Your Ref.

: Please Inform
Our Ref. : AP/LEGAL/ADLI/12/2020
Date : 31.12.2020

MR. ADLI SHARIDAN By Hand /

Ahmad Ibrahim Kuliyyah of By Email
Laws By Fax
International Islamic University
Malaysia By Courier
50728, Kuala Lumpur By Collection
(Attn: Mr. Adli Sharidan)

Dear Sir,

RE : LEGAL OPINION ON ADVANTAGES OF BANKRUPTCY AND THE PROCESS OF

FORECLOSURE ON SECURED FINANCING CHARGED VIA LANDED PROPERTIES

With the kind reference to the above matter, I am pleased to provide herein my legal opinion
on the said matter.
Advantages of Bankruptcy
1. Bankruptcy is a process where a debtor is declared a bankrupt pursuant to an Adjudication
Order made by the High Court against the debtor if he is unable to pay his debts of at least
RM 50,000.00. Yet, as of 25th August 2020, Clause 20 of COVID-19 Bill had increased the
minimum debt threshold from RM50,000.00 to RM100,000.00 subject to condition in
Clause 2(a) of the Insolvency Bill. Clause 21 of COVID-19 Bill stated that this amendment
is valid until 31st August 2021.
2. Section 5 of the Insolvency Act 1967 provided the conditions where one may be a bankrupt;
(a) the debt owing by the debtor to the petitioning creditor, or if two or more creditors
join in the petition the aggregate amount of debts owing to the several petitioning
creditors, amounts to *fifty thousand ringgit;
(b) the debt is a liquidated sum payable either immediately or at some certain future
time;
(c) the act of bankruptcy on which the petition is grounded has occurred within six
months before the presentation of the petition; and
(d) the debtor is domiciled in Malaysia or in any State or within one year before the
date of the presentation of the petition has ordinarily resided or had a dwelling house
or place of business in Malaysia or has carried on business in Malaysia personally or
by means of an agent or is or has been within the same period a member of a firm or

Address : No 4, Jalan 10 Taman Gombak, 68100, Batu Caves, Selangor

Tel : 03-6177 2004 | HP : 016-2086717 | Fax : 03-6177 2004 | Email : alinajhan@yahoo.com | Facebook : Chamber of Ali Najhan
 partnership which has carried on business in Malaysia by means of a partner or partners
or an agent or manager.

3. Section 2E of the Insolvency Act 1967 provides the following;

An interim order made under subsection 2D(1) shall have the following effects:

(a) no bankruptcy petition may be made or proceeded with against the debtor; and
(b) no other proceedings, execution or other legal process may be commenced or
continued against the debtor without leave of the court.

Which means, no other creditors can issue a bankruptcy petition against you once an
interim order has been made. This is a temporary stay which will prohibit the creditors
from taking action to collect the debts and repossess properties.

4. Section 8 of Insolvency Act 1967 further provide on the advantage of bankruptcy where;
(1) On the making of a bankruptcy order—

(a) except as provided by this Act, no creditor to whom the bankrupt is indebted in
respect of any debt provable in bankruptcy shall have any remedy against the property
or person of the bankrupt in respect of the debt, or shall proceed with or commence any
action or other legal proceeding in respect of such debt unless with the leave of the
court and on such terms as the court may impose; and

(b) all the property of the bankrupt shall become divisible among his creditors and shall
vest in the Director General of Insolvency and the Director General of Insolvency shall
be the receiver, manager, administrator and trustee of all properties of the bankrupt.

This provision provides that no action can be taken against your property without the
leave of court and all the property are vested in the Director General of Insolvency.
Thus, the creditors would stop bothering you for debt as legally, you do not own your
property for the time being.

5. Furthermore, Section 46(2) of Insolvency Act 1967 provide on postponement of wife’s

claim;

(2) Where the husband of a married woman has been adjudged bankrupt any money or
other property of such woman lent or entrusted by her to her husband for the purpose
of any trade or business carried on by him or otherwise shall be treated as assets of his
estate and the wife shall not be entitled to claim any dividend as a creditor in respect of
any such money or other property until all claims of the other creditors of her husband
for valuable consideration in money or money’s worth have been satisfied.

Address : No 4, Jalan 10 Taman Gombak, 68100, Batu Caves, Selangor

Tel : 03-6177 2004 | HP : 016-2086717 | Fax : 03-6177 2004 | Email : alinajhan@yahoo.com | Facebook : Chamber of Ali Najhan
 This provision can be viewed in two ways, either an advantage or disadvantage as the
wife is not entitled to claim any dividend as creditor until all claims by other creditors
have been fulfilled.

