Bankruptcy Notice Procedures to Enforce Bankruptcy Action PDF

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BANKRUPTCY NOTICERahman to be advised whether he has any ground to set aside the Bankruptcy Notice and opposed the Creditor’s Petition served by Sri Murni Sdn. Bhd. on the following grounds and procedure to set aside Bankruptcy Notice and Creditor Petition. Where Rahman has a counter-claimed pursuan...

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BANKRUPTCY NOTICE Rahman to be advised whether he has any ground to set aside the Bankruptcy Notice and opposed the Creditor’s Petition served by Sri Murni Sdn. Bhd. on the following grounds and procedure to set aside Bankruptcy Notice and Creditor Petition.

1. Where Rahman has a counter-claimed pursuant to section 3(1)(i) of the Insolvency Act 1967; this section emphasizes that the land must be equal to or exceed the amount claimed and that no action in which judgment has been obtained can be taken. On the fact that Rahman had a counter-claimed in the default judgment claimed RM200,000 which is equal to the value of RM200,000.

2. In the case of Re Bankruptcy Notice (1934) c.431; Re A Debtor (1914) 3 KB 726 held that if the debtor had one or more of the above, he showed: a. that the amount claim was equal or exceeded; b. that it could not be identified in the case in which the judgment was obtained; c. that the essence of the claim had to be specified in the affidavit and that it had to be quantified and put in good faith and has a reasonable prospect of success. Applying to the case, Rahman failed to file within seven days, but section 3(1)(i) of the Insolvency Act 1967 provided that if he fails to comply seven days unless he satisfies the court that he has a counterclaim equal to the sum set out in Judgment Debt. Rahman should file an affidavit of the procedure to set aside claims that he has such an argument equal to that of Sri Murni (Rule 95 BR 1969). The duration of time needed to file an affidavit is 7 days. Accordingly, Rahman should have objected at the Bankruptcy Notice stage and not at Creditor Petition by submitting an affidavit-supported summons in chambers under rule 18 BR 1969.

In MBB v Datuk Lim Kheng Khim (SC) where the debtor denying and challenges the amount owed, he may request that summons be set aside in chambers backed by an affidavit as provided by Rule 18 BR 1969 and not by an affidavit under Rule 95 BR 1969. The application may be sent within 7 days or afterwards. Since the counter-claim is similar to what Sri Murni Sdn Bhd says, there is a cause to object.

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3. A surplus sum in Bankruptcy Notice - the Creditor Judgment is required to strictly comply with the terms of order or Judgment. About the sum claimed as RM275,000 instead of RM200,000, section 3(2)(ii) the Insolvency Act 1967 would be the sum claimed as resorting. Must object Creditor Petition stage as in Dato Hj. Muhammad Bin Hamzah v Public Bank; Re Arunachalam; and D&C Bank v Datuk Ong Kian Seng at the Bankruptcy Notice stage. As far as the case is concerned, Rahman did not do so at Bankruptcy Notice stage and therefore this question cannot at this point be a basis for opposition to the Creditor Petition .

4. Non quantified interest - from the date of judgment, the Bankruptcy Notice notifies 12 per cent per annum and costs the sum of RM15,000. Section 3(1)(i) the Insolvency Act 1967 includes quantification of the interest before Bankruptcy Notice’s issue date. The Supreme Court held that such Bankruptcy Notice is bad in Ghazali Mat Noor and in Fauzia Osman case. The judgment creditor should estimate the interest, and not to determine the amount for the judgment debtor. Bankruptcy Notice's demand must be absolute and reasonable and the decision must know at once how much it has to pay because it has very little time to comply with the Bankruptcy Notice. At Bankruptcy Notice point Rahman will oppose it.

