest
 Total amount must be stated
4. From 1.11.97 to the date of realisation – not view yet
 Rule 89
 Rule 90 – time period must be stated
5. Endorsement is required
 Rule 92 – particulars to be endorsed on the BN
 S3(2) – BN shall be in the prescribed form
6. BN must be signed

Supplementary 1998 (November)

Question 8

a. Advise Allen on the following:

I. Whether Allen can challenge the excessive amount in the bankruptcy notice at this stage; (4m)
 s3(2) – Excessive demand in BN does not render the notice bad per se unless the debtor
has given notice within 7 days (Re Rengasamy Pillai)
 Find out what stage you are now: [Creditor’s petition is fixed for hearing next month.]
act of bankruptcy has been committed. = Creditor’s petition stage. Cannot challenge at
this stage because of s3(2).

II. Whether Allen has committed an act of bankruptcy, if so when? (4m)

 Allen ignored the BN which was personally served on him under s.3(2).
 Whether he has committed act of bankruptcy? Yes, non compliance with BN is an act of
bankruptcy.
 The day of service is exclusive – 1.11.97 (exclude 1st, starts from 2nd)
 On 9.11.97, it is the day of act of bankruptcy being committed.

III. Whether Allen has nay grounds to oppose the creditor’s petition; (4m)
1. Statutory requirement under s5 not fulfilled.
 Debt owing < RM50k (or 10k at the time) – RM9,750
 S6(2): at the date of hearing, the court may require proof of the debt of
petitioning creditor
  S6(3): if the court is not satisfied with the proof of the debt, the court may
dismiss the petition.
2. Affidavit of truth of petition
 Ho Weng Keong
 Koh Kim Kuang
 Affirm one day before doesn’t render the petition void
 S131 IA
3. Once act of bankruptcy is committed on 9.11.97, the petition must be issued within
6 months.
o On 11.5.98, Albert only filed a creditor’s petition > exceeds 6 months.

Cannot challenge interest at petition stage, challenge it at BN stage.

IV. Whether Allen’s procedure to oppose the creditor’s petition is correct. (4m)
 No, not a correct procedure. He must file Form 45 with the Registrar under Rule 116 IR.
(filing only affidavit is fatal opposing the petition) – namely, below statutory threshold,
act of bankruptcy that is relied on beyond 6 months.
 Failure to file is fatal (D&C Bank v Datuk Ong Kian Seng)
 It is not curable under S.131IA/Rule 282IR 2017

b. Assuming that Allen has no grounds to oppose. Could Albert still proceed with the creditor’s petition if
Allen has already been declared a bankrupt and no search was conducted by Albert?

 s. 49 – there is a possibility to take a second bankruptcy order against the bankrupt.

 The effect of it is DGI in first bankruptcy will be the creditor in second bankruptcy.

Rule 93(2)

Rule 96

July 1999

Question 8

1. Pokai seeks your advice whether he has grounds to set aside the bankruptcy notice and, if so, the
procedure.

 No final judgment or order as Pokai applied to set aside the default judgment
 Kaya issued a BN against Pokai for balance of the amount outstanding.
o s3(1)(i) – it must in accordance with the terms of the judgment
o Here, it is for the balance – not in accordance. Dato Mohshari
 Statutory requirement > 50k. Here only 40k
o Amount has not been quantified
 S3(1)(i) – interest quantified until the date of issuance of bankruptcy notice
 Here, it is 8% per annum – haven’t quantified
  Period for payment not stated

Procedure

 Rule 17- apply by way of summons in chamber supported by affidavit. In affidavit, state the
grounds for opposing the notice.
 Apply for extension of time, no act of bankruptcy is committed until the prayer is done.

2. Advise Pokai. Briefly discuss the stages of winding-up procedure commencing from service of
statutory notice of demand under section 218(2) of the Companies Act 1965.

 Procedure for winding up: pg 104

1. Issue and serve statutory notice of demand pursuant to s.466(1) CA 2016
2. After 21days lapsed and no payment, petition must be issued within 6 months
3. Presentation of petition to wind up
4. File affidavit verifying petition
5. Every petition shall be verified by an affidavit and shall be sworn after and filed within 4
days after the petition is presented.
6. Service of petition and affidavit on respondent company
7. Advertise the petition in government, gazette, and 2 local newspapers 7 days before
hearing. – Re NKM: court cannot dispense because it is a statutory requirement.
8. To appear before the Registrar, has to obtain the certificate of compliance from the
Registrar under Rule 32.
9. Respondent company may oppose the petition and file and serve the affidavit in
opposition 7 days before hearing.
10. Solicitor must prepare a list of persons who is appearing on hearing before 12 noon of
the day pervious to the day of hearing.

Supplementary 1999 (October) Question 8

b. Pokai intends to oppose the Petition on the following grounds:

I. That Kaya Bank Bhd’s solicitor had no authority to sign the statutory notice;
 S466(1): a company shall be deemed to be unable to pay its debts if a. the company is
indebted in a sum exceeding the amount…. by his agents
 Case of Sri Hartamas – the court held that the demand in writing need not be in any
special form. The court held that the demand was not bad or invalid,
 Since solicitor is an agent, there is no requirement that it must be Kaya Bank himself. As
long as Kaya authorised his solicitor to sign the notice, the solicitor has authority to sign
the notice.
II. That Pokai Sdn, Bhd. was not insolvent as it has assets, if realise, will be enough to pay off its
debt.
 The test of inability to pay debts is commercial insolvency.
 Re Hong Huat Realty
  Sri Hartamas case

Advise Pokai Sdn. Bhd.