6. Moreover, Section 68 of Insolvency Act 1967 provide that a bankrupt is allowed to manage
the property and allowance to be given for the maintenance;

(1) The Director General of Insolvency may appoint the bankrupt himself to
superintend the management of the property of the bankrupt, or of any part thereof, or
to carry on the trade, if any, of the bankrupt for the benefit of his creditors, and in any
other respect to aid in administering the property in such manner and on such terms as
the Director General of Insolvency directs.

(2) The Director General of Insolvency may make such allowance as he thinks just to
the bankrupt out of his property for the support of the bankrupt and his family, or in
consideration of his service if he is engaged in winding up his estate, but the court may
reduce any such allowance and limit the time for which it may be made.

(3) Where the bankrupt has died, the Director General of Insolvency may make an
allowance to the bankrupt’s family for their support.

(4) The Director General of Insolvency may also make an allowance towards the
funeral expenses of a bankrupt.

7. In conclusion, those are among the advantages of bankruptcy in the light of the Insolvency
Act 1967.

Address : No 4, Jalan 10 Taman Gombak, 68100, Batu Caves, Selangor

Tel : 03-6177 2004 | HP : 016-2086717 | Fax : 03-6177 2004 | Email : alinajhan@yahoo.com | Facebook : Chamber of Ali Najhan
Process of Foreclosure on Secured Financing Charged via Landed Properties

8. Firstly, a letter of demand will be issued to the chargor requesting for the arrears to be paid,
failing which, a letter of recall will then be issued to the chargor requesting for whole
outstanding amount.
9. Before the chargee can make an application to the courts, Form 16D must be issued against
the chargor pursuant to Section 254 of National Land Code 1965 on service default notice
whereby the chargor is required to remedy the breach within one month of the date which
Form 16D was served.
10. Next, the application is made by Originating Summons supported by affidavit in
accordance with Order 83 of Rules of Court 2012. A further affidavit will be filed to state
the particulars amount remaining due under the charge as the hearing date of the
Originating Summons by virtue of Order 83, Rule 3 of Rules of Court 2012.
11. Furthermore, a copy of Originating Summons and affidavit will be served unto the chargor
not less than 4 clear days before the first hearing day according to Order 83, Rules 2(2) of
Rules of Court 2012.
12. If the chargor is absent from the hearing and the hearing is adjourned, the chargee shall
serve on the chargor a written notice together with any further affidavit intended to be used
at the hearing day not less than 2 clear days before the next hearing day based on Order 83,
Rules 2(4) of Rules of Court 2012.
12.1. The affidavit of service must be filed to prove the abovementioned service of
cause paper.
13. Section 256(3) of National Land Code 1965 provides that the court shall order the sale of
the land to which it relates unless there is cause to contrary. The burden of proving cause
to contrary is on the chargor. In the case of Low Lee Lian v Ban Hin Lee Bank Bhd (1997)
2 CLJ 36, the Federal Court held that the cause of contrary can be established in the
following categories:
13.1. Failure to satisfy the notice of requirement in Form 16D;
13.2. Failure to comply with the procedural requirements of Order 83 of Rules of
Court 2012;
13.3. Exceptions to the indefeasibility doctrine in Section 340 of National Land Code
1965; and
13.4. Grant of Order for Sale would be contrary to rule of law or equity.

