Yayasan Ihsan Rakyat v Samsuddin Bin Mohamad Fauzi (WA-29NCC-474-05/2021)

These Grounds concern a Notice of Appeal (Encl 146) dated 9.2.2025 to the Court of Appeal against my decision on 7.1.2026.

By my decision on 7.1.2026, I dismissed Encl 95 with costs of RM3,000.00. Encl 95 is an appeal against the decision of the Deputy Registrar on 5.4.2024, dismissing the application of the Judgment Debtor (“JD”) in Encl 82 to set aside the Judgment Creditor’s (“JC”) petition (“CP”).

The Contents of these Grounds are set out in the table below. Contents Para No & PART PAYMENT IN BANKRUPTCY 4-7 Part Payments in Bankruptcy 8-17 & PART PAYMENTS IN A WINDING UP 18-20 Part Payments in Winding Up 21-26 CONCLUSION 27

This appeal revolves around the statutory threshold in bankruptcy as prescribed by s. 5 of the Insolvency Act 1967. S. 5 sets the threshold of the debt before a creditor may present a petition to declare a debtor a bankrupt. After the amendment by s. 5 of the Insolvency (Amendment) Act 2020, the statutory threshold was raised to RM100,000.00.

S. 5(1)(a) of the Insolvency Act 1967 now provides: “5. Conditions on which creditor may petition

A creditor shall not be entitled to present a bankruptcy petition against a debtor unless—

the debt owing by the debtor to the petitioning creditor, or if two or more creditors join in the petition the aggregate amount of debts owing to the several petitioning creditors, amounts to **one hundred thousand ringgit;”

This appeal involves a cheeky manoeuvre by the JD to defeat the JC’s bankruptcy proceedings against him. The manoeuvre is explained by the JD in his supporting Affidavit. His opening move was to deposit RM70,000.00 directly into the JC’s bank account in part payment of his debt. The object of the payment was to cause his debt to the JC to fall below the statutory threshold of RM100,000.00. The CP would thus be rendered ineffective and liable to be set aside by an application then filed in the form of Encl 82. The part payment was eventually refunded to the JD.

The main if not only issue is whether the JC is compelled to accept the RM70,000.00 paid by the JD and received by the JC, in part payment of the JD’s debt, thereby reducing the amount claimed in the CP to below the threshold sum stipulated under s. 5. The argument is that the CP would thus be rendered ineffective as the bankruptcy Court would not have the jurisdiction to make a bankruptcy order against the JD, see

Moscow Narodny Bank Ltd v Ngan Ching Wen [2005] 3 MLJ Consequently, the CP must be set aside and Encl 82 allowed. Part Payments in Bankruptcy 4 8. The short answer to this question is that, in my judgment, the JC may reject any part payment and insist on full payment of the debt. However, this proposition is not without debate. In Re Yusnita Hussain, Ex P MBF Finance Bhd [2000] 6 CLJ 511, Suriadi J (as he then was) held: “At this stage, unless the debt is paid in full, the creditor may reject that part payment and await the receiving order. But as said earlier, regardless of the source of the payment, so long as payments are accepted after the act of bankruptcy has occurred, the creditor runs the risk of having his petition declared defective.”

However, in Re Anuar bin Ahmad; ex parte CIMB Bank Bhd [2024] MLJU 847, it appears that Azizan Md Arshad JC held that Yusnita (supra), was no longer good law. His Lordship held: “[31] JD refers to a case of Re Yusnita Hussain, Ex P MBF Finance Bhd [2000] 6 CLJ 511, which ruled that, once the BN is filed, no further acceptance of payment can be made. If the JC accepts it, then it will cause the BN to be invalid. The Court also decides that, unless the debt is paid in full, the creditor may reject that part payment and await the receiving order. So long as payments are accepted after the act of bankruptcy has occurred, the creditor runs the risk of having his petition declared defective. [32] After examining the facts of the case, this Court found that in that case, the JC itself had received the payment whereas in our current case, the receipt was by the Insolvency Department. Based on the facts, it is different and this Court does not intend to follow that decision which was decided at the High Court level, keeping in mind that it is not binding on this Court. With all due respect, that case is no longer an established law for the time being.”

