Taiping Recovery Sdn Bhd v Ketua Pengarah Jabatan Insolvensi Malaysia (WA-29PB-141-02/2023)

NOR AZAH BINTI AWIN (I/C NO.: 531220-05-5058/4547430) … RESPONDENTS S/N 6Wpt148duUuU6uLKexhUBw JUDGMENT INTRODUCTION [1] This is the 2nd Respondent’s, appeal against the decision of the Senior Assistant Registrar (“SAR”) allowing the Plaintiff’s application pursuant to section 33B(4) of the Insolvency Act 1967 (“IA”) to prohibit he Director General of Insolvency (“DGI”) from issuing a certificate of discharge to the Bankrupt (“the 2nd Respondent”) pursuant to section 33A(1) of the IA. BACKGROUND FACTS [2] The 2nd Respondent was adjudged a bankrupt on 12.06.2012 and is placed under the administration of the DGI. [3] On 22.04.2022, the DGI issued a written notice to the Judgment Creditors (“1st Written Notice”), informing the Plaintiff of its intention to issue a Certificate of Discharge (“Certificate of Discharge”) for the 2nd Respondent to be discharged from bankruptcy. S/N 6Wpt148duUuU6uLKexhUBw [4] In response, the Plaintiff through its solicitors issued a Notice of Objection dated 26.05.2022 ((“1st Notice of Objection”) objecting to the issuance of such Certificate of Discharge for the 2nd Respondent. [5] In reply, the DGI then issued a letter dated 30.06.2022 informing the Plaintiff that the Plaintiff’s objection was accepted and the 2nd Respondent will retain her status a bankrupt. [6] However, within a span of 5 months after issuing the 1st Written Notice, the DGI once again issued another written notice dated 16.11.2022 to the Plaintiff informing its intention to issue a Certificate of Discharge (“2nd Written Notice”). [7] In response, the Plaintiff once again through its solicitors, issued a Notice of Objection dated 17.11.2022 (“2nd Notice of Objection”) objecting to the proposed issuance of the Certificate of discharge for the 2nd Respondent. [8] On 03.02.2023, the DGI issued a letter to the Plaintiff’s solicitors, rejecting the Plaintiff’s objections based on the foregoing reasons: a. The matter has been under administration for more than 10 years; b. The 2nd Respondent is currently 69 years old and lacks the capacity to contribute to its estate; S/N 6Wpt148duUuU6uLKexhUBw c. The 2nd Respondent is a single mother who relies on her pension money; d. The 2nd Respondent has no assets to be realised for the Plaintiff; and e. Further administration of this case would not bring any benefits to its estate and is a waste of public resources. THE LAW [9] The application filed by the Plaintiff is pursuant to Section 33B(4) of the Insolvency Act 1967. The relevant provision is reproduced below:

A creditor who has furnished a notice of his objection and the grounds of his objection in accordance with subsection (2) may, within twenty-one days of being informed by the Director General of Insolvency that his objection has been rejected, make an application to the court for an order prohibiting the Director General of Insolvency form issuing a certificate of discharge. [10] In the case of Re Benny Ong Swee Siang; Ex Parte United Oveseas Bank (Malaysia) Bhd [2016] 3 CLJ 1001 Lim Chong Fong JC (as he then was) held at paragraph 19 that: “[19] From my reading of ss. 33A and 33B of the Bankruptcy Act 1967, the DGI does not have the absolute discretion to issue the certificate of discharge. The DGI’s exercise of the discretion is plainly subjected to the provisions in s.33B. It must be made judiciously depending on the circumstances of each case. In the Supreme court case of Savrimuthu S/N 6Wpt148duUuU6uLKexhUBw Sinnapan v PP [1987] 1 CLJ 368; [1987] CLJ (Rep) 322; [1987] 2 MLJ 173, Salleh Abas LP held that public interest, reason and justice demand that any statutory power must be exercised reasonably and with due consideration.” PLAINTIFF’S SUBMISSION [11] The 2nd Respondent owns substantial assets (Lands) as follows:

11.1 The 2nd Respondent is currently the legal and registered proprietor of 4 lots of land in Terengganu, namely Lot 141, 142, 144 and 146, Mukim Merang, Wakaf Ru Tapai, Setiu;

