Tutorial 4, Q5 (T1V, L1)

Question 5
On 15 March 2017 BBB obtained Judgment against Borrower at the Melaka High
Court for the sum of RM 350,000-00 with interest and costs. On 5 June 2017 personal
service of Notice of Bankruptcy was effected on Borrower. As Borrower did not
respond to the bankruptcy Notice, BBB proceeded to apply for a creditor’s petition,
served it on 15 Nov. 2017. Borrower, by borrowing from various family members
paid BBB a sum of RM150,000-00 and was seeking time to pay the balance on the
basis that he was trying to sell of certain property that he has in Singapore that was
valued at more than RM1 million. Meanwhile bankruptcy order was made against
Borrower on 23 December 2017.
Borrower seeks your advice on setting aside the bankruptcy order as he was not aware
of its service since he was busy in Singapore arranging for the sale of his property.
Advise Borrower.
Answer
The issue here is whether the bankruptcy order as against Borrower can be set aside?
The topic on annulment is most suitable for this question to set aside the bankruptcy
order since it has already been granted as against Borrower. He didn’t try to set aside
the bankruptcy notice before the creditor’s petition was issued and he even didn’t
show cause against the creditor’s petition if he couldn’t have set the bankruptcy notice
aside before this. Thus, the best option for him now is to see if there can be any
annulment for the bankruptcy order against him. Annulment makes a bankruptcy
order void ab initio, and it has the effect that such order has never been made before
and this restores the debtor’s position to his pre-bankruptcy position as a judgment
debtor only. This is better than the discharge of a bankrupt as this process declares JD
a bankrupt and only will happen when DGI finish paying all the debts due to the
creditors. S. 105 (1) IA 1967 states that the bankruptcy order may be annulled where
(a) it ought not to have been made at all such as defective notice, service,
non-existence of debt, (b) debts of bankrupt are paid in full, or (c) there are
proceedings pending in Singapore. In the case of Perwira Affin Bank v Sardar Md.
Roshan Khan & Anor, at the COA level, it was held that the steps taken by a bankrupt
in civil action or proceedings without the previous consent of the OA in contravention
of s. 38 (1) (a) are null and void. It was held that an annulment of the bankruptcy does
not take effect retrospectively but from such date as the order is made. The civil
proceedings taken by the Respondent during the period of his bankruptcy are
therefore null and void. Thus, the Appellant’s appeal was allowed. However, at the
FC level, they reversed decision of COA annulment order was to operate
retrospectively. It is remitted to the Court of Appeal for the same corum to hear and
decide on the substantive issues of this appeal based on the principles as determined
that the annulment of the appellant's bankruptcy acts retrospectively. This is because a
bankrupt is incompetent to maintain an action without prior sanction of the DGI and
an annulment order did operate retrospectively because debtor had already paid back
to the bank before BO is given. S. 105 (2) states that when bankruptcy order is
annulled, all sales and disposition of property and payments and acts done by DGI or
other person acting under this authority shall be valid but property shall vest in such
person as the court appoints or to the debtor. S. 105 (3) states that notice of annulling
a bankruptcy order shall be gazetted and published in at least one local newspaper.
Applying here, Borrower claims that he was unaware of the service of the bankruptcy
notice, creditor’s petition or bankruptcy order. He managed to pay RM150,000 out of
RM350,000 of debt to BBB. He was even seeking for more time to pay the balance on
the basis that he was trying to sell of certain property that he has in Singapore, which
meant that he had informed BBB about what he was doing in Singapore. The question
is also silent on whether service was done against Borrower’s family members, which
can be another point for Borrower to use against BBB’s bankruptcy order against him.
Based on S. 105 (1) (a), the bankruptcy order against him can be annulled on the
ground that it ought not to have been made at all as there was defective service. Based
on the case of Perwira Affin Bank v Sardar Md. Roshan Khan & Anor, it was held at
the FC that an annulment of the bankruptcy does take effect retrospectively but from
such date as the order is made. This is because Borrower had already paid part
payment to BBB before the bankruptcy order was granted. This means that the
bankruptcy order as against Borrower can be set aside. S. 105 (2) and (3) will come
into play then, wherein all sales and disposition of property and payments and acts
done by DGI shall be valid but property shall vest in such person as the court appoints
or to Borrower now. The notice of annulling a bankruptcy order shall be gazetted and
published in at least one local newspaper as well now.
In conclusion, the bankruptcy order as against Borrower can be set aside based on S.
105 (1) (a)
Prepared by ,
Marvin Raja
1161100438

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