However, in my mind, Anuar bin Ahmad (supra) should not taken as departing from all aspects of Yusnita. The departure, with respect, should be confined to the proposition that mere part payments (without more) after the presentation of the petition will not vitiate the BN and CP. To that limited extent, I would respectfully agree. This appears to be the position as can be seen in the next para 33. “[33] This Court agrees with the Learned Counsel for the JC that a Bankruptcy Notice and a Creditor’s Petition is not vitiated merely because the creditor has received part payment towards the debtor’s debt after the presentation of the petition unless the amount of the debt has been reduced to less than the statutory threshold of RM100,000-00. … [34] In the case of Moscow Narodny Bank Ltd v Ngan Ching Wen [2005] 3 MLJ 693, the Federal Court held: “(60) In Re Patel (A debtor) [1986] 1 All ER 522, it was held that where a debt on which the bankruptcy petition was founded had by the date of the hearing of the petition been reduced by part-payment to less than the statutory minimum the court had no jurisdiction to make a receiving order. That is a very sensible judgment, because, if the debt at the time of making the receiving order, is less than the statutory minimum, then the bankruptcy court clearly has no jurisdiction to make the receiving orders. But, where the debt is above the statutory minimum, the court’s jurisdiction is not ousted.”

Malaysian courts have, on many occasions, followed Re Patel and took a similar view, ie where after the filing of the creditor’s petition the amount owing by the debtor is reduced, the petition is not bad as long as the amount remaining owing at the date of hearing of the petition is more than the statutory limit. See Re Chong Ah Kwan Construction Co [1966] 2 MLJ 39 Re Loh Kok Huah [1992] 1 MLJ 687 Re Ti Hock Soon [1993] 1 CLJ 477 Re Sharifah Mohsin [1994] 3 CLJ 373 Re Fong Yuan Kwong [1996] 4 MLJ 42 Re Darshan Singh a/l Atma Singh, ex p OCBC Bank (Malaysia) Bhd [1996] MLJU 1195 Rozila bte Mohamed v American Express (M) Sdn Bhd [1999] MLJU 959 Dalam Perkara Hussain bin Manaf, ex p Malayan Banking Bhd [2001] MLJU 781 Re MSA Zachariah, ex p Boon Siew Finance Bhd [1993] 3 CLJ 279.” [35] In this case it is clear that the CP has been filed based on a valid Judgment which the JD did not comply with. On this basis, the Judgment can be enforced to safeguard the JC’s interest in recovering payment premised on the JD’s act of bankruptcy for failing to comply with the Bankruptcy Notice dated 15.03.2021 and was the accurate amount owing by the JD to the JC until 08.02.2023, when the Insolvency Department paid out the dividends. Following the Federal Court case of Moscow Narodny (supra) and the accepted position of law in Malaysia, the Amended Creditor’s Petition does not become invalidated simply because the amount owing by the JD is reduced before the Creditor’s Petition could be heard. [36] This Court agrees with the submission by the Learned Counsel for the JC that the debt owing by the JD is well above the statutory minimum (even after taking into account the reduction) and the Court is empowered to make a bankruptcy order so long as it is satisfied that the amount owing by the JD remains above the statutory minimum.”

The correct position is that a BN and a CP are not vitiated merely because the creditor has received part payment towards the debtor’s debt after the presentation of the petition unless the amount of the debt has been reduced to less than the statutory threshold. I entirely agree.

However, what remains good law is Suriadi J’s finding in Yusnita (supra) that that the JC may reject part payments not amounting to full payment of the debt. The finding is worth repeating: “At this stage, unless the debt is paid in full, the creditor may reject that part payment and await the receiving order. But as said earlier, regardless of the source of the payment, so long as payments are accepted after the act of bankruptcy has occurred, the creditor runs the risk of having his petition declared defective.”

The latter part of this dicta merely states that if payments are accepted by the JC after the CP is presented, the JC only runs the risk that the CP may be defective, for example, if the part payments caused the debt to be reduced below the statutory threshold. Clearly, the bankruptcy Court will then have no jurisdiction to make the bankruptcy orders, and the CP is rendered ineffective. However, Suriadi J in Yusnita (supra) did not go any further. He certainly did not find that the JD is compelled to accept mere part payments which vitiate the CP but instead, expressly found that the JC may reject them.

I would therefore accept Suriadi J’s dicta as being the correct statement of the law. The JC may reject the part payments which do not amount to full payment.

