Lecture 4: A Second or subsequent

Bankruptcy/ Bankruptcy Order

4.1 A Second or subsequent Bankruptcy
• S49 IA 1967, allows for second bankruptcy.
However, the two must be administered
separately.
• Any property acquired by the bankrupt after the
Single Order Bankruptcy (previously Adjudication
Order) must be treated as an asset belonging to
the 1st Bankruptcy.
• Case: Re Othman b Abu Bakar ex p Official
Assignee [1954] MLJ 75 - the asset cannot benefit
the creditors in the 2nd. Bankruptcy until the
creditors in the 1st. have been paid in full.
4.1 A Second or subsequent Bankruptcy
• Case: Sama Credit and Leasing S/B v Pegawai Pemegang Harta
Malaysia [1995] 1 MLJ 274
Facts: The appellant creditor had obtained an RO and AO against
the judgment debtor. However unknown to the appellant the
debtor had already been adjudicated a bankrupt 2 years earlier-
1st. bankruptcy. The respondent OA applied to the HC to set aside
the 1st. bankruptcy on the grounds that the RO & AO should not
have been granted as the debtor’s 1st. bankruptcy was still
subsisting, the appellant’s debt should be proved in that 1st.
bankruptcy.

The SAR refused the application. On appeal the HC J found that

since a RO was in force, no further action could be commenced
against the debtor without the leave of court under s.8(1) BA. And
that a bankruptcy search had not been made. On further appeal to
the SC.
4.1 A Second or subsequent Bankruptcy
•SC Held:- appeal allowed.-
RO and AO of 2nd. bankruptcy reinstated.
(i) s.8(i) deals with the effect of RO as opposed to an AO and restrict the
remedies against the property or person in respect of any debt provable
in bankruptcy.
(ii) Ss 49 (1) and (2) permit subsequent RO and AO against an
undischarged bankrupt.
(iii) The powers to rescind and annul a RO and AO are discretionary and
an appellate court would not disturb the finding of a HC unless there was
a strong case to do so.
(iv) A failure to conduct a bankruptcy search per se is not fatal but a
factor to be considered.
4.1 Other issues the Court may consider
• A petition founded on a sum which is below the minimum sum allowed
would be dismissed:
• Re Mat Shah, ex parte Raghbir Singh [1981] 2 MLJ 159
• Soo Kok Loong v Hong Kong & Shanghai Banking Corporation Ltd [2009] 6
CLJ 62 CA.

• The court could still make a bankruptcy order even if the judgment debt on
which the creditor's petition is founded has, by the date of the hearing of
the petition, been substantially reduced, unless the judgment debt is less
than the statutory minimum:
• Re Loh Kok Huah, ex parte Ban Hin Lee Bank [1992] 1 MLJ 687 / [1991] 3 CLJ
(Rep) 183
• Re MSA Zachariah, ex parte Boon Siew Finance Bhd [1993] 2 AMR 1158 /
[1993] 3 CLJ 279
• Moscow Narodny Bank Ltd v Ngan Ching Wen [2005] 3 MLJ 693 FC / [2004] 2
CLJ 241
• Soo Kok Loong v Hong Kong & Shanghai Banking Corporation Ltd [2009] 6 CLJ
62 CA
4.1 A Second or subsequent Bankruptcy
• Case: Bungsar Hill Holdings Sdn Bhd v. Dr Amir Farid Datuk
Isahak [2005] 2 AMR 749
The Federal Court dismissed the appeal by the judgment
creditor against the decision of the Court of Appeal in
upholding the decision of the learned High Court Judge in
annulling the adjudication order and rescinding the receiving
order.
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 covers
other legal grounds like an abuse of the process of the court.
4.1 A Second or subsequent Bankruptcy
• 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.

• In the circumstances of this case, the fact that the debtor

did not appear at the hearing to contest the petition does
not disqualify him from applying for the annulment of the
adjudication order pursuant to s 105(1) of the Act.

• 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.
4.1 Other issues the Court may consider
• At the hearing of the petition, it is not mandatory for the
petitioning creditor to prove the debt again through cross
examination especially when the affidavit verifying the
petition was never challenged. Further the 'personal
attendance' of the petitioning creditor is not required and
the attendance of the counsel is sufficient.
• Case: Affin Bank Bhd v Tan Sri Kishu Tirathrai [2008] 3 MLJ
72
4.1 Other issues the Court may consider
• After the expiration of one month from the day appointed for the
first hearing of the petition (provided the petition shall have been
duly served), no adjournment is allowed unless the debtor has given
prior notice that he intends to show cause against the petition:
• Rule 126 IR
• Section 93(2) IA
• Case: Re Tan Eng Niang, ex parte Ng Choo Kwan & Sons Hardware
Sdn Bhd [2003] 4 MLJ 679 / [2003] 1 LNS 365

• Jurisdiction - Reinstatement
• Case: BBMB Factoring Bank v Mariam Sasiman & Anothers Appeal
[2000] 3 CLJ
• Case: Re Yau Kin Mun ex p Public Finance Bhd [2001] 2 MLJ 185
4.2 Single Order Bankruptcy
• The old law has some confusing reference to Adjudication
Order (AO) and Receiving Order (RO). This has now been
simplified by a single order for bankruptcy whereby the
debtor will be adjudicated a bankrupt upon the granting of
a bankruptcy order (S4 IA 1967).
• Previously, when a RO was made, the DGI became the
receiver of the debtor’s property. The RO protected the
debtor’s property from being dissipated by did not have the
effect of making the debtor a bankrupt.
• The debtor was made a bankrupt only upon the issue of the
AO.
• See: Hong Leong Bank Bhd v Khairulnizam Jamaludin
(2016) 7 CLJ 335 (FC)
4.2 Single Order Bankruptcy
• Although the ROAO were usually made simultaneously, the
making of an AO does not necessarily follow the making of
an RO. If the debtor satisfied the court that he was in a
position to offer a composition or make a scheme or
arrangement acceptable to his creditors then an AO would
be made
• See: Re: Tan Sri Kishu Tirathraj; ex parte Affin Bank Berhad
[2007] 2 MLJ 53 (HC).
• However, today, when a Bankruptcy Order is made:
• No creditor can proceed with or commence any action or
other legal proceeding unless with the leave of the court
• Bankrupt’s property becomes divisible among his creditors
and vests in the DGI. DGI will be the receiver, manager,
administrator and trustee of all properties of the bankrupt.
4.2 Single Order Bankruptcy
• Section 8(1)(a) IA
• Creditor whose debt is provable in Bankruptcy cannot commence
any legal proceeding against the property or person of the
debtor without leave of the court:
• Case: Tanavanus Sdn. Bhd. v Simon Jungking Pingguan [1995] 2
MLJ 564.
• Case: Mohd Kamal Omar v United Overseas Bank (Malaysia)
Bhd & Other Appeals [2018] 5 CLJ 657 FC.

