1. ) Saling Bin Lau Bee Chiang v DINESH KANAVAJI A/L KANAWAGI (WA-29NCC-306-03/2022)

(a) Whether the 26 JC(s) are entitled to apply for the issuance of the Bankruptcy Notice; and

(b) Whether leave to commence bankruptcy proceedings is required to be obtained. Analysis / Findings Issue (a): Whether the 26 JC(s) are entitled to apply for the issuance of the Bankruptcy Notice. [5] The proviso in section 3(1)(i) IA 1967 provides that–

(1) A debtor commits an act of bankruptcy in each of the following cases:

(i) if a creditor has obtained a final judgment or final order against him for any amount and execution thereon not having been stayed has served on him in Malaysia, or by leave of the court elsewhere, a bankruptcy notice under this Act requiring him to pay the judgment debt or sum ordered to be paid in accordance with the terms of the judgment or order with interest quantified up to the date of issue of the bankruptcy notice, or to secure or compound for it to the satisfaction of the creditor or the court; and he does not within seven days after service of the notice in case the service is effected in Malaysia, and in case the service is effected elsewhere then within the time limited in that behalf by the order giving leave to effect the service, either comply with the requirements of the notice or satisfy the court that he has a counterclaim, set off or cross demand which equals or exceeds the amount of the judgment debt or sum ordered to be paid and which he could not set up in the action in which the judgment was obtained or in the proceedings in which the order was obtained: Provided that for the purposes of this paragraph and of section 5 any person who is for the time being entitled to enforce a final judgment or final order shall be deemed to be a creditor who has obtained a final judgment or final order; [6] By reference to the proviso of section 3(1)(i) IA 1967, the express provision therein specifically provides that before a judgment creditor may apply for the issuance of a bankruptcy notice based upon a judgment debt against a judgment debtor, the judgment creditor must be a creditor who is for the time being entitled to enforce a final judgment or final order. [7] In the present case, the 26 JC(s) had applied for the issuance of the BN dated 9.3.2022 grounded upon paragraph ix) of the Order of the Court of Appeal dated 17.1.2019 (“COA Order”). For ease of reference, the Court of Appeal in paragraph ix) ordered that– “ix) Perenggan 83.3F(w) Pernyataan Tuntutan Terpinda adalah dibenarkan iaitu Perayu diperintahkan membayar sejumlah RM2,200,000.00 kepada HSBC Trustee atau kepada Pemegang Amanah alternatif untuk mereka memasukkan dalam Amanah Orang Asli (Jakun) Lembah Linggiu untuk dimanfaatkan sepenuhnya oleh Plaintif-Plaintif dalam Guaman MTJB 228;” [8] By virtue of para. ix) of the COA Order, it is manifestly clear that the JD was ordered to pay RM2.2 million to the HSBC Trustee [presently the court-appointed Trustee (RHB Trustees Berhad vide Johor Bahru High Court Order dated 10.3.2019)] (“RHB Trustee”) and subsequent to that, for the RHB-Trustee to remit the said monies to Amanah Orang Asli (Jakun) Lembah Linggiu, the ‘Trust Fund’. And therefore, it is without doubt that in accordance with the terms of the COA Order, the RHB Trustee/Trust Fund is entitled to receive the monies from the JD and therefore, is the judgment creditor who is legally and rightfully entitled to apply for the issuance of the BN by the court. [9] This is because, the COA Order has effectively in law given the legal right to receive the the judgment debt which includes the legal title and/or interest in the judgment debt to the RHB-Trustee/Trust Fund. On the basis thereof, the RHB-Trustee/Trust Fund is clearly the person/entity who is for the time being and at this very juncture entitled to enforce para. ix) of the COA Order and shall be deemed to be the creditor who has obtained the final COA Order in line with the proviso to s. 3(1)(i) IA1967. [10] It is settled law that the Bankruptcy Court cannot go behind a final judgment and / or order, the passage in the judgment of the Supreme Court in Sovereign General Insurance Sdn Bhd v. Koh Tian Bee [1988] 1 CLJ Rep 277; [1988] 1 CLJ 155; [1988] 1 MLJ 304 wherein the Supreme Court held that: "In the exercise of his jurisdiction in bankruptcy proceedings, the learned judge cannot go behind the judgment. Thus on an application to set aside a bankruptcy notice, it was laid down as early as 1893 that the court could not go behind the judgment. See In Re Easton (1893) 10 Mor 111; 9 TLR 409" [11] It is also settled proposition of law that when a bankruptcy notice was issued not in accordance with the terms of a final judgment and/or order, the bankruptcy notice cannot be deemed to fall with the meaning of section 3(1)(i) IA 1967, and the non-compliance thereof renders the bankruptcy notice null and void as held in the Supreme Court case of Low Mun v. Chung Khiaw Bank Ltd [1987] CLJ (Rep) 172– “The Bankruptcy Act provides expressly that the notice must be to pay the judgment debt "in accordance with the terms of the judgment". Thus in In Re HB [1904] 1 KB 94 a bankruptcy notice was held to be bad if found not according to its terms but on some agreement which modified the terms of the judgment, and therefore not in accordance with the terms of the judgment. … Non-compliance with the terms of the judgment renders the bankruptcy notice invalid, and that failure to comply with such notice is not an act of bankruptcy, and a bankruptcy petition founded on it must necessarily fail.” “As stated by Sir Raymond Evershed in Ex parte The Debtor v. Scott(ante) at p. 78: At each stage of these (bankruptcy) proceedings, you should take the facts as you found them. (p. 78A )" [12] Likewise, in J Raju a/l M Kerpaya v. Commerce International Merchant Bankers Bhd [2000] 3 CLJ 104, the Court of Appeal propounded that: "In our judgment, the following propositions may be distilled from a rationalisation of the authorities we have thus far discussed.

