OCBC Al-Amin Bank Berhad v Mohd Naza Bin Osman Ali (Si Bankrap diwakili oleh Ketua Pengarah Insolvensi) (JA-24MFC-400-05/2024)

This is an application by the Plaintiff via Originating Summons (Enclosure 1) mainly for Order for Sale of a property held under the Land Title No. 304430, Lot 79891, Mukim Pulai, Johor Bahru District, Johor together with the building erected onto it (the “Property”) charged to the Plaintiff under the charge registered on 17.12.2014 and with the presentation no. 106458/2014 (the “Charge”) by the Defendant to be sold by way of public auction.

After having read the Affidavits, written submissions by the Plaintiff and after having heard the oral submissions of the parties, I dismiss Enclosure 1 with costs of RM3000.00 subject to costs of allocator, to be paid by the Plaintiff to the Defendant within fourteen (14) days from the Court order.

Below are my grounds of the decision.

The background facts in this application are gathered from the cause papers and submissions filed by the parties in chronological order.

The brief facts which are relevant to the present application are as follows:

on 12.08.2014, the Plaintiff via letter of offer has offered the banking facilities for the total sum of RM1,521,386.00 and the Defendant has accepted the said offer on 14.08.2014;

subsequent thereto, the Parties have entered into Banking Facilities Agreement on 04.11.2014 for the repayment of the loan granted to the Defendant;

as a consideration to the said facilities, the Defendant has executed a charge onto the Property via presentation no. 106458/2014 and the Charge was registered on 17.12.2014;

the Banking Facilities Agreement, inter alia, provided that the Defendant is requested to pay RM7,201.00 monthly for the period of 419 months and in the event of any default of payment by the Defendant, the Plaintiff has a right to recover all the outstanding amount;

the Defendant has failed to comply with the terms and conditions of the letter of offer, Banking Facilities Agreement and Attachment to the Charge;

by Notice of Recall and Termination of Banking Facilities dated 18.01.2024, the Plaintiff has demanded the payment of all the outstanding amount of RM1,365,432.19 for the banking facilities calculated up to 03.01.2024;

the Defendant has failed, neglected or refused to make the total outstanding amount or any part of it within the time period stated in the letter of demand; and

the Plaintiff’s solicitor has served a Statutory Notice of Default, Form 16D under the National Land Code 1965 (Revised 2020) [Act 828] dated 28.02.2024, by registered post to the Defendant and requested the Defendant to remedy the breach within one

month from the service of the notice and failure which, the Plaintiff will enforce its rights under the Charge to seek an order for sale of the Property.

In brief, the Plaintiff submitted as follows:

the Defendant has sent three (3) cheques amounting to RM172,806.44 being the amount in arrears under the

the Plaintiff may be willing to accept the payment but the Plaintiff is plagued by the position of the Bankruptcy Law which does not allow the Plaintiff to do so;

it is trite law that when a person becomes a bankrupt, no creditor has remedy against the bankrupt person in respect of the debt (unless with leave of the Court) and the bankrupt’s property shall vest with the Director of General of Insolvency (“DGI”) under subsection 8(1) of the Insolvency Act 1967 [Act 360]; and

under subsection 8(2) of Act 360, the Plaintiff is allowed to realize or auction off the charged property, and it does not allow the Plaintiff to accept payment towards the Defendant's loan account.