• Section 8 (1)(b) IA
• All the property of the bankrupt shall become divisible among his
creditors and shall vest in the Director General of Insolvency who
shall be the receiver, manager, administrator and trustee of all
properties of the bankrupt.
4.2 Single Order Bankruptcy
• It does not affect the right of any secured creditor to deal with his
security.
• s8 (2A) IA 1967 - notwithstanding subsection (2), no secured creditor
shall be entitled to interest on his debt if he does not realize his
security within 12 months from the date of the bankruptcy order. Case:
RHB Bank Bhd v Ya'acub Mohd Khalib [2008] 1 CLJ 80
• S8(3) IA 1967- Debtor shall within 24 hours after the order is served.
File an affidavit to the office of the DGI, containing a true and correct
statement of the name, residences of all the partners, and his business
and his principal assets and liabilities.
• Case: Tanavus S/B v Simon Jungking Pigguan [1995] 2MLJ 564
• HC:- (i) s.8(1) BA 1967 Once RO granted no creditor can bring an action
against the debtor except with the leave of the court.
• (ii) s.40(1) BA 1967 debt provable in bankruptcy – includes demand for
unliquidated damages under a contract – therefore leave of court is
necessary before commencement of any action against the debtor.
• Case: Mohd Kamal Omar v United Overseas Bank (Malaysia) Bhd &
Other Appeals [2018] 5 CLJ 657 FC.
4.2 Single Order Bankruptcy
• Cause of action vested in the DGI
• s.38(1)(a) IA 1967 a bankrupt shall not bring an action
other than an action for damages for personal injury
without the prior approval of the DGI
• Case: Chin Kon Nam & Anor v Chai Yun Phin Development
S/B [1996] 4 MLJ 271
• The cause of action here was based upon a breach of
contract by the D that occurred before the P’s bankruptcy.
s39(1)(a) BA 1967 applied and a prior sanction of the DGI
was necessary. Without that the P was not even competent
to engage an Advocate & Solicitor.
4.2 Single Order Bankruptcy
• Case: Re Chua Tin Hong ex p Castrol (M) S/B [1997] 2AMR
1253
• RO and AO been made against one Chua Tin Hong ('the
bankrupt') on 22 March 1991 upon the petition of Castrol
(M) Sdn. Bhd. ('Castrol'). On 4 September 1991, the
bankrupt transferred a piece of land ('the land') of which he
was the registered proprietor to his nephew ('the 1st
respondent') without consideration. On 4 October 1994,
the 1st respondent transferred the land to the 2nd
respondent for a consideration of RM79,964/-. On 28
February 1996, the OA ('the applicant') applied to the SAR
and obtained a declaration that the transfer of the land,
from the bankrupt to the 1st respondent and from the 1st
respondent to the 2nd respondent, was a voluntary
settlement under s. 52 BA 1967 and was void against the
applicant.
4.2 Single Order Bankruptcy
• HC Held:
• (i) The plain meaning of the word "action" in s.38(1)(a) BA is civil
action. Thus, the word "action" in s. 38(1)(a) is confined in its
operation to civil proceedings in court and not to a conveyance
of property

• (ii) s.52 is restricted in its application to settlements made prior

to a settlor being adjudged a bankrupt. In the present case, the
land was transferred after the act of bankruptcy of the bankrupt.
Therefore, reliance on s. 52 BA could not be sustained.

• (iii) The fact that the 2nd respondent had given valuable
consideration for the purchase of the land and had acted in good
faith brought him within the protection contemplated by s.
53(B)(3) .
4.2 Single Order Bankruptcy
• (iv) s. 24(4) must be interpreted as being qualified by s. 349 NLC in so
far as land is concerned. The registered title of a bankrupt does not vest
in the Official Assignee until a transmission is registered in the official
capacity of the latter; if a bankrupt transfers his interest in land to a
person who registers the transfer before any transmission is registered
by the Official Assignee, then the bankrupt's interest will,
notwithstanding his bankruptcy, pass to that person.

• (v) The applicant would be entitled to proceed under s. 340(2) NLC if he

could bring himself within the requirements of that section.

• (vi) In order to ensure that a registered proprietor of land who has been
adjudged a bankrupt does not deal with the land before it is vested in
the Official Assignee, the Official Assignee ought to caveat the land
under s. 323 NLC.
• (vii) 2nd. Respondent’s ( bona fide purchaser for value) appeal allowed.
4.2 Single Order Bankruptcy
• Read also the following cases:
• Re Khoo Kim Hock [1974] 2 MLJ 29
• Goh Eng Hwa v MS Laksamana Realty Sdn Bhd (2004) 3
MLJ
• 97 (CA)
• Akira Sales & Services (M) Sdn Bhd v Nadiah Zee Abdullah
& Another Appeal [2018] 2 CLJ 513 FC
4.2 Single Order Bankruptcy
• Case: Richard Trade & Development S/B v UMBC Bhd.
[1996] 4 MLJ 233
• A debtor who has any pending civil actions does not have to
withdraw such actions but merely obtain the consent of the
Director General of Insolvency (OA).
• No necessity to withdraw the action but only to obtain the
sanction of the Official Assignee where the Plaintiff was
made a bankrupt only after service of the Summons on the
Defendant.
4.2 Single Order Bankruptcy
• Case: Perwira Affin Bank v Sardar Md. Roshan Khan & Anor. CA [2009]
FC [2010] ] 2 CLJ 661
• The Respondent was the sole proprietor of Omar Khayam Enterprise.
The bank had granted banking facilities to him. On 4 March 1999, by
way of a writ the Respondent sought to recover a sum of RM233,155
with interest, on the basis of the bank's negligence and/or breach of
contract. However the Respondent was adjudicated a bankrupt on 27
March 2002. His bankruptcy was annulled on 19 October 2006.
However, he did not inform the OA or the trial Court of his bankruptcy
during the period from 27 March 2002 to 19 October 2006 ("the
Respondent’s bankruptcy period"). Instead, he proceeded to actively
prosecute the trial in the High Court. The trial took place between 28
October 2004 and 13 July 2006, within the bankruptcy period. On 29
November 2004, a month after the trial started, the Respondent filed
his statement of affairs with the OA /Director General of Insolvency. On
13 October 2006, the Respondent applied for an order of annulment of
his bankruptcy on the ground that he had settled all outstanding sums
due and owing to his creditors. Order for annulment was granted on 19
October 2006 ("the annulment order"). On 27 July 2007, the HC gave
judgment for the Respondent.
4.2 Single Order Bankruptcy
• CA:- Q. for determination is:-
• "Upon a true construction of s.38(1)(a), during the Respondent’s
bankruptcy period, was the Respondent competent to maintain an action
based on the bank's negligence and/or breach of contract and to actively
and vigorously prosecute the trial thereof without the previous sanction of
the OA?".
• Held:-
• (i) 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
• (ii) s.38(2) BA 1967 A bankrupt who makes default in performing or
observing this section [or a condition imposed pursuant to subsection (1A)]
shall be deemed guilty of contempt of court, and shall be punished
accordingly on the application of the Director General of Insolvency".
• (iii) An annulment of the bankruptcy does not take effect retrospectively
but from such date as the order is made.
• (v) The civil proceedings taken by the Respondent during the period of his
bankruptcy are therefore null and void.
• (vi) Appellant’s appeal allowed.
4.2 Single Order Bankruptcy
• On Appeal to FC: [2010] 2 CLJ 661
• FC: Reversed decision of CA - annulment order was
to operate retrospectively.
• ‘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’.
4.2 Single Order Bankruptcy
• Case: Tong Soon Tiong & Ors v FA Securities Sdn Bhd Civil
Appeal No 02-26- 2012(T) (FC)
• FC: Q: competency of a bankrupt as a witness. "Is the
evidence of a bankrupt, apart from his capacity as one of
the plaintiffs in an action, inadmissible, even though the
type and cause of action of the other plaintiffs are similar
as against the respondent (defendant)?"
• Upon being adjudged a bankrupt he is subject to some 10
restrictions :(see the Law and Practice of Bankruptcy in
Malaysia by Khoo Kay Ping)
4.2 Single Order Bankruptcy
• 1. disqualified from holding the office of a Member of Parliament
(Article 48 (1) of the Federal Constitution);
• 2. holding public office e.g. being appointed or acting as a Sessions
Court Judge, Magistrate or being nominated or elected to or holding
or exercising the office of Councilor of a local authority (s.37 IA
1967);
• 3. disqualified from being appointed or remaining as a Chairman or
director in statutory offices (Rule 2 (6) (b) of the First Schedule of
Bank Kerjasama Rakyat Malaysia Berhad (Special Provisions) Act
1978 (Act 202);
• 4. practising in certain professions (s. 11 (b)(ii) of the Legal
Profession Act 1976);
• 5. carrying on business or in partnership or by way of a company
(s.35 (1) of the Partnership Act 1961)
4.2 Single Order Bankruptcy
• 6. working in the business of a relative (s.38 (1) (e) (i) of IA
1967);
• 7. maintaining any action without the previous sanction of
the DGI other than an action for damages in respect of an
injury to his person (s.38 (1) (a) of IA 1967);
• 8. leaving Malaysia without the previous permission of the
DGI or of the court (s.38 (1) (c) and s.38 A (1) of IA 1967);
• 9. receiving pension or other gratuity (s.22 of the Statutory
and Local Authorities Superannuation Fund Act 1977); and
• 10. enforcing his rights under certain legislations (see s.
111(4) and (6) of the Income Tax Act 1967).
4.2 Single Order Bankruptcy
• Apart from the above he is free to contract, he may
witness a signature, affirm affidavits on condition
he discloses his bankrupt status and many others.
• Case: Gan Hong Hoe v Gan Kim Hee [1939] 1 MLJ
295;
• Case: Kwan Chew Shen v Citibank N.A. [1987] 1
CLJ 314;
• Case: Lim Wah Siang v Perwira Affin Bank Bhd
[1997] 1 MLJ 374
4.2 Single Order Bankruptcy
• A debtor therefore is thus not totally debilitated by his
bankrupt status. If a bankrupt were to be construed as
an incompetent witness, it would undo statutory
provisions that require a bankrupt to file an affidavit
giving a true picture of his assets at the DGI’s office,
public examination of the bankrupt etc. S.118 EA refers
to categories of witnesses who may be disqualified
from giving evidence by reason of tender age, extreme
old age, incapacitated by diseases whether of body or
mind, or any other cause of the same kind. Therefore
under the Evidence Act 1950 a debtor’s status as a
bankrupt is not a disability that will dilute his
competency to testify, especially if all the rules of
evidence have been complied with.
• FC Held: Debtor’s (6th. Plaintiff) evidence admissible
despite being a bankrupt
4.2 Single Order Bankruptcy
• Case: Ho Ken Seng v Progressive Insurance Sdn. Bhd.
(CA) [2012] 1 MLJ 297; [2012] 2 AMR 1
• FC: Q: ‘whether an undischarged bankrupt when
exercising his rights under s. 92 BA 1967 to review,
rescind or vary any order made by the Court under its
bankruptcy jurisdiction is required to obtain the
previous sanction of the Director General of Insolvency
pursuant to Section 38(1)(a) of the Act.’
• HELD: Section 38(1)(a) Bankruptcy Act not relevant
when a bankrupt invokes s92(2) or s.105(2) for a
review. a bankrupt is no longer required to obtain
sanction from the Director General of Insolvency
(“DGI”) to challenge or appeal against bankruptcy
orders made by the Bankruptcy Court.
4.2 Single Order Bankruptcy
• Case: Low Kok Tuan ex-parte Arab Malaysia and Merchant
Bank Bhd [1997] 4 CLJ 185, Bathamani Suppiah v Southern
Finance Company Bhd [2002] 2 CLJ 650 over ruled.
• Remitted to CA comprising a different panel to hear the merits of
the case.

