Lecture 6:

DISCHARGE
OF A
BANKRUPT

Prepared by Dr. Gita Radhakrishna & Mr. Wong Hua Siong

© No part of these lecture notes shall be reproduced or distributed in any manner whatsoever.
 DISCHARGE OF A BANKRUPT
A. s.33Discharge of bankrupt by order of court
B. s.33A Discharge of bankrupt by certificate of
DGI
C. s.33CAutomatic discharge
D. Effects of Discharge
E. s.105 IA Annulment and its effects
 Discharge of a bankrupt by order of court (s.33 IA)
Application for discharge
• s.33(1) IA The application for discharge to the
court may be made by the bankrupt at any time
after the bankrupt has been adjudged bankrupt .
• r.183(1) IR The application shall be accompanied
by a certificate from the DGI. The certificate must
specify the number of the bankrupt’s creditors and
whether they have filed a proof of debt.
• s. 33(1) IA The court will then fix a date for the
hearing of the application .
• r.183(2) IR The Registrar shall give notice of the
hearing to the DGI not less than 28 days before the
hearing date .
• r. 183(3) IR The Registrar shall also publish such
notice in the Gazette .
 • s.33(9) IA and r.183(3) IR The DGI shall, not less
than 14 days from the hearing, send a copy of
the notice to each creditor who has filed its
proof of debt
Discharge of
a bankrupt • The DGI shall also file his report not less than 7
by order of days before the hearing and a copy of the
report shall be sent to the bankrupt by
court (s.33 registered post.
IA)
• s.33(8) IAThe DGI’s report is prima facie
evidence of the statement in the report.
Discharge of a bankrupt by order of court (s.33
IA)
• r.184(2) IR) If the bankrupt intends to
dispute the DGI’s report, he must give
notice in writing to the DGI not less than 3
days before the hearing

• r.184(3) IR If a creditor intends to oppose

the discharge, he shall give notice to the
DGI not less than 3 days before the
hearing
 Discharge of bankrupt by order of court
(s.33IA)
Hearing of the discharge application
At the hearing of the discharge application the Court shall:
a) s.33(3) IA Take into consideration the report of the DGI on
the bankrupt’s conduct and affairs ;

b) s.33(9)IA Shall hear the DGI and may also hear the creditor ;