On the contrary, the Defendant contends that—

the Defendant was adjudged bankrupt on 25.11.2021 pursuant to the Court Order based on the application filed by the creditor in the Johor Bahru High Court vide case No. JA-29NCC-2238- 12/2019;

despite the Defendant being adjudged bankrupt, the Defendant has continued to pay the monthly housing loan instalment with the assistance of his siblings as the house is a family house occupied by the Defendant’s family, his mother and his sister’s family;

the Defendant has made the instalment payment since December 2021 till March 2023 via ATM Machine. However, the Defendant’s banking account was blocked where he and his family members could not make any payment since April 2023 until now;

the Defendant has gone to Johor Bahru branch of the Plaintiff few times to enquire why his account was blocked without any notification and he did not receive any response instead he was asked to contact the headquarters office at Kuala

the Defendant was informed by the officer at the headquarters that his account was blocked as he has been adjudged bankrupt;

on 01.06.2023, the Defendant has written a letter to the Department of Insolvency (“DOI”), Johor Bahru branch to apply permission for him to pay the housing instalment to the

on 02.06.2023, the Defendant has written a letter seeking the Plaintiff to allow him and his family members to make full payment for the balance of outstanding monthly housing instalment and if it is allowed, they will continue to make monthly housing instalment without fail;

DOI has vide letter dated 07.06.2023 (see exhibit “NAZ-1”) informed the Defendant that the Property is a mortgaged property and is not vested to DGI. Hence, an application has to make to the chargee who has the discretion whether to accept the monthly housing instalment payment or to realize the Property;

Plaintiff has on 30.08.2023 replied that they refused to accept any payment and will proceed with the order for sale as he has been adjudged bankrupt;

on 11.09.2023, the Defendant has written to the Plaintiff that the failure to make payment is due to his account being blocked and not because his failure to make monthly housing instalment. The Defendant also informed that his siblings are willing to give an undertaking to provide guarantee payment of the balance of the housing instalment;

on 29.09.2023, the Defendant has written again to the Plaintiff to seek their permission to accept the housing instalment payment and resolve the issue amicably;

the Plaintiff’s solicitor via letter dated 18.01.2024 served a Notice to Recall and Termination of the Banking Facilities and demanded the Defendant to settle in full the outstanding amount of RM1,365,432.19 within seven (7) days, failing which the Plaintiff will proceed with the legal proceedings;

on 28.02.2024, the Plaintiff via their solicitors has sent Notice of Default in Form 16D under Act 828 which was received by the Defendant on 24.03.2024;

the Defendant via his solicitor has sent a letter dated 04.09.2024 to the Plaintiff’s solicitor to inform that the Defendant will pay the outstanding housing instalment payment up to June 2024, namely 15 months amounting to the sum of RM109,259.00 by way of banker’s cheque;

the Plaintiff’s solicitor via letter dated 11.09.2024 has made a counter proposal that the Defendant pay the sum of RM165,198.44 as at 09.09.2024 (which include the Fire Takaful charges of RM5,826.33) in order to regularize the Defendant’s account;

the Defendant has via his solicitor’s letter dated 25.09.2024 accepted the Plaintiff’s counter proposal and asked the Plaintiff to provide the breakdown for the sum of RM165,198.44;

the Defendant’s solicitor then via letter dated 07.10.2024 enclosed a copy of the RHB Islamic Bank Berhad cheque dated 30.09.2024 for the amount of RM55,939.44;

the Defendant’s solicitor has received the Plaintiff’s solicitor letter dated 10.10.2024 which provide the breakdown for the amount of RM172,806.44 and requested the Defendant to pay the extra payment of RM7,608.00 being the housing instalment payment for the said month;

the Defendant’s solicitor via letter dated 16.10.2024 enclosed a copy of the RHB Islamic Bank Berhad cheque dated 15.10.2024 for the amount of RM7,608.00;

the Defendant’s solicitor has via letter dated 21.10.2024 by way of email to the Plaintiff’s solicitor to confirm that both Parties have agreed to file notice of discontinuance following the payment for the sum of RM172,806.44 by way of three (3) RHB Islamic Bank Berhad’s cheques (“RHB’s cheques”) as full and final settlement;

the Plaintiff’s solicitor via an email dated 22.10.2024 acknowledged receipt of the RHB’s cheques and informed that they are waiting for client’s instruction whether to withdraw Enclosure 1 or not; (all the letters of the solicitors referred in paragraphs (n) to (u) above are collectively marked as exhibit NZ-1 in Enclosure 19)

the RHB’s cheques were cleared on 21.10.2024 (see letter from RHB Bank dated 13.11.2024 marked as exhibit NZ-2 in Enclosure 19 as proof that the cheques were cleared); and

on 23.10.2024, the solicitor mentioning on behalf of the Plaintiff’s solicitor informed the Court that the Plaintiff refused to withdraw Enclosure 1 and would like to proceed with it. COURT ANALYSIS AND FINDINGS