Address : No 4, Jalan 10 Taman Gombak, 68100, Batu Caves, Selangor

Tel : 03-6177 2004 | HP : 016-2086717 | Fax : 03-6177 2004 | Email : alinajhan@yahoo.com | Facebook : Chamber of Ali Najhan
14. In the event the chargor is able to prove cause to the contrary, the chargee’s application
will be dismissed. Yet if the chargor fails to prove such cause to contrary, an Order for Sale
will be granted with cost and a tentative auction date will be fixed by the court. The Order
for Sale will then be served unto the chargor.
15. After the granting of an Order for Sale, an application is made by Notice of Application
supported by affidavit exhibiting the said Order for Sale and a copy of the valuation report.
A valuation report will be deemed to be valid if it is made within 2 years from the date of
filing application based on Practice Direction No. 1/2014.
16. Furthermore, the Registrar of the Court will then fix an auction date if the earlier auction
date cannot be used and a reserve price for the purpose of sale, which is equivalent to the
estimated market value of the land by virtue of Section 257(1)(d) of National Land Code
1965. An auctioneer will also be appointed by the court.
17. In addition, the appointed auctioneer will prepare the Proclamation of Sale and Conditions
of Sale. After being vetted by the chargee’s solicitor, the Proclamation of Sale and
Conditions of Sale will then be advertised in selected newspapers, distributed around the
area of the property and be served on the chargor.
18. One week before the auction date, the deposit of 3% of the reserve price of the property
has to be paid to the court. Simultaneously, the original title and duplicate charge are to be
deposited with the court. Failing which, the court has right to postpone the auction.
19. On the auction day, every interested buyer has to pay 10% of the reserve price to the court
by way of bank draft before the auction starts. The successful bidder has to pay the balance
purchase price within 120 days.
19.1. In the event the successful bidder fails to settle the balance purchase price within
120 days, the 10% deposit will be forfeited by the chargee.
19.2. A new Notice of Application to fix new auction date shall be filed within 8
weeks from the expiration of 120 days. Failing which, the deposit and original
documents will be returned to the charge and the file will be closed based on
Practice Direction No. 1/2014.
20. The chargee may also withdraw the auction any time before the auction date by filing
Notice of Discontinuance if there is payment made by the chargor. Nonetheless, if the
chargee intends to proceed with auctioning the property again, the chargee may do so by
filing a fresh Notice of Application.

Address : No 4, Jalan 10 Taman Gombak, 68100, Batu Caves, Selangor

Tel : 03-6177 2004 | HP : 016-2086717 | Fax : 03-6177 2004 | Email : alinajhan@yahoo.com | Facebook : Chamber of Ali Najhan
21. Additionally, the auction may be conducted virtually via e-Lelong website administered by
the High Court. The website can be accessed at https://elelong.kehakiman.gov.my . This
website is the alternative to the normal face to face auction conducted in Court and its
implementation is right on time considering we are in the middle of a pandemic.
21.1. An online registration is required for the people who intends to take part as a
bidder in the e-Lelong system in which the bidder has to fill in few required
details in order for the court to identify and verify the identity of the person.
21.2. In the case of a company, it is allowed for a representative to register on behalf
of the company in which there will be sections to be filled and ticked.
21.3. Upon successful registration, the bidder will receive an email notifying their
application thus allowing the bidder to access e-Lelong website.
21.4. The bidder will have to deposit money as reservation upon participation in
auction of a specific property to be auctioned which is paid through a bank draft
to the e-Lelong Operation Centre via Pos Laju or by hand. The bidder may also
pay the deposit money by hand to any High Court of Malaya. Bear in mind that
the deposit payment shall be made within one working day before the auction
took place.
21.5. Upon successful bidding, the bidder shall pay off the balance purchase price
minus the deposit of the auctioned property within 120 days after the sale is
concluded or the deposit will be forfeited.
21.6. However, the deposit will be returned to unsuccessful bidders.
21.7. The online public auction will be conducted on weekdays from Monday to
Friday in three separate sessions, 9.00AM to 10.00AM, 11.00AM to 12.00PM
and 2.30PM to 3.30PM.
21.8. Upon failure of any bidding in a session within 2 minutes 30 seconds, the
auction will be deemed inactive and expire for the last 30 seconds of activation
time.
21.9. The final maximum offered amount will not be increased upon conclusion of
the auction, but there is possibilities that the amount will be lowered in which it
will depend on the highest bidder as the highest bidder to reduce the amount
being bid in which as long as there is highest bidder, the lower bidders may not
lower down their amount of bid.

Address : No 4, Jalan 10 Taman Gombak, 68100, Batu Caves, Selangor

Tel : 03-6177 2004 | HP : 016-2086717 | Fax : 03-6177 2004 | Email : alinajhan@yahoo.com | Facebook : Chamber of Ali Najhan
22. In conclusion, those are the advantages of bankruptcy and the process of foreclosure on
secured financing charged via landed properties. Do contact me if there is any further
inquiry regarding the matters.

Thank you

Yours Faithfully,

CHAMBER of ALI NAJHAN

CHAMBER OF ALI NAJHAN
ADVOCATES & SOLICITORS

Address : No 4, Jalan 10 Taman Gombak, 68100, Batu Caves, Selangor

Tel : 03-6177 2004 | HP : 016-2086717 | Fax : 03-6177 2004 | Email : alinajhan@yahoo.com | Facebook : Chamber of Ali Najhan