• Case: Ng Yen Kok v AmFinance Berhad (formerly known as MBf

Finance Berhad Civil Appeal No M-03- 247-2009 (CA) [2012] 1
MLJ 297; [2012] 2 AMR 1
• Receiving order and adjudication order granted on the basis of an
invalid creditor’s petition were invalid, and therefore set aside. JD
obtained and BNotice was served by way substituted service.
However, Appeal Record did not contain the order for substituted
service. RO & AO set aside.
4.3 Annulment of Bankruptcy Order
• 1. S105 (1) IA 1967 – the bankruptcy order may be annulled where:
• (a) it ought not to have been made at all – defective Notice, service, non
existence of debt; or
• (b) Debts of bankrupt are paid in full: or
• (c) there are proceedings pending in Singapore

• 2. S105 (2) IA 1967– 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.

• 3. S105(3) IA 1967 – Notice of annulling a bankruptcy order shall be gazetted

and published in at least one local newspaper.

• Effect of an annulment
• - Terminates bankruptcy.
• - Debtor reinstated to the original position.
• - All property will re-vest except those that have been disposed.
4.4 Possession of property
• (1) s55 IA 1967 – the DGI shall take possession of the deeds, books and
documents of the bankrupt and all other parts of his property capable
of manual delivery.

• Case: Hasnah Che Hasan v Hongkong Bank Malaysia Bhd.[2010] 7

CLJ190
• Appeal by JD against the Deputy Registrar's decision dismissing her
application to rescind and annul the RO & AO made against her on the
following grounds –
• (1) that the bankruptcy notice (BN) and the creditor's petition (CP)
were not served at the JD's correct address;
• (2) the documents filed in court were tampered with;
• (3) the calculation of interest in the BN was inaccurate; and
• (4) the person purportedly authorised to act on behalf of the JC had no
authority.
• The JC raised an objection that the JD had no locus standi to set aside
the RO and AO (that were apparently given in the JD's absence in the
bankruptcy proceedings) without the previous sanction of the Official
Assignee under s. 38(1)(a) B A 1967
4.4 Possession of property
• Held (allowing JD's appeal):
• (1) Under s. 105(1)BA the jurisdiction to annul and rescind the RO and AO were
discretionary and the actual state of affairs at the date of the orders had to be
considered.
• (2) The sanction in s. 38(1)(a)BA did not apply to a bankrupt who sought the
court's discretion to set aside the RO and AO or any other orders against him in
the bankruptcy proceedings.
• (3) The facts showed that the BN and CP were not posted on the correct
premises of the JD and that the CP was not served by way of substituted
service. There was also no evidence to show that the JD was informed of any
adjournment or of the actual date of hearing of the CP when the RO and AO
were made against her.
• (4) The affidavit of service did not state who had directed him to serve the BN
and in what capacity he had served it. Further, r. 109 provided that the CP shall
be served by specified persons. The JC also did not comply with rr. 110 and
111(1) BR on substituted service.
• (5) The RO and AO stated that the JD was present in court when the CP was
called for hearing whilst the handwritten copy of the notes recorded by the
Deputy Registrar stated that the JD was absent. The JC blamed its previous
solicitors to have inadvertently stated that the JD was present. The presence of
the JD had a strong bearing on the determination of whether the BN was in fact
posted at the JD's correct premises and on the subsequent creditor's petition
purported to have been posted by way of substituted service.
4.4 Possession of property
• (6) The JC did not show any rebuttable evidence that the alterations in the BN
and affidavit thereto were done before the filing thereof. The alterations were
also not initialled by the deponent or the Commissioner of Oaths. The
reasonable inference was that the alterations were done after the affidavit was
affirmed and the BN signed by the Deputy Registrar. Such alterations or
tampering of evidence was inadmissible and rendered the BN bad in law.
• (7) There was no evidence to show that the deponent of the relevant affidavit
had the legal authority to commence the bankruptcy proceedings on behalf of
the JC. No explanation or rebuttable evidence was given nor was there a copy
of the power of attorney to show such authority.
• (8) As there was no explanation or rebuttable evidence on the difference in the
calculation of the interest, the JC was deemed to have accepted the JD's
contention of a miscalculation. The BN was therefore a nullity.
• (9) The period of delay had to be considered or assessed from the date the JD
knew or ought to have known of the RO and AO made against her. The JD only
came to know of the orders when she was informed by a financial institution
that she was not qualified to obtain a loan to purchase a vehicle. She then
appointed solicitors to obtain the details of the bankruptcy proceedings and
thereafter managed to obtain all the relevant documents from the insolvency
department.
• (10) It was not fair and equitable that the JD should have been adjudged a
bankrupt based on the cumulative effect of the defects found. The JD advanced
sufficient reasons in support of her application to rescind and annul the RO and
AO under s. 105 of the Act.
4.4 Possession of property
• (2) Properties that do not pass to DGI – s48(1)(a) IA 1967
• (i) property held on trust
• (ii) tools of the trade, necessaries to a value not exceeding
RM5,000/-