I have identified two (2) issues below for the determination of this

whether the Plaintiff is allowed to accept the loan payment after the Defendant has adjudged bankrupt; and

whether the conduct of the Plaintiff of accepting the housing instalment payment from the Defendant after issuing the Notice Recall the Loan and Termination and also Notice 16D under Act 828 is amounting to cause to the contrary under subsection 256(3) of Act 828.

Whether the Plaintiff is allowed to accept the loan payment after the Defendant has adjudged bankrupt 9. The relevant provisions governing and concerning foreclosure proceedings in Enclosure 1 are the ones as set out in Act 360 and Act 828.

Subsection 8(1) of Act 360 provides that— "On the making of a bankruptcy order:

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

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.". [Emphasis added]

Pursuant to subsection 8(1) of Act 360, no creditor can proceed to recover the debts from a bankrupt without the leave of the Court. However, subsection 8(2) of Act 360 provides an exception, which state as follows: ''This section shall not affect the power of any secured creditor to realize or otherwise deal with his security in the same manner as he would have been entitled to realize or deal with it if this section had not been passed -- nor shall it operate to prejudice the right of any person to receive any payment under or by virtue of section 31 of the Employment Act, 1955 [Act 265] of the States of Peninsular Malaysia or any corresponding provisions in Sabah and Sarawak.". [Emphasis added]

Therefore, based on subsection 8(2) of Act 360, High Court decision in Janegi House Sdn. Bhd. lwn. CIMB Bank Bhd. [2013] 2 CLJ 804 and Federal Court decision in K Balasubramaniam (Likuidator Bagi Kosmopolitan Credit & Leasing Sdn Bhd) v. MBF Finance Bhd & Ors [2005] 1 CLJ 793, the Plaintiff submits that—

whenever any person becomes a bankrupt, all the property of the bankrupt now rests with the DGI and creditors are required to file a proof of debt;

for a secured creditor, the law provides 3 options as stated in K Balasubramaniam (supra) which includes allowing the secured creditor to auction the charged property and stand outside the liquidation; and

there are no provisions in law that allow the Plaintiff to accept monies to pay down the Defendant's (borrower) debt under his loan account.

I refer to Clause 9.1 of the Banking Facilities Agreement which set out Events of Default, inter alia, as follows: “…(j) Insolvency if the Customer or any Security Party or a corporation related to the Customer (by virtue of Section 6 of the Companies Act) or any party whose debts, obligations or liabilities are guaranteed by the Customer or any Security Party become insolvent is unable to pay their debts as they fall due, stops, suspends, reschedules or threatens to do so in respect of all or part of their debts or proposes or makes a general assignment or an arrangement or composition with their creditors; or…”. [Emphasis added]

Following the default, pursuant to Clause 10.1. the Plaintiff will by way of notice to the Defendant to terminate the Banking Facilities Agreement and the facilities will become immediate due and payable. Section 12.01 of the Annexures to the Charge provides that the Plaintiff has the rights to exercise the rights and powers provided including to enter and take possession of the Property and to sue and institute legal proceedings to recover the outstanding amount from the Defendant.

Upon reading the Clause 9.1(j) of the Banking Facilities Agreement, the Plaintiff is allowed to accept the instalment payment even though the Defendant has adjudged bankrupt. The Plaintiff can terminate the agreement and recall the facilities under Clause 10 of the agreement if the Defendant is not able to pay any of the monthly instalment payment. The Plaintiff can also exercise their rights and powers for the remedies as stipulated in Section 12.01 of the Annexures to the Charge.