c)s.33(9) IA Put questions to the debtor and receive such

evidence as the court thinks fit .
 Discharge of bankrupt by order of court
(s.33IA)
At the hearing of the discharge application : s.33(3) IA - The
court may make any of the following orders:
(i) grant an absolute order of discharge;
(ii) refuse an absolute order of discharge;
(iii) grant an order for discharge but suspend its operation for a
specified time; or
(iv) grant an order of discharge subject to any conditions with
respect to any earnings or income which may afterward
become due to the bankrupt or with respect of his after-
acquired property.
 Discharge of bankrupt by order of court
(s.33IA)
Lim Tee Keong v HLG Securities Sdn Bhd [2016] 3 MLJ 201 (CA)
The bankrupt appealed against the dismissal by the High Court of his application
for discharge from his bankruptcy under s. 33 of the Bankruptcy Act 1967 (‘the
Act’). The bankrupt had been in bankruptcy for about ten years. He was about 65
years at that time and was diagnosed with cancer in 2014. He passed away later.
The grounds of appeal among others were:
1. The appellant was old and was suffering from cancer;
2. The Judge had failed to address his mind to two critical facts, namely that the
bankrupt was adjudged a bankrupt due to losses suffered on the share market;
and the bankrupt had suffered the losses during the Asian Financial Crisis
1997/1998;
3. The bankrupt had become ‘insolvent not through any fault, moral or otherwise,
but through just being caught at the wrong turning of the economic cycle’.
 Discharge of bankrupt by order of court
(s.33IA)
The creditor submitted that the discharge should not be allowed because
the DGI report was incomplete and had failed to show that the DGI had
undertaken a comprehensive and thorough investigation on the assets of
the bankrupt.
CA held :
1. The discretion to be exercised by the court under s 33(3) is wide and
it is ‘fettered only with the consideration of equity, fairness and good
conscience’ and that a bankrupt should not be put under bondage
for his entirety.
2. In exercising the discretion to discharge a bankrupt from a
bankruptcy, the court must take into consideration the report of the
DGI as to the bankrupt’s conduct and affairs including a report as to
the bankrupt’s conduct during the proceedings under his
bankruptcy.
 Discharge of bankrupt by order of court
(s.33IA)
3. The CA referred to the case of Lim Hun Swee v Malaysia
British Assurance Bhd (currently known as Allianz General
Insurance Malaysia Bhd) & Ors (judgment creditors) [2011] 2
MLJ 218, where Ramly Ali JCA
held, at p 226, that consideration of the DGI report by the
court hearing an application for discharge from bankruptcy is a
mandatory requirement and the most important consideration.
However, the court is not bound to accept the report if the
court is satisfied that the report is incomplete and unreliable or
made based on incomplete investigation into the conduct and
affairs of the bankrupt.
 Discharge of bankrupt by order of court
(s.33IA)
4. DGI’s report was very brief. Required a more thorough investigation into
the assets of the bankrupt, especially all those within 5 years before the
date of the RO (now bankruptcy order) was pronounced.
The DGI’s report should have:
• listed all the bankrupt’s previous properties and the current owners if any.
• whether the current owners were in a close relationship with the bankrupt
and
• whether there was evidence that the current owners were holding the
properties as nominees for the bankrupt. The DGI had failed to address all
the issues in the report.
Based on the above grounds the CA dismissed the appeal of the bankrupt
with costs
Mohana Sundari d/o E Subramaniam ex p United Prime Corpn.[2004] 5
MLJ 227
An appeal by the bankrupt on the conditions imposed by the SAR for
discharge. Court considered the facts of the case – bankruptcy arose as a
result of a guarantee which she signed at the age of 25 years.
- Bankruptcy arose through no fault of hers
- She was not in control of the affairs of the company in which her siblings
were directors
- The period of the bankruptcy
- Her contribution to the benefit of the creditors
- The magnitude of the deficiency in the bankruptcy estate
- Value of the bankrupts' total assets against the value of the total liability
- Bankrupt’s domestic, social and financial circumstances
- The number of creditors and their objections
HC:- ordered her to be discharged as a bankrupt.
Re Ah Kang [1994] 2 CLJ 738
– application was made 3 years after being adjudged a bankrupt.
Debts due had been settled by a third party. Only 1 debt was
outstanding where according to OA’s Report creditor would be paid
a dividend of 4.04%. Creditor objected but court noted that
- the principal debt had been settled and what remained was only
the interest
- bankrupt was 60 years old
- had been faithfully paying RM60/- to the OA every month
- not likely to be gainfully employed
HC granted the discharge judgment to be entered for the creditor in
respect of the balance of the proved debt.
Asia Commercial Finance (M) Bhd v. Bassanio Teo Yang [2009] 9 CLJ 413 [HC] Note:
case is before the IA which has a definition of “social guarantor” and s.5(3) of IA)
Respondent was a guarantor under a hire purchase for a car. Principal had
defaulted. As respondent had been unable to pay he was adjudged a bankrupt.
Agreed with OA to pay RM50/- a month. Appellant now objects to the DGI
discharging the respondent under s. 33A.
HC:- (i) Discharge granted. Absence od DGI’s financial report not adverse to
respondent. Respondent was a ‘social guarantor ‘ and was not reckless or
contribute to the bankruptcy.
(ii) The power of the court to prohibit the DGI from issuing the certificate to
discharge the respondent for a period of two years should only be exercised in
clear cut cases of abuse of s. 33A. E.g.where:
• the bankrupt had obtained huge loans with no intention of paying them back or
• the bankrupt was maintaining an extravagant lifestyle beyond his reported
income or
• he had continued to be reckless in his financial affairs.
No such evidence from the DGI’s affidavit. Therefore no abuse of s. 33A.
Lok Kew Ex-parte: Nam Fatt Marketing Sdn Bhd & Another case [2019] 1 LNS
1162
Husband and wife became bankrupt after being guarantors for a
corporate loan. They applied for discharge under s. 33 (1) IA 1967 citing
their age - 66 years old and serious illness. The business had collapsed
because of economic crisis.
According to the DGI’s reports, debt owed at the time of the applications
for discharge was RM 228,258.05. The reports stated that the two bankrupts
did not have any realisable assets and that the dividend that could be paid
to creditors was less than 10%. There were no medical reports when the
applications were heard before the SAR. These were only filed at the
appeal stage.