• s.68(2) & (3) IA 1967 - DGI may give the bankrupt an

allowance but court may reduce any such allowances and
limit the time for which it may be made. Even if the
bankrupt dies, the DGI may make allowances to his family.

• DGI has to honour all charges, liens, caveats. – Merchantile

Bank Ltd. v OA of the Property of How Han The [1969]

• Goods on hire purchase unless all installments have been

paid.
4.4 Possession of property
• 3. Property that can pass to the DGI:-s.48(1)(b)(i)
• all property that is vested in or acquired or devolves to him upon
commencement of
• bankruptcy and before his discharge.

• Property over which bankrupt can exercise rights

• Property under reputed ownership i.e. possession with the consent of

the owner at time of bankruptcy or acquired before discharge – to
protect creditors who may have given credit for goods to the bankrupt
unknowingly – s.48(b)(iii) “order and disposition clause”

• Foreign property – DGI may seek a conveyance or PA to take

possession of the property – s.27 IA 1967 on a failure to comply - a
bankrupt may be cited for contempt.

• Shares / shareholdings
4.5 Doctrine of Relation Back -s.47 IA 1967
• 1. This has far reaching effects on the bankrupt’s
dealings, property and actions from the time the
act of bankruptcy is committed. Its objective is to
protect creditors against fraudulent conveyances
and also to bar third party dealings with the
debtor.
4.5 Doctrine of Relation Back -s.47 IA 1967
• Case: Koh Lian Hee (a bankrupt) v Koh Thong Chuan &
Anor. [1997] 5 MLJ 186; [2003] 1 MLJ 113
• A father, three sons and brothers who controlled four
private limited companies, acted as guarantors to these
companies. 22 Sept. 1990 father conveyed property worth
RM1m to his youngest son (D1) vide a SPA. D1 paid off the
redemption sum and the said property was registered in his
name on 26 March 1991. Meanwhile on 15 Aug. 1991 a
creditor’s petition was presented against the father and on
3 July 1992 he was adjudged a bankrupt. In Sept. 1993 D1
charged the said property to D2. The OA claimed that the
transfer was void under ss 47 and 52
• HC Held:- effective date of conveyance of said property was
26 March 1991 which was within the 6 months of creditor’s
petition on 15 Aug. 1991. Therefore alleged to be a
fraudulent conveyance and caught under s.47 – relation
back
4.5 Doctrine of Relation Back -s.47 IA 1967
• Case: Koh Thong Chuan v The OA of the property of Koh Lian Hee,
Bankrupt [2003] 1 MLJ 113
• D1 and D2 in the above action appealed separately to the CA against the
decision of the HC.
• CA Held:- (i)s.349NLC landed property would only be vested in the plaintiff
by way of registration. Until then, the plaintiff only has an equitable
interest in the said property. Accordingly, the legal interest in the charges
acquired by the second defendant, as a bona fide purchaser for value and
without notice, would overreach the plaintiff's equitable interest. This also
rendered the second defendant's interest, as the registered chargees,
indefeasible.
• (ii) Though there was a finding of fraudulent transfer of the said property
the title of the said property had yet to be vested in the plaintiff pursuant
to s. 349 NLC .Therefore, the plaintiff only has an equitable interest in the
property.
• (iii) Whilst s. 53B(1) generally allows the OA to recover property from one
who acquires it from a bankrupt, s. 53B(3) provides an exception in respect
of one who has given valuable consideration and acted in good faith.
Consequently remedy is only against persons who entered into the
transaction with the bankrupt, i.e. the first defendant.
• (iv) First defendant's appeal dismissed with costs; second defendant's
appeal allowed with costs.
4.5 Doctrine of Relation Back -s.47 IA 1967
• Case: Abu Bakar b Jaafar & Anor. v MBB [1991]
[1991]1CLJ 492
• The Ps who was a partner in Pen Trading & Co.(Pen) ,
was a customer of the D bank and maintained current
and deposit accounts. MBB sued Pen and summons was
served on the Ps by way of substituted service –
newspaper advertisement. JID was obtained against the
Ps and MBB proceeded with bankruptcy proceedings.
The Notice was also served by way of substituted service
– newspaper advertisement. The Ds on becoming aware
of the bankruptcy proceedings informed the Ps that the
account was being frozen as per s.47(2). The Ps sued the
D Bank.
• Held:- Ds right in freezing the accounts under s.47(2) –
relation back. Once the Ds had knowledge vide the
newspaper advertisements s.54(1)(b) protection for bona
fide transactions did not apply.
4.6 Where creditor has issued execution –
s.50 IA 1967
• 1. Creditor cannot retain the benefit of the execution or attachment unless
he has completed and realized the proceeds of the attachment before the
bankruptcy order was made. For this purpose execution is completed
when:-
• Attachment of Goods or land – seizure and sale
• Attachment of Debt – receipt of the debt.(payment)
• Attachment of property – sale of property
• 2. Where an RO has been made and the creditor has not completed the
execution within 6 months of the RO, the creditor cannot retain the
benefit. Has to be handed over to DGI – Re Syed Ahmand & Co exp the OA
[1958] 1 MLJ 205.
• 3. Application of s50(1) BA 1967 is seen:
• Re Low Nai Bros & Co (1969) – the creditor took garnishee proceedings
after the RO was made. Held: he was not entitled.
(b) OA of property of Lim Chiak Kim v United Bank Ltd (1988) – Bank had
notice of the act of bankruptcy and the petititon before execution. Held:
not entitled.
4.7 Avoidances of voluntary settlement – s52
IA 1967
• 1. Voluntary settlement i.e. one without valuable consideration
though generally valid may be void against DGI i.e. property will
be ‘over-reached’ by DGI.
• 2. 1st limb: Any settlement of property by a settler who becomes
bankrupt within 2 years after the date of settlement will be void
against the DGI unless parties can prove:
• (i) settlements made before and in consideration of marriage
• (ii) settlements made in favour of purchaser or encumbrances in
good faith or for valuable consideration
• (iii) settlements made on or for the wife, children of the settlers,
of property which has accrued to him after marriage in right of
his wife.
• 3. 2nd limb: If a settler becomes bankrupt within 5 years after
the date of settlement, the settlement is void unless the parties
under the settlement can prove that the settler :
• (i) the settler was solvent at the time of the settlement
• (ii) the whole interest of the settler in such property passed on
the execution to the Trustee of such settlement
4.7 Avoidances of voluntary settlement – s52
IA 1967
• Case: Chin Yau King v. Liew Chi Shing @ Liaw Chi Shing & Anor
• P vide a Loan Agreement dated 5 Jan.2000 with the D1 lent D2
RM 155,000/-. On 17 Jan.2000 D1 ( 12 days later) conveyed land
by way of gift to his son D2. P commenced action for recovery of
loan on 21 March 2000. RO and AO were made on 13 Nov. 2003
• Issues to be tried were-
• (i) Whether the transfer of the land by the D1to the D2 was a gift
for love and affection as wedding present to the 2nd defendant.
• (ii) Whether the transfer was done with the intention of the 1st
defendant to defraud the plaintiff.
• (iii) Whether the 1st defendant, at the material time of the
transfer, had sufficient assets to cover the loan of RM155,000.00
provided to him by the plaintiff."
• HC Held :In this case the D1was already made a bankrupt and the
DGI is not made a party, as such P’s claim dismissed. Though
transactions came within scope of s. 52 the DGI was not made a
party and so
• P’s claim dismissed.
4.7 Avoidances of voluntary settlement – s52
IA 1967
• Case: Ooi Siew Chin v Jemari Bhd. & 3 Ors. [2009] 1LNS 1355
• Contracts entered into by an undischarged bankrupt without
knowledge of DGI – void.

