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4.1 A Second or subsequent Bankruptcy

1. S49 IA 1967, allows for second bankruptcy. However, the two must be administered separately.
2. 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.
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.
Sama Credit and Leasing S/B v Pegawai Pemegang Harta Malaysia [1995] 1 MLJ 274
 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 1 st. bankruptcy on the
grounds that the RO & AO should not have been granted as the debtor’s 1 st. 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.
 SC Held:- appeal allowed.- RO and AO of 2nd. Bankruptcy reinstated.
(1) 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.
(2) Ss 49 (1) and (2) permit subsequent RO and AO against an undischarged bankrupt.
(3) 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.
(4) A failure to conduct a bankruptcy search per se is not fatal but a factor to be considered

4.2 Single Order Bankruptcy

(1) 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).
(2) 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.
(3) The debtor was made a bankrupt only upon the issue of the AO - Hong Leong Bank Bhd v
Khairulnizam Jamaludin (2016) 7 CLJ 335 (FC)

(4) 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
Re: Tan Sri Kishu Tirathraj; ex parte Affin Bank Berhad [2007] 2 MLJ 53 (HC).

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(5) 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.
(6) 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.
 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.
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. (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.

8. 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
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.
Re Chua Tin Hong ex p Castrol (M) S/B[1997] 2AMR1253
 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. The High Court held that:
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

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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) .
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.

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).
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.
 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?".
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It was held that:
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.
iv. The civil proceedings taken by the Respondent during the period of his bankruptcy
arE therefore null and void.
v. Appellant’s appeal allowed.
 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’.
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)
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.36 of the Act);
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. practicing 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)
6. working in the business of a relative (s.38 (1) (e) (i) of the Act);
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 the Act);
8. leaving Malaysia without the previous permission of the DGI or of the court (s.38 (1)
(c) and s.38 A (1) of the Act);
9. receiving pension or other gratuity (s.20 (2) of the Act); and
10. enforcing his rights under certain legislations (see s. 111(4) and (6) of the Income Tax
Act 1967;
11. 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-

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Gan Hong Hoe v Gan Kim Hee [1939] 1 MLJ 295;
Kwan Chew Shen v Citibank N.A. [1987] 1 CLJ 314;

Lim Wah Siang v Perwira Affin Bank Bhd [1997] 1 MLJ 374
 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
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
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.
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, nonexistence of
debt; or
b) Debts of bankrupt are paid in full: or
c) there are proceedings pending in Singapore

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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.
4. 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. S.55 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.
Hasnah Che Hasan v Hongkong Bank Malaysia Bhd. [2010] 7 CLJ 190
 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
 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.
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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.

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.

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

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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.
Koh Lian Hee (a bankrupt) v Koh Thong Chuan & Anor.[1997]
 A father, 3 sons and brothers who controlled 4 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
Koh Thong Chuan v The OA of the property of Koh Lian Hee, Bankrupt [2003]
 D1 and D2 in the above action appealed separately to the CA against the decision of the HC.
 CA Held:-
a. 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.
b. 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.
c. 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.
d. First defendant's appeal dismissed with costs; second defendant's appeal allowed with
costs.
Abu Bakar b Jaafar & Anor. v MBB[1991]
 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.

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 H: 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]

3. Application of s50(1) BA 1967 is seen:

a) Re Low Nai Bros & Co (1969)
 The creditor took garnishee proceedings after the RO was made. H: 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 petition before execution. H: 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:
 settlements made before and in consideration of marriage
 settlements made in favour of purchaser or encumbrances in good faith or for valuable
consideration
 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 was solvent at the time of the settlement
 the whole interest of the settler in such property passed on the execution to the Trustee of such
settlement
ChinYau 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-
a) 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.
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st
b) Whether the transfer was done with the intention of the 1 defendant to defraud the
plaintiff.
c) 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: 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.

Ooi Siew Chin v Jemari Bhd. & 3 Ors. [2009] 1LNS 1355
 Contracts entered into by an undischarged bankrupt without knowledge of DGI – void.

Senator Ibrahim b Hj Yaakob,(bankrupt) v Siti Ramlah b Bajau [1991]

 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’.

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.

4. S.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.

4.8 Avoidance of Preferences

1. Where a debtor makes a fraudulent preference and is subsequently adjudged a bankrupt on a petition
presented within 6 months of the fraudulent preference, the transaction will be void against the DGI.
2. The DGI may recover from the ‘preferred creditor’ any money paid or property transferred to him
even if the creditor did not know that he was being ‘preferred’
3. However any person who has taken in good faith for value without notice is protected.
4. 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.

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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. S.36(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
Foo Fatt Chuen v. Jacobson Cheong Weng Hin & Ors (Mohamad Ariff Yusof J) [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.

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8. S.38(1A) discretion of the DGI to grant any permission & the court may also impose such conditions
as it considers fit.
9. S.38(2) breach of any of the above conditions – deemed to be contempt of court.

4.11 Proceedings consequent upon Adjudication

1. Proof of debt by creditors: s24 IA 1967
Sch. C – 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.
2. Statement of affairs by bankrupt:s.16 IA 1967
 Form 37 provides that 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.
3. 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.
4. Public Examinaion 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)
5. 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.
6. R.149 the public examination of a debtor may be dispensed with if he is under some mental or physical
disability.

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