In this regard, in exercising this right to reject, the JC is not obliged to consider the interests of the debtor. He is entitled to reject an offer from the JD in his own interests as a creditor of the JD. Obviously however, the JC cannot act for collateral purposes or unreasonably. But he is not obliged to show compassion or act with generosity to the JD. In Ross and another v Commissioners for HM Revenue and Customs [2010] EWHC 13 (Ch), Hendersen J followed the dicta of Robert Walker J (as he then was) as set out below: “[47] Secondly, and following on from the point which I have just made, in IRC v a Debtor, loc cit, Robert Walker J said at 974B that it seemed to him reasonably clear: ‘that in considering an offer a creditor is entitled to have regard to his own interests (so long as they are his interests as a creditor, and not in some other capacity so as to bring in collateral considerations). The creditor is not required to balance his interests against those of the debtor, or to take a chance, or to show patience or generosity, even though some creditors might do so. As Lord Phillimore put it in Viscount Tredegar v Harwood and others [1929] AC 72 at p 82, acting reasonably is not the same as acting justly, fairly or kindly. That was a landlord and tenant case but this point at least is of general application.”

Similarly, in deciding whether to reject part payments which would reduce the JC’s debt below the statutory threshold, the JC is entitled to act in its own interests and need not act with generosity to allow the JD to escape the severe consequences of bankruptcy. Here, there is no evidence to suggest any collateral purpose on the part of the JC. The JD’s reliance on OCBC Bank (Malaysia) Bhd v Sethu Ambalaga Thevar [1998] 3 CLJ 563, is misplaced as the case involved a tender of the full debt, which the JC could not reasonably reject.

As such, the JC will not be acting unreasonably if he takes the view that he prefers to accept recovery from the bankruptcy process than in accepting part payments which will effectively terminate that process. This will not amount to using bankruptcy proceedings as a weapon of extortion but it will be a reasonable and bona fide exercise of a statutory remedy.

For completeness, I should deal with the analogous position of a company in the winding-up process and the relevant statutory threshold. The Singapore Court of Appeal in Sun Electric Power Pte Ltd v RCMA Asia Pte Ltd (formerly known as Tong Teik Pte Ltd) [2021] 2 SLR 478 explained the need for the increase in the statutory threshold in July 1999 by s 2 of the Bankruptcy (Variation of Minimum Amount of Debt for Petition for Bankruptcy) Order 1999. The Court held: “[102] Finally, Prof Ho [Minister of State for Law] also stated that the increment of the debt limit in s 254(2)(a) of the Companies Act was to “strike a proper balance between the interests of debtors and creditors” (Second Reading at col 2187). This shows that the higher debt limit was intended to offer greater protection to the debtor company while also balancing the interests of creditors. It can be inferred from this that the debt limit of $10,000 was intended to be a form of safe harbour, so that as long as a company’s debt did not exceed $10,000, it should not be deemed to be unable to pay its debts. Consistent with this intention, Parliament must also have intended that if a company pays up a debt in part upon service of the statutory demand such that it falls below $10,000, it should not be deemed to be unable to pay its debts. [103] Accordingly, in our opinion, a company that pays the debt demanded in a statutory demand in part within the prescribed period such that the remaining amount payable falls below $10,000 should not be deemed to be unable to pay its debts pursuant to s 254(2)(a) of the Companies Act.”

Pembinaan Bukit Timah Sdn Bhd v Hiform (M) Sdn Bhd [2024] MLJU 2030 explained Sun Electric Power (supra), as folows: “[46] Apart from identifying the need for this ‘safe harbour’, the panel of the Singapore Court of Appeal chaired by Sundaresh Menon CJ went through the legislative history pertaining to the applicable threshold and found support for the view that a company will not be deemed to be unable to pay its debts as long as the outstanding debt fell below the statutory threshold during the prescribed 21-day period. This inference was drawn from the successive and continual increments of the statutory threshold legislated by Parliament which showed that Parliament did not want companies to be deemed to be unable to pay their debts if the outstanding debt was too low in light of current economic conditions and inflationary trends (at paragraph 97). Inference was also drawn from the successive increment for bankruptcy threshold (at paragraph 101).”

I entirely agree with this reading of Sun Electric Power (supra). It is entirely consistent with the position in Yusnita (supra). More importantly, the Singapore Court of Appeal said nothing about the right of a creditor to reject part payments of an outstanding debt.