• Case: Senator Ibrahim b Hj Yaakob,(bankrupt) v Siti Ramlah b

Bajau [1991] 2 MLJ 479
• Here property of the bankrupt held jointly with his wife included
half share under ‘harta perncarian’
• Held:- Upon death of bankrupt, wife entitled to her half share of
joint property under ‘harta pencarian’.
4.7 Avoidances of voluntary settlement – s52
IA 1967
• Case: Silver Corridor Sdn Bhd v Gallant Acres Sdn Bhd & Anor.
[2015] 9 CLJ 919, CA - Grounds of Judgment dated 01.09.2015
• For a company under liquidation, section 293 of the Companies Act
1965 had to be read either with section 52 or section 53 of the
Bankruptcy Act 1967 to determine whether certain transactions,
• disposals or payments involving the assets of the company were
void or voidable for the reason that it constituted an ‘undue
preference’ as against the assets or creditors of the company
concerned.
• Section 52 is the applicable provision when the challenge was that
the disputed transaction was not entered bona fide and/or for
favourable consideration whereas section 53 would only be relevant
in a situation where the company is already insolvent and the
challenge is to invalidate certain disposals or payments effected to
some creditors or beneficiaries, in preference to others or the
general body of creditors.
4.7 Avoidances of voluntary settlement – s52
IA 1967
• Case: Lim Chiew v Lee Chao Yong & Anor * Another Appeal [2018]
1 LNS 1025 CA
• (i) As the Liquidator had rightfully exercised his discretion to admit
the Proof of Debt based on his investigation which he had
particularised in his affidavit and supported with documents, it
cannot be said that the conduct of the Liquidator was so
unreasonable and absurd that no reasonable person would act. As
such, the Court will not interfere with the Liquidator's exercise of
discretion.

• (ii) Given the delay of 2 years and 7 months in filing the application
and the lack of explanation for such delay as well as the fact that the
issues raised in the application vis-a-vis the genuineness of the
Proof of Debt had already been raised and determined in previous
application which had been dismissed, the application ought to have
been dismissed.
BANKRUPT’S PROPERTY AVAILABLE FOR
DISTRIBUTION

S.8(1)(b) IA – All the property of the bankrupt shall

become divisible among his creditors and shall vest in the
DGI who shall be the receiver, manager, administrator
and trustee of all properties of the bankrupt.
Section 8(1)(b) is to be read with s.48 of the IA.
S. 2 IA - Definition of “property”
BANKRUPT’S PROPERTY WHICH IS NOT AVAILABLE FOR
DISTRIBUTION

◼Property of the bankrupt that cannot pass to the DGI

and is not available for distribution to the creditors:
(i) S.48(1)(a)(i) –property held on trust by the
bankrupt for another person
(ii) and (ii) IA – the bankrupt’s tools of trade, necessary
wearing apparel and bedding and necessities for
himself, wife and children to a value as may be
prescribed
(iii)The bankrupt’s Employment Provident Fund. See
s.51(c) of the Employees Provident Fund Act 1991
(Act 452)
BANKRUPT’S PROPERTY AVAILABLE FOR
DISTRIBUTION
S. 48(1)(b) IA – Property that can pass to the DGI and is available for distribution
to the creditors
1. Properties belonging to or vested in the bankrupt at the commencement of the
bankruptcy and acquired before his discharge (s.48(1)(b)(i)IA)
Examples: Salary or pension received by the bankruptcy. A portion of the salary
or pension may be ordered to be received by the DGI to be distributed to the
creditors. See s.57 IA.
2. The bankrupt capacity to exercise rights over property. The capacity to exercise
the right must be in respect of a property of the bankrupt for his own benefit
(s.48(1)(b)(ii) IA).
Example: The bankrupt’s right to claim liquidated damages payable by the
developer for delay in the delivery of vacant possession under a sale and
purchase agreement. This right can therefore be divested to the DGI.
BANKRUPT’S PROPERTY AVAILABLE FOR
DISTRIBUTION

3. Third party’s goods which are in the bankrupt’s possession

(s.48(1)(b) (iii) IA).
(Subject to the law relating to bills of sale) Any goods found to be in
the possession, order or disposition of the bankrupt at the
commencement of the bankrupt are divisible among the bankrupt’s
creditors if the goods are with the bankrupt with the consent and
permission of the true owner.
BANKRUPT’S PROPERTY AVAILABLE FOR DISTRIBUTION

• There is a risk that a debtor may transfer his property

before the bankruptcy order is made with the intention
to avoid its property from being vested to the DGI
• Properties that have been transferred by the bankrupt
to other persons before the the bankruptcy order may
also be reclaimed for the benefit of the creditors.
Doctrine of relation back (s.47 IA)

Normally, a bankruptcy order takes effect when the order is made by the
judge.
s.47(1) a relation back of the bankruptcy can occur. Under the doctrine of
relation back, the commencement of bankruptcy relates back to the earliest
act of bankruptcy committed by the bankrupt in the 6 month before the
presentation of the petition.
(a) First situation: only one act of bankruptcy - the bankruptcy relates back
to the time when the act of bankruptcy was being committed;
(b) Second situation: where there is more than one act of bankruptcy
committed, the bankruptcy relates back to the first act of bankruptcy by the
bankrupt within 6 months before the presentation of the petition.
Any dealings by the bankrupt within the periods mentioned in (a) or (b)
above will be void and the property reverts to the DGI.
DOCTRINE OF RELATION BACK (1 ACT OF
BANKRUPTCY)

Presentation
of
CP

BO
Doctrine of relation back
s.47(1) IA –
fraudulent transfer of property to s.8(1)(b) – any property
wife will be void and property is belonging to bankrupt
vested with the DGI vest to DGI
DOCTRINE OF RELATION BACK (2 ACTS OF
BANKRUPTCY)