However, in the present case, the Defendant has continued to make the housing instalment payment to the Plaintiff from December 2021 till March 2023. The Defendant is not able to pay the housing instalment payment since April 2023 as his loan account has been blocked by the Plaintiff. The Defendant argued that he has ability to continue the housing instalment payment with the assistance of his siblings although he is a bankrupt. The non-payment of the housing instalment payment is not due to his inability to pay.

It is not disputed that the Defendant’s loan account has been blocked by the Plaintiff. This has resulted the Defendant was unable to pay the monthly housing instalment payment. Therefore, the contention of the Plaintiff that the Defendant has failed, neglect or refuse to make housing instalment payment is devoid of merit.

Hence, I rule that pursuant to Clause 9(j) of the Banking Facilities Agreement, the Defendant has not defaulted any housing instalment payment due and payable to the Plaintiff.

Further, according to subsection 8(2) of Act 360, the Plaintiff is given an option to realise the Property or otherwise to deal with it. The wordings “otherwise deal with it” give an option to the Plaintiff to continue with the Banking Facilities Agreement where the Plaintiff can continue to accept the monthly instalment payment made by the Defendant.

The Federal Court decision in K Balasubramaniam (supra) where it was held that— "When answering Questions 3 and 6, I have already dealt at length the relevant provisions of the Act and Rules as to the status of the secured creditor and that he has the option to choose any of the methods given to him under the law to realize his security. He can:

realize his security and stand outside the liquidation;

surrender his security under para. 10 of Schedule C and prove for the whole debt; or

value his security and prove for the unsecured balance under para. 11 of Schedule C.". [Emphasis added]

Hence, based on subsection 8(2) of Act 360 and the Federal Court decision in K Balasubramaniam (supra), when the Defendant becomes a bankrupt, the Plaintiff has three (3) options available to them. In the instant case, the Plaintiff has opted to the first option, namely to realise the Property and stay outside the liquidation when they served Notice of Recall and Termination of the Banking Facilities and Statutory Notice of Default in Form 16D to the Defendant.

I rule that once the Plaintiff has opted to proceed with the first option which allowing the Plaintiff to sale the charged property by way of auction and stand outside the liquidation, the Plaintiff is not allowed to accept any payment made by the Defendant.

Whether the conduct of the Plaintiff of accepting the housing instalment payment from the Defendant after issuing the Notice Recall the Loan and Termination and also Notice 16D under the National Land Code is amounting to cause to the contrary under subsection 256(3) of Act 828

Subsection 256(3) of Act 828 provides that— “On any such application, the Court shall order the sale of the land or lease to which the charge relates unless it is satisfied of the existence of cause to the contrary.”. [Emphasis added]

I refer to the Supreme Court case of Low Lee Lian v. Ban Hin Lee Bank Bhd. [1997] 2 CLJ 36 where it was decided that— “[5] Proceedings under s. 256 are not concerned with any contractual claims that the chargor may have against the chargee. They are concerned with the very narrow and limited question whether the chargor has adduced facts that establish cause to the contrary in the sense discussed herein. [6] A narrow and restrictive interpretation of s. 256(3) of the Code is necessary for reasons of policy. It therefore follows that, to resist an application under s. 256(3) of the Code, it is not sufficient to allege breaches by the chargee of the loan agreement between the chargor and the borrower or even of the terms of the annexure to the charge. An allegation that the chargee acted in breach of contract, while it may rise to an independent action in personam, is insufficient per se to defeat the ad rem rights of a chargee under his registered charge to an order for sale. [7] It follows further that, in the absence of strong and compelling reasons (as were present for instance in Public Finance Bhd. V. Narayanasamy [1971] 1 LNS 107 and Overseas Chinese Banking Corporation Ltd v. Lee Tan Hwa) a Court would not be justified in withholding relief to a chargee under s. 256 of the Code. In our judgment, cause to the contrary within s. 256(3) may be established only in three categories of cases. First, it may be taken as settled that a chargor who is able to bring his case within any of the exceptions to the indefeasibility doctrine housed in section 340 of the Code establishes cause to the contrary. Secondly, a chargor may show cause to the contrary within s. 256(3) of the Code by demonstrating that the chargee has failed to meet the conditions precedent for the making of an application for an order for sale. Thirdly, a chargor may defeat an application for an order for sale by demonstrating that its grant would be contrary to some rule of law or equity.”. [Emphasis added]