When determining an issue under the Act, it is incumbent upon the court to accord its provisions a strict construction.

The consequence of such an approach to construction is that a bankruptcy notice that requires a debtor to pay a judgment debt otherwise than in accordance with the terms of the judgment founded is null and void ab initio. Hence, a debtor does not commit an act of bankruptcy if he makes default upon such a notice.

A challenge on the ground that a bankruptcy notice requires a debtor to pay a judgment debt otherwise than in accordance with the terms of the judgment may be taken at any time after service of the notice......" [13] In consideration of the foregoing, this Court is of the view that the 26 JC(s) in the present case are not entitled to apply for the issuance of the bankruptcy notice dated 9.3.2022 because they are not the creditor within the meaning of the provision in section 3(1)(i) IA 1967. [14] Consequently, the BN dated 9.3.2022 was not properly issued within the meaning of section 3(1)(i) IA 1967 and hence, the said BN is therefore bad, null and void ab initio. The reasons are that the failure to comply with the provision of s. 3(1)(i) IA1967 and in particular the proviso of the said section militates the validity and legality of the BN, and thus, whether in fact or in law, the BN is not a bankruptcy notice within the meaning of section 3(1)(i) IA 1967 for the further reasons as follows –

(a) it did not claim payment of the judgment debt in accordance with the term of the COA Order as necessarily required by paragraph ix) of the order;

(b) the judgment debt/ monies claimed were founded upon para x) of the COA Order and those monies were admittedly due, and the emphasis is that, it was actually due between the JD and the RHB-Trustee/Trust as opposed to the 26 JC(s); and

(c) in Dr Shamsul Bahar Abdul Kadir & Another appeal v. RHB Bank Berhad [2015] 4 CLJ 561 wherein the Federal Court at paras. 53 and 54 followed the ratios in the cases of Re Woodall, ex p Woodall and Re ex p Ide and held that “A bankruptcy proceeding was not execution but the right of the creditor to issue bankruptcy notice was pegged to the right of the creditor to proceed to execution. A creditor was not entitled to issue bankruptcy notice if he was not in a position to issue execution on his judgment at the time when he issued the bankruptcy notice. If by reason of the Rules of Court or on account of some valid legal reason a creditor was in no position to issue execution at the time when he issued the bankruptcy notice, then the creditor had no right to issue bankruptcy notice”; and