Doctrine of relation back

s.47(1) IA

Timeline

- fraudulent transfer of
Failure to comply
property to wife Bankruptcy
with BN CP
- 1 Act of bankruptcy
st Order
2nd Act of presented
- Void under s.47(1) 2nd
Bankruptcy
limb
s.8(1)(b) – any property
belonging to bankrupt vest
6 months from to DGI
date of CP presented
 This is an action by the Official Assignee (plaintiff) against the son of Koh
Liang Hee (KLH) (1st defendant) and the finance company (2nd defendant)
DOCTRINE OF RELATION for declaratory orders that the transfer to the 1st defendant and the charge
to the 2nd defendant was void by virtue of s.47 and/or s.52 BA 1967
BACK:
OFFICIAL ASSIGNEE OF On 15/12/1989 judgment was obtained by UMBC against KLH in the sum of
RM5.13m
THE ESTATE OF KOH
LIANG HEE (A BANKRUPT) On 22.9.1990 a S&P was executed between KLH and his son (1st defendant)
V KOH THONG CHUAN & where KLH sold his property to the son for the price of RM1million.
ANOR [1997] 5 MLJ 136 On 26/3/1991 the transfer of property to the son was registered
(HC) On 15/5/1991 a BN was presented by UMBC against KLH for failing to satisfy
KOH THONG CHUAN V the judgment of 15/12/1989 amounting to RM5.13m.
THE OFFICIAL ASSIGNEE KLH failed to comply with the BN.
OF THE PROPERTY OF On 15/8/1991 a bankruptcy petition was presented by UMBC against KLH
KOH LIANG HEE, A
BANKRUPT [2003] 1 MLJ On 3/7/1992 KLH was adjudged a bankrupt
113 (COA) On 1/9/1993, the finance company (2nd defendant) granted financial
facilities to the son which was secured by 2 separate charges on the
property.
 In relation to the doctrine of relation back, the HC found:
1. The conveyance of the property from KLH to his son
DOCTRINE OF RELATION was a fraudulent conveyance under s.3(1)(b) BA 1967.
BACK:
OFFICIAL ASSIGNEE OF 2. By virtue of s.47(1) BA 1967 –
THE ESTATE OF KOH LIANG (i) the bankruptcy relates back and commences at the
HEE (A BANKRUPT) V KOH time the act of bankruptcy on which the bankruptcy
THONG CHUAN & ANOR petition was founded; or
[1997] 5 MLJ 136 (HC) (ii) where there is more than one act of bankruptcy, the
KOH THONG CHUAN V THE bankruptcy relates back and commences at the time the
OFFICIAL ASSIGNEE OF first act of bankruptcy was committed by the bankrupt
THE PROPERTY OF KOH which was within 6 months before the presentation of the
LIANG HEE, A BANKRUPT bankruptcy petition.
[2003] 1 MLJ 113 (COA)
3. There are 2 acts of bankruptcy by KLH –
(i) the failure of KLH to comply with the BN presented on
15/5/1991(s.3(1)(i));
(ii) the fraudulent conveyance of the property from KLH
to his son which was registered on 26/3/1991 (s.3(1)(b))
 4. For purpose of calculation of relation back,
DOCTRINE OF RELATION
BACK: the second limb of s.47 is applicable as there are 2
OFFICIAL ASSIGNEE OF acts of bankruptcy.
THE ESTATE OF KOH LIANG
HEE (A BANKRUPT) V KOH 5. The transfer of the property took place on
THONG CHUAN & ANOR
[1997] 5 MLJ 136 (HC) 26/3/1991 when the transfer was registered. This
KOH THONG CHUAN V THE
OFFICIAL ASSIGNEE OF was well within the period of 6 months before the
THE PROPERTY OF KOH presentation of the bankruptcy petition on
LIANG HEE, A BANKRUPT
[2003] 1 MLJ 113 (COA) 15/8/1991. (16/2/1991 – 15/8/1991)
 The Official Assignee succeeded in obtaining a declaratory
DOCTRINE OF RELATION order from the HC that-
BACK:
OFFICIAL ASSIGNEE OF
1. the conveyance of the said property from KLH to
THE ESTATE OF KOH LIANG the son was void under s.47 and/or s.52 of the BA 1967;
HEE (A BANKRUPT) V KOH
THONG CHUAN & ANOR
2. The charges created were void and that by virtue of
[1997] 5 MLJ 136 (HC) s.47 and s.52 of the BA 1967 and s.340(4) of the NLC the
KOH THONG CHUAN V THE Official Assignee was entitled to recover the said property
OFFICIAL ASSIGNEE OF from KLH’s son and free from the finance company’s
THE PROPERTY OF KOH
LIANG HEE, A BANKRUPT
charges.
[2003] 1 MLJ 113 (COA) The KLH’s son and finance company appealed to the COA.
 COA held (dismissing the 1st appellant’s (KLH’s son) appeal and allowing the
2nd appellant’s appeal (finance company))
1st appellant (KLH’s son)’s appeal
DOCTRINE OF RELATION 1. In computing time for relation back, the transfer of the property is
BACK: when the transfer was registered. In this case the registration took
OFFICIAL ASSIGNEE OF place on 26/3/1991 (COA agreed with the HC).
THE ESTATE OF KOH LIANG 2. The transfer of the property from KLH to the 1st appellant was a
HEE (A BANKRUPT) V KOH fraudulent conveyance constituting an act of bankruptcy within
THONG CHUAN & ANOR s.3(1)(b) of the BA 1967. The transfer was within the 6 months period
before the presentation of the bankruptcy petition and can be
[1997] 5 MLJ 136 (HC) considered for relation back under s.47 BA.
KOH THONG CHUAN V THE 3. The transfer is void against the Official Assignee. By virtue of s.53B(1) of
OFFICIAL ASSIGNEE OF the BA 1967 the said property was deemed to be the property of the
THE PROPERTY OF KOH Official Assignee (respondent)[page 124 para E &F].
LIANG HEE, A BANKRUPT s.53B(1) BA 1967 provides:
[2003] 1 MLJ 113 (COA)
Property or proceeds therefrom deemed to be property of DGI
(1) Where a person has acquired property of the bankrupt under a
transaction that is void or under a voidable transaction (that is subsequently
set aside) and sold, disposed of, realized or collected the property or any part
of it, the money or other proceeds from any such dealing, whether further
disposed of or not, shall be deemed to be the property of the DGI.
 DOCTRINE OF RELATION BACK (2 ACTS OF
BANKRUPTCY)