Q. Whether the JC could object when the ground was serious illness?
Contd. Lok Kew Ex-parte: Nam Fatt Marketing Sdn Bhd & Another case [2019] 1
LNS 1162
HC:. Difference between discharge by the court and by the DGI.
Discharge by court -s. 33 (1) : A bankrupt may at any time after being adjudged
bankrupt apply to the court for an order of discharge, and the court shall appoint a
day for hearing the application.
• Discharge by the DGI -s. 33A (1) : The DGI may, in his discretion but subject to s. 33B,
issue a certificate discharging a bankrupt from bankruptcy.
• s. 33B (2A) (d) : ...no objection shall be made against a bankrupt suffering from
a serious illness certified by a Government Medical Officer.
• applications before the DGI: the JC cannot object to the applications based on
serious illness
• applications before the court: not so. NO restrictions when before the Court.
• Bankrupts had not satisfied the court on grounds for a discharge. Accordingly,
appeal dismissed with costs for the JC.
 Discharge of bankrupt by order of court
(s.33IA)
Under s.33(4) IA where at the hearing the court is satisfied that
the bankrupt has committed an offence under Part VII (s.109-
114) of the IA, or under s.421,422,423 or 424 of the Penal Code,
the court shall, unless for special reasons it otherwise
determines-
a) refuse the discharge; or
b) order the discharge but suspend the operation of the
order until a dividend of not less than 50% has been paid
to the creditors.
 Discharge of bankrupt by order of court
(s.33IA)
Section 33(6) IA is a long list of activities that should not be indulged
in by a bankrupt. On the proof of any of the facts mentioned in
s.33(6) of IA, the court shall either:
a) refuse the order;
b) allow the discharge but suspend the operation of the order for
a specified time;
c) allow the discharge but suspend the operation of the order
until a dividend of not less than 50% has been paid to the
creditors; or
d) grant an order of discharge subject to any conditions with
respect to any earnings or income which may afterwards
become due to the bankrupt or with respect of this after-
acquired property.
 s.33(5) IA If after the expiration of 2
years from the date of any order
Discharge of made under s.33 IA, the bankrupt
bankrupt by satisfies the court that there is no
reasonable probability for him to
order of court comply with the terms of the order, the
(s.33IA) court may modify the terms of the
order .
 Discharge by Director General of Insolvency
(DGI)’s certificate (s.33A IA)
Issuance of certificate of discharge.
1. s.33A (1) – the DGI may in his discretion issue a certificate
discharging a bankrupt from bankruptcy.
2. s.33A(2) – A certificate discharging a bankrupt from
bankruptcy shall not be issued unless a period of 5 years
has lapsed since the date of the bankruptcy order.
3. s.33A(3) – Where the DGI has issued a certificate of
discharge the DGI shall give the notice of discharge to the
Registrar and shall advertise the notice in a local
newspaper.
 Discharge by DGI’s certificate (s.33A
IA)
Objection by creditor to discharge of bankrupt by DGI’s certificate.
1. s.33B(1) IA – Before issuing a certificate of discharge the DGI shall
serve on the creditor who has filed a proof of debt a notice of his
intention to issue the certificate of discharge.
2. s. 33B(2) IA – a creditor who wish to object to the issuance of the
certificate shall furnish the DGI with notice of objection stating
the grounds of objection within 21days from the date of service
of the notice to issue the certificate of discharge to him.
3. s.33B(3) IA If a notice of objection is not furnished the creditor is
deemed to have no objections to the discharge.
 Discharge by DGI’s certificate (s.33A IA)
s. 33B(4) IA If his objection has been rejected by the DGI, the
creditor may file an application to the court within 21 days from
the date he was informed of the rejection by the DGI, for an order
prohibiting the DGI from issuing the certificate of objection.
33B(5) IA The application must be served on the DGI and the
bankrupt(s.).
s. 33B(6) IA the court may after hearing the DGI and the bankrupt–
i. dismiss the creditor’s application;
ii. make an order that for a period not exceeding 2 years a certificate of
discharge shall not be issued by the DGI.
 Discharge by DGI’s certificate (s.33A IA)
See Asia Commercial Finance (M) Bhd v Bassanio Teo Yang [2009] MLJU 313