(d) the cause of action to recover the judgment debt founded on the para. x) of the COA Order is rightfully and legally vested in the RHB-Trustee/Trust Fund, and hence, the legal authority to act, obligations and powers to institute any execution action and/or proceedings including the present bankruptcy action shall be brought by the RHB-Trustee/Trust Fund in accordance with term of the COA Order as necessarily required by para. x) therein, with due compliance with the trust instrument/trust deed governing the the RHB-Trustee/Trust Fund and also, the provisions in the Trustee Act 1949 and the Trustees (Incorporation) Act 1952. [15] Further to that, this Court finds it necessary to emphasise that the provisions in the IA and IR really do not specifically bar the 26 JC(s) / the trust beneficiaries from instituting a bankruptcy action against the JD, however, with due respect, and provided always that the mandatory strict compliance with the provisions in the IA and IR for the issuance of a bankruptcy notice is abided to properly by the 26 JC(s). [16] This Court further opines the in order for the 26 JC(s) to have the legal right and authority to apply for the issuance of a bankruptcy notice in compliance with section 3(1)(i) IA 1967, all legal rights of the RHB-Trustee/Trust Fund in respect of the JD’s indebtedness under the COA Order have to be assigned to the 26 JC(s) or any of the trust beneficiaries by way of a deed of assignment and notices of such assignment shall be served to the relevant parties, trust beneficiaries, trustee(s) and the JD. [17] Such an assignment of the legal right in the respect of the judgment debt (if it exists) would have entitled the 26 JC(s) to receive or claim the debt or chose in action, and thereby also, legally enabling and authorise the 26 JC(s) to apply for the issuance of the bankruptcy notice within the meaning of section 3(1)(i) of the IA 1967 vide section 4(3) of the Civil Law Act 1956, which provides:

(a) an action by or against a firm in the name of the firm, against or by a member of the firm; or

(b) an action by a firm in the name of the firm against a firm in the name of the firm where those firms have one or more members in common, shall not be issued except with the leave of the Court.

(a) considering that no service of Writ Summons and the Statement of Claim and/or the amended ones were ever served on the JD being an individual partner of Messrs. Khana & Co (a partnership);

(b) the JD as an individual partner of Messrs. Khana & Co (a partnership) was not a named party to the proceedings in the 22- 228-2009 suit;

(c) considering subparas. (a) and (b) above, the judgment debt in para. x) of the COA Order cannot be used to found the bankruptcy notice dated 9.3.2022 against the JD without leave of the court;

(d) the 26 JC(s) shall apply for and obtain that leave of the court, and the failure of which would also renders the bankruptcy notice dated 9.3.2022 invalid and of no effect, this is so, even on and after the dissolution of Messrs. Khana & Co (a partnership), because the authority of each partner (the JD) to bind the firm, and the other rights of the partners continue so far as necessary to wind up the partnership and to complete transactions begun but unfinished at the time of the dissolution in compliance with section 40 of the Partnership Act 1961. [26] For the above reasons alone, this Court finds that the application by the JD in Encl. 6 ought to be allowed. Conclusion [27] It bears reiterating that bankruptcy action is quasi-criminal in nature and there are grave penal consequences directly flows from it, which involve losses of fundamental liberties and hence, strict compliance to the provisions of the IA and IR are mandatory – see Badiaddin bin Mohd Mahidin & Anor v. Arab Malaysian Finance Bhd [1997] 1 LNS 353; [1998] 1 MLJ 393; Sobri bin Arshad v. Associated Tractors Sdn Bhd [1991] 3 CLJ Rep 756; [1991] 3 MLJ 32. For these reasons, compliance with the provision in section 3(1)(i) IA for the issuance of a bankruptcy notice is strict and mandatory and also, a proper application for leave to commence bankruptcy action against the JD has to be adhered to by the 26 JC(s). [28] In Sobri bin Arshad v. Associated Tractors Sdn Bhd [1991] 1 CLJ 798; [1991] 3 CLJ (Rep) 756; [1991] 3 MLJ 32, Edgar Joseph Jr observed– "On a concluding note, bearing in mind that bankruptcy proceedings, if successful, would have harsh and penal consequences, meticulous compliance with the law is often necessary. The case of In Re North ex-parte Hasluck is the authority for the proposition that the statue relating to bankruptcy should be construed in a manner most favourable to the person affected." [29] Based on the above reasons, and also, after careful scrutiny and judicious consideration of the affidavits and written submissions of the parties, the application in Encl. 6 is allowed in paragraph (1) only with no order as to costs, and with liberty to file afresh. [30] Consequently, the bankruptcy notice dated 9.3.2022 is set aside by this Court. Dated: 10.8.2022 t.t (CHAI GUAN HOCK) Senior Assistant Registrar High Court of Malaya Kuala Lumpur Counsel/Solicitors For the Judgment Creditors: G. Ragumaren (David Ragumaren with him) Messrs. G. Ragumaren & Co. 56-1, RGA Chambers Jalan Telawi, Bangsar Baru 59100 Kuala Lumpur For the Judgment Debtor: Melissa Kaur Manakh a/p Ram Singh Messrs. Melissa Ram No. 3-1, Jalan Abdullah, Off Jalan Bangsar 59000 Kuala Lumpur