It is not disputed that the Defendant has been adjudged bankrupt on 25.11.2021 and the Plaintiff has accepted the monthly instalment for the housing loan from December 2021 till March 2023. From April 2023 onwards, the Defendant’s account was blocked by the Plaintiff on the reason that the Defendant is a bankrupt.

Subsequent thereto, the Plaintiff has proceeded with the foreclosure proceedings by issuing the Notice to Recall and Termination of the Banking Facilities and Statutory Default Notice in Form 16D to the Defendant. The reasons being the Defendant failed, neglect and refuse to pay the monthly instalments under the Banking Facilities Agreement.

The Notice to Recall and Termination of the Banking Facilities has been issued by the Plaintiff’s solicitor on 18.01.2024 and Statutory of Default in Form 16D was issued on 28.02.2024.

It is noted that the Plaintiff has taken about two (2) years to discover the Defendant is a bankrupt and have accepted the housing instalment payment from December 2021 till March 2023. The Plaintiff has taken two (2) years plus to terminate the Banking Facilities Agreement.

Based on the facts presented by the Defendant via their affidavits as per paragraph 7 above, it is not disputed that the Plaintiff has accepted the housing instalment made by the Defendant vide RHB’s cheques, after the Notice to Recall and Termination of the Banking Facilities and Statutory Default Notice in Form 16D were issued to the Defendant.

I am of the view that the conduct of the Plaintiff is inconsistent with the contentions and stance taken by the Plaintiff. When the Plaintiff has made a counter proposal and proceeded to accept the payment of RM172,806.44 made by the Defendant via the RHB’s cheques, the Plaintiff has opted to continue their obligations under the Banking Facilities Agreement and treated the said facilities agreement is subsisting and binding on all the Parties.

It can clearly be seen that the Plaintiff was blowing hot and cold, first enforcing their rights and powers of the Plaintiff under the Banking Facilities Agreement and Annexures to the Charge to sale of the Property, and at the same time has accepted the payment of RM172,806.44 by way of RHB’s cheques. The Plaintiff later on has breached their promise by not withdrawing Enclosure 1 after the RHB’ cheques have been cleared.

Therefore, I rule that the Plaintiff’s conduct was inconsistent with their stance and the Defendant has established the cause in contrary under subsection 265(3) of Act 828 when the Plaintiff decided to accept the payment of the Defendant via the RHB’s cheques. The Plaintiff who is seeking remedy via Enclosure 1 does not come with clean hand and treated the Defendant fairly. It would be against rule of equity if the Enclosure 1 is granted.

CONCLUSION Based on the reasons above, I dismiss Enclosure 1 with costs of RM3000.00 subject to allocator costs, to be paid by the Plaintiff to the Defendant within fourteen (14) days from the Court order. Dated 12 September 2025. Signed by: ……………….. Wong Mee Ling Judge High Court of Malaya Johor Bahru Johor Darul Ta’zim. Counsel/Solicitor For the Plaintiff: Mr. Louis Chong Huey Hwang Messrs Zaid Ibrahim & Co. Counsel/Solicitor For the Defendant: Mr. M. K Tan Messrs G.K. Sritharan & Co.