Re Benny Ong Swee Siang, ex parte United Overseas Bank (M) Bhd
(formerly known as United Overseas Finance (M) Bhd) [2016] 8 MLJ
805
The JD was adjudged a bankrupt on 6 October 1998. The DGI wrote
twice to the JD at his last known address to attend a meeting but the
JD did not respond and his estate was left un-administered.
Consequently the DGI on 10 July 2012 issued a notice of intention to
issue a certificate of discharge in respect of the JD. The JC served its
notice of objection.
Contd. Discharge by DGI’s certificate (s.33A IA)

The DGI rejected the JC’s notice of objection on the grounds that –
i. The case had been administered for 16 years;
ii. The JD could not be located despite actions taken by the
Insolvency Department;
iii. The JD has no known assets to be distributed to the creditors and no
dividends could be declared to the creditors.
The JC applied to court to prohibit the DGI from issuing a certificate of
discharge to the JD under s 33B(4) of the Bankruptcy Act 1967 (now
s.33B(4) IA). The JC contended that the certificate of discharge ought
not to be issued because the JD’s estate in bankruptcy has not been
administered. The JD had been left to lead a normal life
notwithstanding he had been adjudged a bankrupt.
The senior assistant registrar dismissed the JC’s application and hence
the appeal by JC.
 Contd. Discharge by DGI’s certificate (s.33A IA)

High Court held:

a) Pursuant to ss 33A and 33B of the Act, the DGI does not have the
absolute discretion to issue the certificate of discharge. The DGI’s
exercise of the discretion is plainly subjected to the provisions in s 33B.
It must be made judiciously depending on the circumstances of
each case.
b) From the information furnished by the JC, the JD had been and was
still gainfully employed as a lecturer in Penang. In other words, he
was traceable. The court was thus not satisfied that the DGI had
utilised all reasonable endeavours to locate him.
c) This was the situation of an un-administered estate in bankruptcy. The
procedures such as meeting of creditors, public examination of
debtor and other administrative tasks as laid down in ss 15–17 and 40–
69 of the Act had not yet been undertaken to date.
 Contd. Discharge by DGI’s certificate (s.33A IA)

d) There had been no recovery of the judgment debt to date

from the JD which ought to have been the dividends paid
out from the realisation of the assets of the JD. If the
certificate of discharge was issued, the JD would get off
scot-free.
e) It was just and expedient that the appeal should be
allowed. Accordingly, the DGI should forthwith procure the
attendance of the bankrupt JD and commence the
administration of the estate in bankruptcy.
Discharge by DGI’s certificate (s.33A IA)
Mayban Finance Bhd v Lee Kee Sen [2014] 10 CLJ 543
• It was held that the burden is on the DGI to prove
reasonableness for a discharge. A bankrupt cannot be
discharged at the cost of commercial morality and public
interest. There is need to strike a balance.
 Discharge by DGI’s certificate (s.33A IA)
Under s. 33B(2A) IA, no objection shall be made against –
a) A social guarantor (See s.2 IA for definition of social
guarantor);
b) Person with disability;
c) A deceased bankrupt;
d) A bankrupt suffering from a serious illness certified by a
Government Medical Officer.
 Automatic discharge (s.33C IA)
1. This is a new provision under the IA 1967
2. S. 33C(1) IA provides that an adjudged bankrupt may
be discharged from bankruptcy upon expiration of 3 years
from the date of the submission of the statement of affairs if:
(i) the bankrupt has achieved the amount of targeted
contribution set by the DGI; and
(ii) the bankrupt has complied with the requirement to
render an account of moneys and property to the DGI.
 Automatic discharge (s.33C IA)
S. 33C(2) : The targeted contribution shall be determined by the DGI
upon considering amongst others the following factors:
(i) total debts of the bankrupt;
(ii) the current monthly income of the bankrupt;
(iii) current monthly income of the bankrupt’s spouse that may
contribute to the maintenance of the bankrupt’s family;
(iv) prospective monthly income of the bankrupt during the
bankruptcy;
(v) expenses for maintenance of the bankrupt and the bankrupt’s
family; and
(vi) total property of the bankrupt which may be realized during the
period of 3 years.
 Automatic discharge (s.33C IA)
s.33C(3) IA The DGI is required to serve a notice of discharge to each creditor at
least 6 months before the expiration of the 3 years but the notice shall not be
served earlier than a year before the expiration of the 3 years (Upon receiving the
notice from the DGI, the creditor may file an application to court within 21 days
from the date of receipt of the notice, objecting the discharge from bankruptcy.