a. Irregularity of Bankruptcy Notice regarding service and validity of Bankruptcy Notice The irregularity of service that Sri Murni served the Bankruptcy Notice to Rahman 's wife Jelita. BR 1969 Rule 97, 109 and Rule 111 stipulated that Bankruptcy Notice must be personally served to Rahman and must be proved by an affidavit. Sri Murni may apply for substituted service in compliance with Rule 110 BR 1969, for substitute service to succeed the court must be satisfied that personal service is unlikely as Rahman can evade or the substitute service method sought is successful in informing Rahman and Sri Murni has not complied with the procedure Note 1/68. In this case, the service is bad and will be ground to set Bankruptcy Notice aside and also ground against the petition to challenge or show cause. b. The validity of the Bankruptcy Notice issued on 4th December 2019 and served on 1st May 2020 is against the rule 96 BR 1969 that stipulated the duration of the Bankruptcy Notice is three months from the date of issue. If Sri Murni wants to extend the validity 2

period Sri Murni may apply to the court but this was not done and the Bankruptcy Notice has been expired when it served. It is to be noted that this kind of irregularity is serious according to the section 6 the Insolvency Act 1967 and rule 106 of BR 1969, and it is the ground to challenge of Bankruptcy Notice and Creditor’s Petition stage as well.

On the irregularity of Bankruptcy Notice is the ground other than the counterclaim, that proceed under rule 18 BR 1969, Rahman shall apply by way of Summon in Chamber supported by Affidavit in Datuk Lim Kheng Kim v MBB . This application can be done in the stage of Bankruptcy Notice.

5. That the summary judgment obtained is not final. According to the section 3(1)(i) of the Insolvency Act 1967 provides that a definitive judgment or order has to be obtained by the creditor. A final judgment or order is one which eventually disposed of the parties' rights and this shall include a judgment in default not set aside and a summary judgment not set aside or appealed against as in Re Udos Ak Rigging was held JID is not a final judgment as JD has applied to set it aside. If JD has not applied to set it aside within the time period, then the JD would crystalise into a final judgment. Meanwhile in Michale Kho Miang How court held that filing of an appeal renders the lower court’s judgment as not final.

Sri Murni secured summary judgment against Rahman on the facts he did not file an appeal. The summary judgment thus constitutes a final judgment within the context of Section 3(1) (i) the Insolvency Act 1967. Hence Rahman cannot challenge the Creditor’s Petition.

6. The next question is whether the completion of the Creditor’s Petition on 9 July 2020 will be the basis for disputing the petition. a. The Creditor’s Petition must be presented within 6 months after the act of bankruptcy pursuant to section 5 the Insolvency Act 1967. b. On the facts, the act of bankruptcy was committed on 12th May 2020 after 7 working day from 1st May 2020 the Creditor’s Petition was served 9th July 2020. c. Since the Creditor’s Petition was served with 6 months, Rahman has no ground to challenge the issue in Creditor’s Petition stage. 3

7. If the Affidavit of Truth of Petition issued on 7 July 2020 before the presentation of the Creditor’s Petition on 9 July 2020 could be rooted in opposition to or challenge Rahman's Petition. a. In Sobri Arshad v Associated Tractor Sdn Bhd that affidavit to verify creditor’s petition was affirmed 1 day before the presentation of the petition, held the petition is nullified and cannot be cured by section 131 the Insolvency Act 1967. b. In Koh Kim Kuang v MBF Finance Bhd , the petition was confirmed by affidavit that had been affirmed before the petition was filed. Court held that section 6(1) BA 1967 and Rule 106 BR 1969 stipulate that the petition of a creditor shall be confirmed by affidavit, but shall not prescribe the time for confirmation of the affidavit. The petition lodged here is valid. In conclusion, the decision in Koh Kim Kuang v MBF Finance Bhd is followed, then the petition is valid and Rahman cannot oppose the Creditor’s Petition.

Finally, Rahman to be explained the procedure for showing cause against the petition according to Rule 117 BR 1969 when a debtor wants to show cause by filing a notice in Form 16 with the Registrar stating the claims in the petition that he wish to deny or challenge and send a copy of the notice to the petitioner (Creditor and his solicitor) 3 days before the petition hearing. The notice to be supported by affidavit, however, an affidavit in opposition is held not a notice under rule 117 which is mandatory and is not curable under section 131 the Insolvency Act 1967.

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