Abdul Rashid Bin Mohamad Isa v PTT INTERNATIONAL TRADING PTE. LTD. (B-03(IM)(NCC)-76-07/2022)

For ease of reference, the parties in this appeal shall be referred to as they were before the High Court below.

This is the Judgment Debtor's ("JD") appeal against the decision of the learned High Court Judge ("HCJ") delivered on 22.6.2022 in which the Judgment Creditor's ("JC") appeal to the Judge in Chambers was allowed.

Briefly, the facts leading to the present appeal are as follows.

On 17.12.2018, the JC served a bankruptcy notice to the JD for an amount of RM59,567,505.93, and the JD had seven days from the date of service to reply and make payment (until 24.12.2018).

On 21.12.2018, the JD filed a Summons in Chambers to set aside the bankruptcy notice. However, the JD did not file any affidavit under Rule 93(1) of the Insolvency Rules 2017 ("IR 2017").

On 22.1.2019, the learned Registrar found that the JD had committed an act of bankruptcy on 25.12.2018 because the JD did not file any affidavit under Rule 93(1) of IR 2017 and did not make any payment of the outstanding sum stated in the bankruptcy notice to the JC. Consequently, the JD filed an appeal to the Judge in Chambers against the said decision.

On 19.6.2019, the JC filed a creditor's petition against the JD.

On 7.10.2020, 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 5.12.2021, 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.

On 6.12.2021, 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 However, the learned Registrar also decided that since the JC had withdrawn the creditor's petition, the bankruptcy action against the JD came to an end, and the JC was already out of time to file any creditor's petition since the act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 25.12.2018.

Dissatisfied with the decision of the learned Registrar, the JC filed an appeal to the Judge in Chambers on 17.12.2021. 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.

On 22.6.2022, 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 us.

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.

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.

The learned counsel for the JD cited Re: Subramaniam Paidathally; Ex-Parte: G Ragumaren & Co [2011] 1 LNS 1594 in support of their submission.

In Re: Subramaniam (supra), the learned Registrar had struck out the first judgment creditor's petition, which was grounded on the error in stating the correct date of the judgment debtor's act of bankruptcy. The judgment creditor did not appeal against the decision but instead filed a second creditor's petition based on the corrected date of the judgment debtor's act of bankruptcy.

The Registrar proceeded to strike out the second creditor's petition on the ground that the judgment creditor could not file another creditor's petition based on the same act of bankruptcy once the first creditor's petition was dismissed. The recourse available to the judgment creditor was either to appeal against the dismissal or to start the proceeding afresh. On appeal, the learned HCJ had affirmed the decision of the Registrar and dismissed the judgment creditor's appeal.

The above-mentioned case was cited by learned counsel for the JD for the proposition that once a creditor petition is struck out or withdrawn, the bankruptcy proceedings will come to an end and a subsequent creditor petition cannot be filed based on the same act of bankruptcy that was relied upon by the earlier creditor petition. Thus, even if six months had not lapsed from the date of the act of bankruptcy, a subsequent petition cannot be filed. In Re: Subramaniam (supra), the learned High Court Judge acknowledged that there is no express provision in the Bankruptcy Act on this question. Be that as it may, His Lordship ruled that a second petition cannot be filed based on the same act of bankruptcy as the first petition terminated all bankruptcy proceedings. However, in our opinion, the above mentioned case can be distinguished on the facts for the following reasons.

In Re: Subramaniam (supra), because of the uncorrected mistake as to the date of bankruptcy, the JD filed an application to strike out the bankruptcy petition. In the instant case, there is no issue of a mistake in respect of the date of bankruptcy on the part of the JC. It was the Registrar who "declared" that the act of bankruptcy was committed on 25.12.2018 although the application of the JD to set aside the BN was still pending. This mistake of the Registrar was corrected by the learned High Court Judge on 7.10.2020. The JD then moved to strike out the creditor petition but the JC was allowed to withdraw the petition with liberty to file afresh. In Re: Subramaniam (supra), the creditor petition was struck out by the Registrar without any reservation of the right of the JC to refile the petition. Therefore, we are of the view, that as the creditor petition was withdrawn with liberty to file afresh, a second creditor petition which complies with the six month period from the date of the act of bankruptcy is proper and cannot be objected to.

As such, we conclude that the decision in Re: Subramaniam (supra) does not assist the JD in this present appeal.

Based on Rule 93(2) of the IR 2017, 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.

Reverting to the facts of the present case, we are of the considered view that the crucial facts are as follows. Firstly, the bankruptcy notice was issued on 17.12.2018. 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 25.12.2018.

In the present case, even though the amount stated in the bankruptcy notice was not paid within seven days, an application to set aside the bankruptcy notice under Rule 17 of the IR 2017 was already filed by the JD before 25.12.2018 through Encl. 6.

We pause here to note that Encl. 6 was not included in the appeal records, but the parties did not dispute that Encl. 6 is the JD's application to set aside the bankruptcy notice. The parties also did not dispute that Encl. 6 is still pending for hearing and determination.

The learned HCJ in his grounds of judgment found that the act of bankruptcy had not yet occurred since Encl. 6 had not been disposed of. The learned HCJ in his decision also directed for Encl. 6 to be heard. We agree with the learned HCJ.

In our view, the act of bankruptcy did not occur on 25.12.2018, as there is a pending application to set aside the bankruptcy notice. This is regardless of whether the application was made under Rule 17 of the IR 2017 or otherwise since it comes within the ambit of Rule 93 of the IR 2017.

Therefore, the act of bankruptcy cannot occur until Encl. 6 is heard and disposed of. Since Encl. 6 has not been heard and disposed of, the act of bankruptcy has been stayed according to Rule 93 of the IR 2017 thus it is premature at this stage to argue that the bankruptcy proceeding has terminated especially when the earlier petition was withdrawn with liberty to file afresh and it was allowed by the court as we noted earlier.

In conclusion, for reasons enumerated above, we have come to a unanimous decision to dismiss this appeal with costs. We further direct the Deputy Registrar to hear Encl. 6 the day after this judgment is delivered, as we agree with the learned HCJ that the application under Encl. 6 should be heard expeditiously.

Costs of RM5,000.00 to be paid by the JD to the JC, subject to allocator. Dated: 21 February 2024 Solicitor For The Appellant: Chan Siew Cheong Tetuan Teh & Lee Unit A-3-3, A-3-4 & a-3-5 Tingkat 3 Northpoint Offices, Mid Valley City No. 1 Medan Syed Putra Utara 59200 Kuala Lumpur Solicitor For The Respondent: Neo Chi Chyn Tetuan Firoz Julian Level 19-1 Menara Damansara Town Centre 50490 Kuala Lumpur