• However, the objection shall only be made on the following grounds:

(i) that the bankrupt has committed an offence under the IA or s.421, 422, 423
or 424 of the Penal Code pertaining to fraudulent deeds and dispositions of
property;
(ii) the discharge would prejudice the administration of the bankrupt’s estate;
or
(iii) the bankrupt has failed to co-operate in the administration of estate.
See s.33C(4) IA.
 Automatic discharge (s.33C IA)
s.33C(6) IA The notice of application to object shall be served on the
DGI and the bankrupt at least 14 days before the hearing of the
application ().

On hearing of the application for objection, the court may order the
following:
(i) dismiss the application and approve the discharge; or
(ii) suspend the discharge for a period of 2 years.

s.33C(8) IA In the event the court made an order to suspend the

discharge, the bankrupt shall continue to fulfil his obligations under the IA
during the period of suspension and be discharged automatically at the
expiry of the 2 years’ period
s.33C(9) IA - the issuance of certificate of discharge
Effect of discharge
• s.35(1) IA Depending on the conditions imposed, a
discharge shall release a bankrupt from all debts .

• S.35(1) – (5) IA – A discharge shall not operate to release

the bankrupt from any debts due to the government or
any branch of public revenue, or due to any person under
any offence, fines or fraud or fraudulent breach of trust.
 Annulment of Bankruptcy Order (‘BO’)
s. 105 IA Annulment of adjudication and its effects:
1. Grounds to annul bankruptcy order: s.105(1): A court may annul a bankruptcy
order under the following circumstances:-
(a) where in the opinion of the court the debtor ought not have been adjudged a
bankrupt. Burden is on the bankrupt; or if he has committed no act of bankruptcy
or if the creditor was not entitled to obtain the order. The burden is on the
bankrupt to prove that he ought not to have been adjudged bankrupt.
(b) All debts have been paid in full; or
An application to annul the bankruptcy order on the ground that the debt has been
settled cannot be allowed unless the court is satisfied that all debts which have been
actually and properly proved in the bankruptcy have been settled in full. An
unconditional release by the creditors is not sufficient as a ground for the
application. Thus, where the creditor has agreed to accept a lesser sum in full
satisfaction of its claim, it may still object to the bankrupt’s application for annulment.
 Annulment of BO
Settlement of debt should not be made without the knowledge of the DGI. All dealings with
the estate must be made through him or joining his as a party. Any settlement made without
his involvement is not binding on the estate and is invalid.
(c) all the property in Singapore and distribution ought to be effected there and there is
nothing to administer in Malaysia. 2. Effect of annulment of bankruptcy order 1. It
terminates the bankruptcy 2. The debtor is reinstated into his original position
3. All property will re-vest on him except those that have been disposed.
It should be noted that a bankruptcy order would also be annulled by the court if the
composition or scheme proposed by the bankrupt is approved by the court but in such a
case, the annulment is not pursuant to an application of the bankrupt for annulment.
4. In hearing the application, the court should take into consideration the following:
(a) Bankrupt’s conduct
(b) Interest of the creditors
(c) Interest of the public
 Annulment of BO

See : Re Peter Wong [1958] MLJ 116

Re Yong Tet On Paul [1996] 1 MLJ 721
Re Seow Yin Foong, ex parte United Orient Leasing Co Bhd & Anor [1994] 2 CLJ 845