Doctrine of relation back

s.47 IA

Timeline

- 26/3/1991 property
Failure to comply 15/8/1991
3/7/1992
sold Bankruptcy
with BN CP
- was this done Order
23/5/1991 presented
fraudulently?
2nd Act of
- Yes – 1st Act of
Bankruptcy s.8(1)(b) – any property
bankruptcy
belonging to bankrupt vest
to DGI
16/2/1991 6 months 16/2/1991 – 15/8/1991
 2nd appellant’s appeal (finance company)
1. The property has not been registered under the name of the
respondent. Until the registration of the said property pursuant
DOCTRINE OF RELATION to s.349 of the NLC in the respondent’s name, the respondent
BACK: was only vested with an equitable interest in the said property;
OFFICIAL ASSIGNEE OF s.349 NLC provides:
THE ESTATE OF KOH LIANG
HEE (A BANKRUPT) V KOH Registration of official assignee
THONG CHUAN & ANOR (1) Where the OA claims any land, or share or interest in
[1997] 5 MLJ 136 (HC) land, under any written law for the time being in force relating
KOH THONG CHUAN V THE to bankruptcy he may apply to the registrar under this section
OFFICIAL ASSIGNEE OF for the registration thereof in his name and the registrar shall
THE PROPERTY OF KOH give effect to the application….
LIANG HEE, A BANKRUPT (2) …
[2003] 1 MLJ 113 (COA)
(3) No land, share or interest shall vest in the official
assignee under any adjudication of bankruptcy, or order for
administration in bankruptcy, until it has become registered in
his name pursuant to this section.
 2. The second appellant had acted in good faith and for valuable
consideration. In accordance with equitable principles, the legal
interest in the charges acquire by the second appellant as bona fide
DOCTRINE OF RELATION purchaser for value and without notice prevailed over the
BACK: respondent’s equitable interest.
OFFICIAL ASSIGNEE OF
THE ESTATE OF KOH LIANG 3. The second appellant was entitled to the protection of s.53B(3) of
HEE (A BANKRUPT) V KOH the Act. Section 53B(3) provides:
THONG CHUAN & ANOR Property or proceeds therefrom deemed to be property of DGI
[1997] 5 MLJ 136 (HC) (3) Notwithstanding subsections (1) and (2), where any person,
KOH THONG CHUAN V THE (not being the person who acquired the property from the bankrupt) to
OFFICIAL ASSIGNEE OF whom the property was sold, resold or otherwise disposed of, had paid
THE PROPERTY OF KOH or given therefor valuable consideration and acted in good faith such
LIANG HEE, A BANKRUPT person shall not be subject to the operation of this section and the
[2003] 1 MLJ 113 (COA) DGI’s recourse for discovery of the consideration so paid or given or its
value shall be solely against the person who entered into the
transaction with the bankrupt.
4. In such circumstances the respondent would have to take the said
property subject to the second appellant’s charges.
 There are 2 limbs to this section.
The first limb -
1. If the settlor becomes a bankrupt within 2 years after
any settlement of property, the transaction shall be
VOLUNTARY void and the property vests in the DGI for purposes of
the bankruptcy;
SETTLEMEN 2. s.52(3) IA “Settlement” means “any conveyance or
T (S.52(1) transfer of property, bill, bond, note, security for
money or covenant for the payment of money and any
IA) gift of money.”
Example: Bankrupt
two years 1.1.2024

Transfer
Bankrupt
property
1.1.2023
1.1.2022
VOLUNTARY 3. 3 exceptions to the situation above:
a. where the settlement was made before marriage
SETTLEMEN and in consideration of marriage; or
b. where the settlement was made in favour of a
T (S.52(1) purchaser or incumbrancer in good faith and for
valuable consideration; or
IA) c. where the settlement was made on or for the
bankrupt’s wife or children and the property was
accrued to the bankrupt after marriage in right of his
wife.
VOLUNTARY On 27/10/1980 the husband was made a bankrupt.
SETTLEMENT It was discovered that he had transferred a piece of land to
(S.52(1) IA): his wife on 22/12/1978 for love and affection.
OFFICIAL The OA applied, among others, for a declaration that the
ASSIGNEE OF THE transfer of the land was a voluntary settlement within s.52
PROPERTY OF BA 1967 since the transfer was made within 2 years prior
to the husband being adjudged a bankrupt. The transfer
SENATOR was thus void and the land should be vested with the OA
IBRAHIM BIN for purposes of the bankrupt.
HAJI YAACOB V The wife denied that the transfer was a voluntary
SITI RAMLAH settlement and argued, among others, that –
[1991] 2 MLJ 479 1. the transfer fell under the 3rd exception to s.52(1);
2. the transfer was made merely to perfect her title to
it and even if the said transfer was absolutely void against
the OA her share of the land was not affected.
 The HC held allowing the application of the OA:
VOLUNTARY 1. Evidence showed that the husband became a
SETTLEMENT bankrupt within 2 years after the date of the transfer of the
(S.52(1) IA): land.

OFFICIAL 2. The first exception does not apply because the

transfer was not made in consideration of marriage.
ASSIGNEE OF THE 3. Transfer of the said land which was made for love and
PROPERTY OF affection was not purchased by the wife for valuable
SENATOR consideration.
IBRAHIM BIN 4. The words ‘property which has accrued to the settlor
after marriage in right of his wife…’ in s.52 of the BA 1967,
HAJI YAACOB V meant that the property must be in the name of the wife. It is
SITI RAMLAH immaterial whether she acquired it before or after the
[1991] 2 MLJ 479 marriage. The property is accrued to the husband solely by
virtue of his position as husband when the wife dies intestate.
The Court referred to the decision in Re Bower Williams , ex p
Trustee [1927] All ER 275
 4. From the evidence, the land was registered in
VOLUNTARY the name of the husband. The wife’s name did not
SETTLEMENT appear as co-owner of the land.
(S.52(1) IA): 5. The transfer of the property therefore does not
OFFICIAL fall under the exceptions under s.52 and was void
ASSIGNEE OF THE against the OA.
PROPERTY OF See also:
SENATOR Chin Ah Keow @ Chin Lai Sitt v Soliha Ahmad
IBRAHIM BIN Nasarudin & Ors [2017] 1 LNS 1337
HAJI YAACOB V Official Assignee of the Estate of Koh Liang Hee (a
SITI RAMLAH bankrupt) v Koh Thong Chuan & Anor [1997] 5 MLJ
[1991] 2 MLJ 479 136 (HC) – on the judgment relating to s.52 BA 1967
 The second limb of s.52
If the settlor becomes a bankrupt subsequently within 5
VOLUNTARY years after the date of settlement, the transfer will be void
SETTLEMEN against the DGI

T (S.52(1) Example: Bankrupt

1.1.2024
IA) five years

Transfer Bankrupt
property 1.1.2023
1.1.2019
 Exceptions –
VOLUNTARY Unless the parties under the settlement can show:

SETTLEMEN (i) the settlor was able to pay all his debts without the
T (S.52(1) aid of the property in the settlement; and
(ii) That the interest of the settlor in such property had
IA) passed to the trustee of such settlement on the execution
of the settlement.
 ◼ Where a person is unable to pay his debts with
his own money as they become due, but is
AVOIDANCE found to have given benefit in favour of any
creditor, he is deemed to have given such
OF creditor a fraudulent preference over other
creditors if he is adjudged bankrupt within 6
PREFERENC months after the date of giving the benefit.
ES (S.53 IA) ◼ The benefit may be in the form of conveyance or
transfer or property, or making a charge on the
property, making payment, incurring obligation,
taking or being subject to judicial proceeding.
 A transaction may amount to a fraudulent preference if it
satisfies the following 5 conditions:

AVOIDANCE ✓ The debtor is adjudged bankrupt within 6 months after

the transaction took place;
OF ✓ The transaction is one of the types mentioned in s.53IA
(giving preference to a creditor);
PREFERENC ✓ The transaction took place when the debtor was unable
to pay his debts;
ES (S.53 IA) ✓ The person in whose favour the transaction was
affected was a creditor of the debtor or a person in
trust of a creditor;
✓ The effect of the transaction was to confer on the
creditor a preferential priority or advantage over other
creditors in the bankruptcy.
 ◼The DGI may recover from the ‘preferred
creditor’ any money paid or property
AVOIDANCE transferred to him even if the creditor did not
OF know that he was being ‘preferred’.
PREFERENC ◼Exception in 53(2) IA – However, where
subsequent to receiving the benefit the creditor
ES (S.53 IA) has conveyed the property to an innocent
person who acts in good faith and gives valuable
consideration, the rights of the person over the
property will not be affected.
 ◼For interest in land, the vesting thereof in the DGI is not automatic.
◼Upon making the bankruptcy order, land or interest in land belonging to the
debtor vests only in equity in the DGI.
◼The DGI must apply to the Registrar of Land for the registration thereof in his
SALE OF name. (See s.349(1) and (3) of the National Land Code).
◼Pending the registration, he has no right to deal with the property.
LAND Case:
KOH THONG CHUAN V THE OFFICIAL ASSIGNEE OF THE PROPERTY OF KOH LIANG
HEE, A BANKRUPT [2003] 1 MLJ 113 (COA)
RE CHUA TIN HONG EX PARTE CASTROL (M) SDN BHD (1996) MLJU 608 (transfer
was made after the debtor was adjudge a bankrupt)
Exception under s.54 IA
54. Protection of bona fide transactions without notice
(1) Subject to the foregoing provisions of this Act with respect to the effect of bankruptcy on an
execution or attachment, and with respect to the avoidance of certain settlements and preferences,
nothing in this Act shall invalidate in the case of a bankruptcy--
(a) …
(b) …
(c) …
(d) any contract, dealing or transaction by or with the bankrupt for valuable consideration;
if -
(i) The conveyance takes place before the bankruptcy order; and
(ii) The person other than the bankrupt, having the transaction, has not, at the time of the conveyance,
notice of any act of bankruptcy by the bankrupt
(2) For the purpose of this section "valuable consideration" means a consideration of fair and
reasonable money value in relation to--
(a) the value of the property conveyed, assigned or transferred; or
(b) …
4.8 Avoidance of Preferences
• See also:
(i) s.53A –avoidance of assignment - bad debts