11.2 Constructed on these 4 lots of land is a beach resort known as

11.3 A quick online search reveals that the Sutra Beach Resort is available for booking at websites such as Booking.com and Agoda.com. This demonstrates that the Sutra Beach Resort is still operating up until today;

11.4 Throughout her bankruptcy period, neither the 1st nor the 2nd Respondent ever disclosed the income gained through the operation of the Sutra Beach Resort; and

11.5 The 2nd Respondent is currently the controlling director of Sutra Beach Resort Sdn Bhd, which is the company set up by the 2nd Respondent to operate and maintain the Sutra Beach Resort. DGI’s SUBMISSION [12] The DGI submits that although the assets referred to above belongs to the 2nd Respondent, nevertheless the lands do not vest with the DGI due to the provision in the Malay Reservation Enactment No. 17/1360 (“the Enactment”). Thus, the DGI has no power to sell those lands to pay the creditors. [13] Section 9 of the Malay Reservation Enactment provides as follows:

Restriction as to transfers, charges and leases

Subject to the provisions of sub-sections (ii) and (iii) of this section and of sections 11 and 19, no Malay holding shall be transferred, charged, leased or otherwise disposed of to any person not being a Malay, and no memorandum of transfer, charge or lease in S/N 6Wpt148duUuU6uLKexhUBw contravention of this section or any other sections in this Enactment shall be capable of registration in any Land Office or Registry of Titles. [14] Section 15 of the Malaysia Reservation Enactment provides as follows: 15 Restriction as to insolvency No Malay holding shall vest in an Official Receiver on the insolvency of the proprietor thereof. Nothing in this section shall be deemed to affect the vesting of any Malay holding in an Official Receiver where the petition upon which the proprietor is adjudicated insolvent was filed before the commencement of this Enactment. FINDINGS BY THIS COURT [15] This court finds that the grounds given by the DGI to allow a discharge of the 2nd Respondent is misconceived for the reasons appearing hereafter. [16] It is noted that after more than 10 years of the 2nd Respondent’s bankruptcy, the 2nd Respondent is still the registered owner of 4 lots of land on which the Sutra Beach Resort is built and the Sutra Beach Resort is still operating up until today. The Lands had been valued at RM14,140,000.00 by another creditor who also objected to the S/N 6Wpt148duUuU6uLKexhUBw intention to discharge the 2nd Respondent (see exhibit LSS-2 in the Affidavit Sokongan Pemiutang in WA-29PB-87-01/2023). The amount owing to the Plaintiff based on the proof of debt is RM29,304,802.25, arising out of a consent judgment. [17] The Respondents are now relying on the fact that the 4 lots of land are Malay Reserved Land and cannot be disposed of by the DGI, and therefore the 2nd Respondent has no asset which can be realised by the DGI which therefore warrants her discharge. [18] Even if one were to accept the DGI reasoning that the Lands belonging to the 2nd Respondent do not vest with the DGI, the 2nd Respondent could have made attempts to sell the land on her own, with the consent of the DGI and after such sale, the proceeds or at least a substantial part of the proceeds could have been paid to the DGI to be used to settle a reasonable percentage of the debts owing to the creditors of the 2nd Respondent. This was not done. [19] This court agrees with the Plaintiff’s submission that the Respondents’ contention is fundamentally wrong and is against to public policy and public interest. If such contention is allowed, this will set down a dangerous precedent and open the floodgates for future cases whereby an individual can simply borrow a substantial amount of money or incur a substantial amount of debt, use the money it gained to buy Malay Reserve Land, and after becoming bankrupt, apply for a S/N 6Wpt148duUuU6uLKexhUBw discharge on the grounds that a Malay Reserve Land cannot be disposed of by the DGI. Upon discharge, the individual would then enjoy a luxurious life on a piece of land acquired for free at the expense of legitimate creditors. [20] Alternatively if the Malay Reserve Lands cannot be vested in the DGI, the DGI could have made the discharge of the 2nd Respondent’s bankruptcy subject to a condition requiring the 2nd Respondent sell off the 4 lots of Malay Reserved Lands and pay the net proceeds to the