Bungsar Hills Holdings S/B v Dr. Amir Farid Datuk Ishak [2003]
The issue to be determined was whether there was sufficient grounds for the court to annul
the AO and rescind the RO. Debtor was in the middle of negotiating settlement and was
not aware of the bankruptcy notice that was served by way of substituted service.
CA:- (i) appeal dismissed. S.105(1) was a discretion and the judge had exercised it
correctly. No reason to meddle with the judgment.
(ii) By annulling the AO on the ground that ‘the debtor has money tied up somewhere’,
might open the floodgate where debtors who neglect to oppose a petition can later
be freed from adjudication by resorting to s 105(1) .
(2) where the court is satisfied that the debt has been paid in full with the knowledge of the
DGI. All dealings should be made through the DGI –
 Annulment of BO
On appeal to FC [2005] 2 AMR 749:- dismissed the appeal by the judgment creditor. Reversed
the decision of the CA and reinstated the decision of the HC in annulling the AO and RO. -
exercise of discretionary power under the first limb of s 105(1)
Abdul Hamid b Mohamad, FCJ
(a) the phrase "where in the opinion of the court a debtor ought not to have been adjudged
bankrupt, ..." covers not only purely technical grounds like defective service of the bankruptcy
notice or the creditor's petition but also other legal grounds e.g. an abuse of the process of
the court.

(b) While the debtor's "ability to pay his debt" may not be a "technical ground", it is a "legal
ground" which falls within the scope of the said phrase;

(c) the fact that the debtor did not appear at the hearing of the petition does not disqualify
him from applying for the annulment of the AO pursuant to s 105(1) of the Act;
(d) On the facts of this case, there is no reason for this court to interfere with the findings of
fact of the Learned judge that the respondent was solvent and was able to pay his debt or
with the exercise of his discretion."
 Annulment of BO

Kwong Yik Bank v Haw Chiew Yin [1985] 2 MLJ 452

Judgment was obtained in 1976 for RM30,000/-. Subsequently RM15,000/-
was paid towards the reduction of the judgment debt. By 1981 the
outstanding balance with interest was around RM30,000/-. Applicant issued
a bankruptcy notice and RO and AO was made. Subsequently a further
sum of RM6,000/- was paid in full and final settlement.
Respondent filed a motion to annul the RO & AO. HC allowed. Appellant
appealed.

