ABDUL RASHID MOHAMAD ISA V PTT INTERNATIONAL TRADING Pte Ltd [2024] MLRAU 32

COURT OF APPEAL (PUTRAJAYA)

Bankruptcy Proceedings

2.    On 21 December 2018, the JD filed a Summons in Chambers to set aside the bankruptcy notice. However, the JD did not file any affidavit under r 93(1) of the Insolvency Rules 2017 (“IR 2017”)

3.    On 19 June 2019, the JC filed a creditor’s petition against the JD.  On 7 October 2020, the learned HCJ allowed the JD’s appeal and held that there was no act of bankruptcy because the JD had already applied to set aside the bankruptcy notice.  On 5 December 2021, the JC informed the Court that it would like to withdraw the creditor’s petition since the High Court held that there was no act of bankruptcy on the part of the JD.

4.    On 6 December 2021, the learned Registrar allowed the JC’s application to withdraw the creditor’s petition with the liberty to file afresh. However, the learned Registrar also decided that since the JC had withdrawn the creditor’s petition, the bankruptcy action against the JD came to an end, and the JC was already out of time to file any creditor’s petition since the act of bankruptcy had occurred on 25 December 2018.

5.    Dissatisfied with the decision of the learned Registrar, the JC filed an appeal to the Judge in Chambers on 17 December 2021. On the other hand, the JD applied to set aside the JC’s appeal. The JC’s appeal and the JD’s application to set aside the appeal were heard together.

6.    On 22 June 2022, after hearing both parties, the learned HCJ had allowed the JC’s appeal and dismissed the JD’s application to set aside the appeal. The JD then appealed against the decision of the learned HCJ. The appeal was heard before Court of Appeal.

Issue

The core issue in the instant appeal is whether the learned HCJ had erred in fact and law in failing to appreciate that the withdrawal of the creditor’s petition would terminate and end the bankruptcy proceeding against the JD

(a) The learned counsel for the JD submitted that the learned HCJ failed to appreciate that the withdrawal of the creditor’s petition would terminate and end the bankruptcy proceeding against the JD.

(b) In the case of Subramaniam (supra), the Registrar made a ruling to dismiss the initial petition from the first judgment creditor.  This decision stemmed from an error in specifying the accurate date of the judgment debtor’s act of bankruptcy.  The judgment creditor opted not to challenge this ruling through an appeal. Instead, they proceeded to file a second creditor’s petition, this time accurately reflecting the date of the judgment debtor’s act of bankruptcy.

(c)   The Registrar, in turn, decided to dismiss the second creditor’s petition, citing that the judgment creditor was not permitted to file another creditor’s petition based on the same act of bankruptcy once the first petition had been dismissed. The judgment creditor was left with two options: to either appeal against the dismissal or to initiate the proceedings anew. Subsequently, upon appeal, the High Court Judge affirmed the Registrar’s decision and dismissed the appeal brought forth by the judgment creditor.

(d) The case mentioned was cited by the JD’s counsel to argue that once a creditor petition is struck out or withdrawn, bankruptcy proceedings cease, and a subsequent petition based on the same act of bankruptcy cannot be filed, even if six months haven’t passed since the act. In Re: Subramaniam, the High Court Judge recognized the absence of a specific provision in the Bankruptcy Act regarding this issue. Nevertheless, His Lordship ruled that a second petition cannot be filed based on the same act of bankruptcy, as the first petition concluded all bankruptcy proceedings. However, the Court of Appeal held that this case can be distinguished.

(e)  Re: Subramaniam Paidathally; ExParte: G Ragumaren & Co [2010] 17 MLRH 199, the JD applied to strike out a bankruptcy petition due to an error regarding the date of bankruptcy. However, in the present case, the mistake in dating the bankruptcy was made by the Registrar, not by the JC. The petition was withdrawn with the liberty to refile, unlike in Subramaniam where no such option was granted. Consequently, filing a second petition within the correct timeframe is warranted and should not be objected to.

(f)   As such, the Court concluded that the decision in Re: Subramaniam (supra) does not assist the JD in the present appeal.

(g) Referring to Rule 93(2) of the IR 2017, it stipulates that until the application to set aside the bankruptcy notice has been heard and determined, no act of bankruptcy under the notice shall be deemed to have been committed. Applying such law the present case, the significant facts are as follows: Firstly, the bankruptcy notice was issued on December 17, 2018. Therefore, if there was any non-compliance with the bankruptcy notice under Section 3(1)(i) of the Insolvency Act 1967 (Revised 1988) [Act 360], or if no application to set aside the bankruptcy notice has been made under Rule 93 of the IR 2017, the act of bankruptcy would have occurred on December 25, 2018.

(h)  In this case, the bankruptcy notice wasn’t paid within the seven-day period, but the JD had already filed an application to set it aside before December 25, 2018, as indicated by Encl 6. Despite Encl 6 not being part of the appeal records, both parties confirmed it as the JD’s application, still pending for determination. The High Court Judge ruled that the act of bankruptcy hadn’t occurred due to this pending application, directing for Encl 6 to be heard.   The Court agreed with such assessment. Regardless of the specific rule under which the application was made, it falls within the scope of Rule 93 of the IR 2017. Therefore, bankruptcy cannot occured until Encl 6 is decided upon. As it stands, the act of bankruptcy has been stayed, making it premature to claim the bankruptcy proceeding has concluded, especially since the earlier petition was withdrawn with the option to file afresh.

(b) Costs of RM5,000.00 to be paid by the JD to the JC, subject to allocator.

Key Take Away

2.    Court rules and procedures, such as Rule 93 of the IR 2017, play a crucial role in determining the occurrence of an act of bankruptcy and the progression of bankruptcy proceedings.