• (ii) s.53B Property or proceeds acquired by anyone under a void or voidable

transaction shall be deemed to belong to the DGI. DGI has a right to recover it
unless such person has acquired it for valuable consideration and in good faith.

• (iii) s.54 – protection of bona fide transactions for value without notice –
includes – attachments, executions, settlements, preferences shall not be
invalidated:-
• a) any payment by the bankrupt to any of his creditors;
• (b) any payment or delivery to the bankrupt;
• (c) any conveyance or assignment by the bankrupt for valuable consideration;
• (d) any contract, dealing or transaction by or with the bankrupt for valuable
consideration:
• if -
• (i) it takes place before the date of the RO; and
• (ii) the person took without notice of the bankruptcy
4.9 Disqualification of a Bankrupt – s36 IA
1967
• 1. s36(1) IA 1967- A bankrupt cannot be:
• appointed as a Sessions Court Judge or Magistrate
• nominated or elected for office of councilor of a local authority

• 2. Art 48(1) Federal Constitution (FC): An undischarged bankrupt cannot

be a Member of Parliament.

• 3. Bankrupt also cannot:

• (a) hold positions in statutory bodies or societies
• (b) Practicing certain professions – eg. advocate & solicitor, engineer,
architect, company secretary
• (c) Working in the business of a relative,
• (d) Maintaining any civil action without the prior sanction of the DGI,
• (e) Be receiving pension or gratuity,
• (f) A trustee under any written law,
• (g) A director of a limited company or corporation

• 4. s.36(2)(a)- The disqualification will cease once the bankruptcy order

is cancelled/ annulled.
4.10 Disabilities of a bankrupt – s38 IA 1967
• 1. s.38(1)(a) cannot maintain any civil action other than for personal
injuries without the sanction of the DGI
• 2. s.38(1)(b) every 6 months bankrupt has to tender accounts to the
DGI
• 3. s.38 (ba) to report any monies / properties in any form received
exceeding RM500/-
• 4. s.38(bb) inform DGI of any change of address.
• 5. s. 38(1)(c) cannot leave the country without the prior sanction of
the DGI
• 6. s.38(1)(d) cannot carry on any business directly; or
• 7. s.38(1)(e) participate / manage any family business without prior
consent of DGI
4.10 Disabilities of a bankrupt – s38 IA 1967

• Case: Foo Fatt Chuen v. Jacobson Cheong Weng

Hin & Ors (Mohamad Ariff Yusof J) [2012] 3 CLJ
632 [HC]
• Undischarged bankrupt - Carrying on business -
Whether contractual transactions
• entered thereof void - Exceptions - Bankruptcy Act
1967, ss. 38(1)(d), (e) – only with approval of DGI.
• Contracts entered into without approval – void.
4.10 Disabilities of a bankrupt – s38 IA 1967

• 6. s.38(1A) discretion of the DGI to grant any

permission & the court may also impose such
conditions as it considers fit.

• 7. s.38(2) breach of any of the above conditions –

deemed to be contempt of court.
4.11 Proceedings consequent upon Adjudication
• Proof of debt by creditors: s40 & 42 IA 1967, Schedule C of IA
• Formal claim made by creditor – affidavit and delivered to OA.
• Provable debts s 40(1), (2) and (3) – all present, future,
contingent debts.
• Unprovable debts – s.40(1) – unliquidated damages.
• Case: Malayan Banking Bhd v Boau Yoon Fut [2014] 9 CLJ 429 CA-
decided on 28 October 2014

• Statement of affairs by bankrupt:s.16 IA 1967

• Debtor has to provide a Statement of Affairs verified by Affidavit
within 21 days of service of bankruptcy order on him under a CP
or if under a Debtor’s petition – 7 days.
• Case: Lim Tee Keong v HLG Securities Sdn Bhd [2016] 4 CLJ 840
CA- decided on 3 March 2016
4.11 Proceedings consequent upon Adjudication
• Creditors meeting: s.15 IA 1967
• Sch. A– DGI to call for a 1st creditors meeting upon the
Statement of Affairs being filed. Any creditor who has filed
his proof of debt may question the debtor. DGI may
consider /propose a scheme of arrangement or
composition.

• Public Examination of debtor: s.17 IA 1967

• After the 1st. creditor’s meeting, the DGI may apply to
court for a Public Examination of the debtor. Creditors will
be notified by the DGI of the date which should also be
advertised in a local newspaper and gazetted. Should the
debtor fail to attend a warrant for his arrest may be issued
by the court (s28 IA 1967)
• Case: Public Bank Bhd v Choong Yew Wah [2014] 5 CLJ 695
CA
4.11 Proceedings consequent upon Adjudication

• r.145 Where the court finds the bankruptcy was

brought about by adverse factors eg. fraud,
cheating,etc. the court may adjourn the
bankruptcy proceedings sine die.

• r.149 the public examination of a debtor may be

dispensed with if he is under some mental or
physical disability.
TUTORIAL 4
• Question 1
• On 15 March 2018 BBB obtained Judgment against Borrower at the
Melaka High Court for the sum of RM550,000/- with interest and costs.
On 5 June 2018, 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
October 2018. Borrower, by borrowing from various family members
paid BBB a sum of RM250,000/- 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 made against Borrower on 23 Dec. 2018.
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.
TUTORIAL 4
• Question 2
• On 17.4.2018, Bank Kaya obtained judgment against Amelia
in Melaka High Court for RM500,000.00 together with
interest and costs. On 2.5.2018, Bank Kaya served a
bankruptcy Notice on Amelia and she ignored it.
• On 2.6.2018, Bank Kaya filed and served a Creditors Petition
on Amelia together with an affidavit verifying the petition
on Amelia. The Creditors Petition was attested by a Solicitor
from Kuching, Sarawak. Amelia intends to oppose the
Petition.
• Advise Amelia.
TUTORIAL 4
• Question 3
• On 17.2.2019, Bank Kaya Bhd. (BKB) obtained judgment against
Tom at the Melaka High Court for RM350,000/- together with
interest and costs. On 14.6.2019 the Bankruptcy Order was made
against Tom on the Creditor’s Petition filed by BKB.
• Subsequently, Tom’s uncle Brian approached BKB and made a
payment of RM300,000/- in full and final settlement of its claim
against Tom. Tom subsequently filed an application under
s.105(1) IA 1967 to have the Bankruptcy Order annulled on the
grounds that the debt had been fully settled. The SAR of the HC
allowed the application although it was objected to by BKB.
• BKB intends to appeal to the judge in Chambers. Advise BKB on
the viability of the appeal.