FC:- On the records the bankrupt Respondent had failed to satisfy that the
proved debt had been fully paid.
The effect of an annulment is to wipe out the bankruptcy.
It would have been different if the application were for a discharge.
 Annulment of BO
Affin Bank Bhd v Abu Bakar Ismail [2017] 7 CLJ 282 (CA)
The judgment creditor ('the appellant'), appealed against the HC decision
affirming the decision of the Deputy Registrar to set aside and annul the
AORO pursuant to s. 105 of the Bankruptcy Act 1967. The appellant had
obtained judgment against the respondent in 2004. The respondent's first
application to annul the AORO was made on grounds that there was in
existence a Singapore Court of Appeal ('the SCA') order that the respondent
was solvent. The first application was dismissed by the SAR, and on appeal, the
HCJ granted the annulment.
However, on appeal the CA dismissed the appeal and reinstated the SAR’s
order.
The 2nd. application for annulment was on similar grounds. The appellant
objected against the 2nd. application on similar grounds.
HCJ considered both the SCA decision and the fact that for more than 4
years, the DGI was not able to assess the damages awarded by the SCA.
Contd. Affin Bank Bhd v Abu Bakar Ismail [2017] 7 CLJ 282 (CA)
The appellant’s strongest objection was the issue of res judicata.
CA:
• The AORO was rightly made at the material time as there was no evidence
of the respondent's solvency and/or ability to pay.
• When the SCA decision was delivered 33 days from the AORO, the
respondent had a right to apply under s. 105 of the Act as there was
sufficient evidence to show that he was solvent.
• The first application under s. 105 of the Act was not successful.
• However, in the second application, one of the main considerations was
the admission by the DGI not being able to assess damages. This additional
fact which transpired over a period of time would not attract res judicata.
• Therefore, the HCJ rightly exercised the discretion to annul given in s. 105 of
the Act.
Affin Bank Bhd v Abu Bakar Ismail [2020] 3 CLJ 739 (FC)-Allowing appeal with
costs
The bank thus obtained leave from this court to appeal against the decision
of the CA on the following questions of law
(i) where the courts had already found that the AORO had been rightly
made, whether the court may subsequently annul the AORO under s.
105(1) of the BA, on the basis that such orders 'ought not to have been
made', based on new arguments regarding the debtor's ability to pay his
debts or subsequent change of circumstances; and
(ii) whether the solvency of a debtor, under s. 6(3) read with s. 105(1) of the
BA, must necessarily relate to his ability to pay his debts as they became
due, as at the time of the hearing of the creditor's petition, and not relate
to his ability subsequent to the AORO made.
FC: The relevant date to consider whether the debtor was able to pay his
debts was the date of the making of the AORO. There was no evidence of
the debtor's solvency at the date of the bankruptcy order.
Affin Bank Bhd v Abu Bakar Ismail [2020] 3 CLJ 739 (FC)-Allowing appeal with costs
After the decision of the CA on the 2nd. annulment application, the bank
wrote to the debtor enquiring about the steps taken by the debtor to recover
the judgment sum awarded by the Singapore HC.
The debtor did not reply. The case of Bungsar Hill v. Dr Amir Farid was
certainly not the authority to support the debtor's contention that the date for
consideration whether a debtor ought not to have been adjudged a
bankrupt, was after the bankruptcy order was made. The position taken by
the debtor went against the principle of law. The first question was therefore
answered in the negative.
The solvency of a debtor, under s. 6(3) read together with s. 105(1) of the BA
must necessarily relate to his ability to pay his debts as they become due, at
the time of hearing of the creditor's petition. The solvency does not relate to
the debtor's ability to pay his debts subsequent to the making of the AORO.
Further, it related to 'commercial solvency' and not 'balance sheet solvency'.
Power of court to annul - Grounds for annulment
Re Subramaniam Palani; ex p Tharenpalan Subramaniam [2015] 6 CLJ 928 [HC]
The judgment debtor, Subramaniam' - JD was a partner in Subrita Enterprise that
appointed the judgment creditor, Tharenpalan - JC to carry out road surfacing
works. When Subrita Enterprise failed to pay the JC sued and obtained a Final
judgment against the JD on 25 June 2004 for RM17,500 with interest of 8% per
annum from 27 May 1995 till full settlement and costs of RM3,864. On 5 December
2011 a bankruptcy notice was issued against the JD for RM42,498.24. JC obtained
an order for substituted service. JC filed a creditor's petition on 2 January 2013
and again obtained an order for substituted service.
At the hearing of the creditor's petition on 26 February 2013, the SAR struck off the
bankruptcy proceedings because the creditor's petition was filed out of time
without leave for an extension of time to file the creditor's petition.
JC appealed successfully to judge-in-chambers and a RO & AO granted.
JD upon learning from a third party applied under s. 105(1) of the Bankruptcy Act
1967 to annul the RO AO, on the following grounds:
Contd. Re Subramaniam Palani; ex p Tharenpalan Subramaniam [2015] 6 CLJ 928 [HC]

• the bankruptcy process was irregular in that the creditors' petition was filed out of
time without leave or prior obtaining an extension of time and that he had not
been properly served and made aware of the bankruptcy proceedings.
• the court order for substituted service did not stipulate for a newspaper
advertisement of the bankruptcy notice and creditor's petition.
• computation of the amount due under the final judgment in the bankruptcy notice
was wrong by reason that it included pre-judgment interest that was already time-
barred by the Limitation Act 1953. If this interest was removed, the judgment debt
fell below the RM30,000 as provided in s. 5(1) of the BA
• therefore the ROAO was void.
• the date stated and used for the computation of the pre-judgment interest in the
bankruptcy notice was wrong, i.e. two days earlier than that stated in the
judgment.
Contd. Re Subramaniam Palani; ex p Tharenpalan Subramaniam [2015] 6 CLJ 928 [HC]