DGI to distribute to her rightful and deserving creditors. Similarly, the 2nd Respondent could have offered to do the same on her discharge, as was done in the case of Re Siah Ooi Choe (1997) 3 SLR (R) 766 referred to by the 2nd Respondent in her submission where the Court held: [25] Mr Siah himself offered to sell the flat mentioned earlier and pay the net proceeds to the Official Assignee. The senior assistant registrar made an order of discharge subject to this condition. I upheld it. The flat has since my decision been sold, and the net proceeds have been paid to the Official Assignee…” [21] I am guided by the decision of the court is the case of Lim Hun Swee v Malaysia British Assurance Bhd (2011) 2 MLJ 219 where the Court held; S/N 6Wpt148duUuU6uLKexhUBw “[49] In some appropriate and deserving genuine cases, a bankrupt should be discharged from his bankruptcy, but not at the expense of commercial morality and public perception on bankruptcy law in the country. In allowing a discharge, the court must be very cautious in balancing between the interest of the bankrupt as an individual and the interest of the public and commercial reality at large. The application for a discharge can easily be abused especially in cases where the DGI has failed to carry out proper and complete investigation into the affairs of the bankrupt. There must be full and frank disclosure of all the relevant and material facts in the DGI’s reports. [50] It must be noted that in the interest of the public, commercial morality must be preserved at its highest level at all times. Bankruptcy law should not be used to defeat this goal. An order for a discharge should not be granted easily without proper and complete investigation into the affairs of the bankrupt. The public as well as commercial players should not be imbued with the perception that a person can easily borrow money (even in big amount) from financial institutions or create debts with other business creditors, then stash the money away, whether in his own name or any related persons and need not be repaid; then personally apply for a bankruptcy order against him (as in the present case) and after a short period apply for an order for a discharge with a minimum or too little dividend to be paid to the creditors, and after the discharge he can enjoy a luxury life. If this practice and perception is not checked, then commercial morality would decline. In this type of fiasco, the court and the DGI should be blamed for not carrying out their duties effectively under the bankruptcy law. CONCLUSION [51] Based on the above considerations, this court finds that it is unsafe to adopt and rely on the reports prepared by the DGI especially when there seems to be no proper and complete investigation as to the assets, income and expenses of the bankrupt. The reports contain contradictions, brief in nature and thus unreliable. To allow an order for a discharge of the bankrupt in the present circumstances would make a mockery of the provisions of the bankruptcy law available to safeguard the interest of creditors. It will not only lead to a decline in business morality but will also result in great injustice to legitimate creditors.” S/N 6Wpt148duUuU6uLKexhUBw [22] For the above reasons I find the decision of the DGI to allow a discharge of the 2nd Respondent under the circumstances described above is grossly unjust to her creditors and it offends commercial morality and public perception of bankruptcy laws in this country. Therefore, I dismiss the 2nd Respondent’s appeal against the decision of the SAR to prohibit the DGI from issuing certificate of discharge to the 2nd Respondent. Dated 20 March 2025 ……………t.t………………. Ahmad Murad Bin Abdul Aziz Judge High Court of Malaya Kuala Lumpur FRANKY IRWAN ABDUL RASHID FOR 1ST RESPONDENT IN BOTH APPLICATION JABATAN INSOLVENSI MALAYSIA CK LIM & DAMIAN CHAN FOR JUDGEMENT DEBTOR IN BOTH APPLICATION APPEAL OF SUIT PB87 &PB141 TETUAN FARHANA LIM S/N 6Wpt148duUuU6uLKexhUBw PB87 : S MANIARASAN & LIM WEI INN FOR APPELANT TETUAN ADAM ABDULLAH & MANI PB 141 : TAN THIAM POH FOR APPELANT TETUAN BELDEN Cases Referred to: ➢ Re Benny Ong Swee Siang; Ex Parte United Overseas Bank (Malaysia) Bhd [2016] 3 CLJ ➢ Re Siah Ooi Choe (1997) 3 SLR (R) 766 ➢ Lim Hun Swee v Malaysia British Assurance Bhd (2011) 2 MLJ 219 Legislation Referred to: ➢ Companies Act 2016 ➢ Insolvency (Winding Up) Rules 1972 Decision date: 22 October 2024