Tutorial 4

Question 5
Prepared by ,
Marvin Raja ( 1161100438 )
Question 5 On 15 March 2017 BBB obtained Judgment against Borrower at the Melaka High Court for
the sum of RM 350,000-00 with interest and costs. On 5 June 2017 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 Nov. 2017. Borrower, by borrowing from
various family members paid BBB a sum of RM150,000-00 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 was made against Borrower on 23 December 2017.
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.
The issue here is whether the bankruptcy order as against Borrower can be set aside?

The topic on annulment is most suitable for this question to set aside the bankruptcy order since it has already been granted as against
Borrower. He didn’t try to set aside the bankruptcy notice before the creditor’s petition was issued and he even didn’t show cause
against the creditor’s petition if he couldn’t have set the bankruptcy notice aside before this. Thus, the best option for him now is to see
if there can be any annulment for the bankruptcy order against him. Annulment makes a bankruptcy order void ab initio, and it has the
effect that such order has never been made before and this restores the debtor’s position to his pre-bankruptcy position as a judgment
debtor only.

This is better than the discharge of a bankrupt as this process declares JD a bankrupt and only will happen when DGI finish paying all the
debts due to the creditors. S. 105 (1) IA 1967 states that the bankruptcy order may be annulled where (a) it ought not to have been
made at all such as defective notice, service, non-existence of debt, (b) debts of bankrupt are paid in full, or (c) there are proceedings
pending in Singapore. In the case of Perwira Affin Bank v Sardar Md. Roshan Khan & Anor, at the COA level, it was held that 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. It was held that an annulment of the bankruptcy does not take effect retrospectively but from such date as the order is made. The
civil proceedings taken by the Respondent during the period of his bankruptcy are therefore null and void. Thus, the Appellant’s appeal
was allowed. However, at the FC level, they reversed decision of COA annulment order was to operate retrospectively. It is 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. This is because a bankrupt is incompetent to
maintain an action without prior sanction of the DGI and an annulment order did operate retrospectively because debtor had already
paid back to the bank before BO is given. S. 105 (2) states that 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. S. 105 (3) states that notice of annulling a bankruptcy order shall be gazetted and published in at
least one local newspaper
Applying here, Borrower claims that he was unaware of the service of the bankruptcy notice, creditor’s petition or
bankruptcy order. He managed to pay RM150,000 out of RM350,000 of debt to BBB. He was even seeking for
more time to pay the balance on the basis that he was trying to sell of certain property that he has in Singapore,
which meant that he had informed BBB about what he was doing in Singapore. The question is also silent on
whether service was done against Borrower’s family members, which can be another point for Borrower to use
against BBB’s bankruptcy order against him. Based on S. 105 (1) (a), the bankruptcy order against him can be
annulled on the ground that it ought not to have been made at all as there was defective service. Based on the
case of Perwira Affin Bank v Sardar Md. Roshan Khan & Anor, it was held at the FC that an annulment of the
bankruptcy does take effect retrospectively but from such date as the order is made. This is because Borrower
had already paid part payment to BBB before the bankruptcy order was granted. This means that the bankruptcy
order as against Borrower can be set aside. S. 105 (2) and (3) will come into play then, wherein all sales and
disposition of property and payments and acts done by DGI shall be valid but property shall vest in such person as
the court appoints or to Borrower now. The notice of annulling a bankruptcy order shall be gazetted and
published in at least one local newspaper as well now.

In conclusion, the bankruptcy order as against Borrower can be set aside based on S. 105 (1) (a