HC allowed the appeal with costs; SAR’s order granting AORO set aside:
(1) JD’s supporting affidavit did not state that the CP being out of time was. This
point was already dealt earlier on appeal by JC to the judge-in-chambers after
the CP was struck off by the SAR. Therefore, the court was functus officio on this
point.
(2) Although rr. 97 and 109 BR 1969 prescribe personal service of the bankruptcy
notice and creditor's petition, r. 110 also provide for substituted service.
(3) Although JC had complied with the substituted service order of the court, the
hearing of the creditor's petition against JD was conducted ex parte. Thus, by O.
32 r. 6 of the ROC, the ROAO may be set aside because ex parte order was not a
definitive order but only a provisional order.
It could be reviewed based on evidence and arguments subsequently adduced
by the opposing party. There was no prohibition against the review being
undertaken pursuant to s. 105(1) of the BA application rather than a setting aside
application that is normally done. (paras 32 & 33)
Contd. Re Subramaniam Palani; ex p Tharenpalan Subramaniam [2015] 6 CLJ 928 [HC]

(4) The merger principle did not automatically apply to all pre-judgment interest. –
- only if it was contractually agreed by the parties.
- It did not apply if pre-judgment interest is awarded under s. 11 of the Civil Law Act
1956 as is the case herein.
- Thus, JC had over computed the interest and the legally due sum as demanded in
the bankruptcy notice was excessive.
- the time barred pre-judgment interest must be discarded.
- It followed that the ROAO granted was void because it was less than the statutory
threshold of RM30,000/-
(5) Since bankruptcy proceedings result in personal inconvenience, grave financial
and reputational consequences, the JC must be vigilant and diligent.
(6) The misstatement of the date was fatal - more than a formal defect because it
misrepresented the originating basis of the bankruptcy proceedings.
Curable remedy in s. 131 of the Bankruptcy Act and r. 274 of the Rules respectively
should be sparingly resorted to.
Appeals in Bankruptcy
1. S.90(1) HC shall have jurisdiction to hear all issues.
2. HC may review, rescind or vary any order.
3. r.67 DGI not required to give security for costs.
4. Time for appealing shall be 14 days from the date
judgment / order appealed from was perfected –
extraction of signed/ sealed order
5. An appeal shall not operate as a stay of bankruptcy.
Reciprocal Arrangements - Singapore &
Other Countries
• S.104 – reciprocal recognition and arrangement relating
to Singapore and designated countries – Singapore,
Brunei, UK, Hong Kong, New Zealand, Sri Lanka, India.

• Effect is that the property of the bankrupt in these

designated countries will vest in the respective DGI who
will deal with the property and send the proceeds to the
DGI Malaysia less administrative expenses.
Reciprocal Arrangements - Singapore & Other Countries

Effect:
• The property of the bankrupt is these designated countries will vest
in the respective DGI who will deal with the property and send the
proceeds to the DGI of Malaysia less administrative expenses.

• Similarly, property in any jurisdiction will be vested in the OA

appointed in other jurisdiction where proceedings have been
opened in respect of the debtor in such other jurisdictions.
Contd. Reciprocal Arrangements - Singapore & Other Countries

Dato’ Kuah Tian Nam v. Tan Wring Peng [2009] 1 LNS 702
The Plaintiff who had been adjudged a bankrupt in the Republic of
Singapore instituted an action for the return of land transferred to the
defendant.
In reply the defendant, inter alia, contended that the plaintiff being a
bankrupt had no locus standi to commence the present proceedings.
HC: dismissed the plaintiff’s application as he had been adjudicated a
bankrupt by the Singapore Courts, and in the absence of leave from the
OA, he was incompetent to commence the present proceedings.
Recommended Reading:-

Gita Radhakrishna,'Insolvency Law: Bankruptcy and Companies Winding-up (CLJ, Kuala Lumpur 2019).
Chapters 6 and 7.

Cases
Lim Tee Keong v HLG Securities Sdn Bhd [2016] 3 MLJ 201 (CA)
Asia Commercial Finance (M) Bhd v. Bassanio Teo Yang [2009] 9 CLJ 413 [HC
Lok Kew Ex-parte: Nam Fatt Marketing Sdn Bhd & Another case [2019] 1 LNS 1162
Re Benny Ong Swee Siang, ex parte United Overseas Bank (M) Bhd (formerly known as United Overseas
Finance (M) Bhd) [2016] 8 MLJ 805
Affin Bank Bhd v Abu Bakar Ismail [2017] 7 CLJ 282 (CA)
Re Subramaniam Palani; ex p Tharenpalan Subramaniam [2015] 6 CLJ 928 [HC]