However, Pembinaan Bukit (supra) took it one step further, and in my judgment one step too far. The Court found that by extending the statutory threshold, it would be inferred that Parliament intended that creditors could not refuse part payment that would cause the outstanding debt to fall below the statutory threshold and thus defeat the bankruptcy. It seems to me that this Parliamentary inference did not come from Sun Electric Power (supra).

This is what the Court held: “[48] … The decision to enact the increase from RM10,000.00 to RM50,000.00 was made by the Minister of Domestic Trade and Consumer Affairs, exercising authority vested in s. 466(1)(a). … [50] In my assessment, if the changes had not been implemented, there would have been a significant increase in the number of winding-up petitions starting from 2020, particularly due to the economic strains induced by the COVID-19 pandemic. Companies faced unprecedented challenges during and post-pandemic, including disruptions in supply chains, reduced consumer demand, forced closures, and financial instability. These factors contributed to many businesses struggling to sustain operations and meet financial obligations, ultimately leading to an elevated risk of insolvency and winding-up petitions. These adjustments highlight a proactive response to economic challenges, with the primary objective being the establishment of a practical framework that protects the interests of creditors while ensuring the sustainable functioning of businesses. [51] Given the increase in the statutory threshold aimed at mitigating the economic impact of the Covid-19 pandemic, it stands to reason that the purposive interpretation of such legislation is to facilitate partial payments, offering companies a chance to sidestep winding-up proceedings if the debt is reduced during the 21-day notice period. A creditor therefore cannot effectively refuse partial payment as such payment is made in accordance with the law. Therefore, I am of the considered view that the Plaintiff’s part payment towards the statutory demand, causing the outstanding debt falling below the statutory threshold before the expiry of the 21-day notice period, would result in s.466(1)(a) of the Companies Act 2016 no longer being a valid ground to wind up its entity. Hence, the petition filed by the Defendant against the Plaintiff is bound to fail.”

With the greatest of respect, I am unable to agree with this reading of the legislation. There is nothing in s. 466 that suggests that the ordinary right of a creditor to refuse part payment in winding up proceedings is now compromised. To read in such exclusion is to introduce words into the legislation. This extension of the protection to debtors should be left to by express words of Parliament rather than, with respect, by judicial inference. Conversely, a creditor’s right to wind up an insolvent company as provided for in the Companies Act 2016 should not be eroded except by clear words.

In conclusion, in both insolvency regimes, I find that there is nothing to prevent a creditor from rejecting part payments.

In the case of bankruptcies, I would gratefully accept the statement of Suriadi J in Yusnita (supra) that unless the debt is paid in full, the creditor may reject part payments.

Accordingly, I find that the JC was fully entitled to reject the part payment of RM70,000.00.

It follows that the appeal in Encl 95 against the decision of the Deputy Registrar on 5.4.2024, is dismissed with costs of RM3,000.00, subject to allocatur. Dated the 27th day of March 2026 ..........................tt............................ YA TUAN SAHERAN SUHENDRAN JUDICIAL COMMISSIONER OF THE HIGH COURT (COMMERCIAL 11) (INSOLVENCY 2) OF KUALA LUMPUR IN THE TERRITORY, MALAYSIA Counsel for the Judgment Debtor: Solicitors: Irman Al-Syaffeeq bin Mohd Simin Messrs. Abdul, Low & Partners (Shah Alam) Counsel for the Judgment Creditor: Solicitors: Muhamad Hafizan Shafuan bin Kamarulzaman Messrs. Ram Reza & Muhammad (Petaling Jaya) Case References: • Moscow Narodny Bank Ltd v Ngan Ching Wen [2005] 3 MLJ 693 • OCBC Bank (Malaysia) Bhd v Sethu Ambalaga Thevar [1998] 3 CLJ 563 • Pembinaan Bukit Timah Sdn Bhd v Hiform (M) Sdn Bhd [2024] MLJU 2030 • Re Anuar bin Ahmad; ex parte CIMB Bank Bhd [2024] MLJU 847 • Re Yusnita Hussain, Ex P MBF Finance Bhd [2000] 6 CLJ 511 • Ross and another v Commissioners for HM Revenue and Customs [2010] EWHC 13 (Ch) • Sun Electric Power Pte Ltd v RCMA Asia Pte Ltd (formerly known as Tong Teik Pte Ltd) [2021] 2 SLR 478 Legislation References: • Companies Act 2016 • Insolvency (Amendment) Act 2020 • Insolvency Act 1967 Decision Date: 07th January 2026