The court ruled that the provisions regarding secured creditors in the Insolvency Act and Companies Act do not apply to third-party secured creditors, allowing the petitioner's proof of debt.

JUDGMENT

Mohd Rosli Yusoff JC

(Encl 1 Notice of Motion - By The Petitioner To Quash The Decision Of DGI Rejecting POD Filed By The Petitioner Against The Respondent.)

Introduction

[1] This Notice of Motion is an application by the Petitioner to quashthe decision of the DGI rejecting the Proof of Debt (POD) filed by the petitioner and subsequently to order the DGI to accept the POD of the Petitioner claiming the full amount of RM2,015,306.48 and Cost.

Background

[2] The Petitioner had granted a financing facility of RM1,680,000.00 ("the financing") to the Respondent. The financing was secured inter alia by charge over a landed property held under HSM 501, PT 883 Mukim Selehong Utara, Daerah Tumpat, Kelantan ("the Charge").

[3] The charge is a third-party charge executed or created by three joint proprietors namely Kefat a/p Chau Kom @ Jakun, Mek Keput a/p Chau Di and Mek Keput a/p Eh Edam @ Eh Ding ("the Third Party Chargor").

[4] Upon failure of the Respondent to observe their obligations under the financing, the Petitioner commenced legal proceedings and obtained a judgment against the Respondent on 20 January 2020.

[5] The Respondent was then wound up on 15 June 2021 and the Petitioner subsequently filed a POD to the DGI for the sum of RM2,015,306.48 without surrendering their security ie the said Third Party Charge to DGI.

[6] At the same time, the Petitioner has commenced foreclosure proceedings against the land charged and the same is still pending.

[7] DGI had rejected the POD filed by the Petitioner on the ground that the Petitioner is a secured creditor and had not surrendered their security tothe DGI.

Submission By The Petitioner

[8] The contentions of the Petitioner are as follows:

(a) that being a third party secured creditor, the provisions of Item 9,10 & 11 of Schedule C of Insolvency Act 1967 (which is in pari materia with s 524(1) of the Companies Act 2016 ) are not applicable to the Petitioner.

(b) the security ie the charge over the said Land had been created bythe Third Party Chargor and not by the Respondent themselves and as such, the said security shall not be for the benefit of Respondent's Creditors.

(c) the provisions of Item 9, 10 & 11 of Schedule C of Insolvency Act 1967 (which is in pari materia with s 524(1) of the Companies Act 2016 are only applicable to the First Party Charge. Therefore the Petitioner, not being a First Party Chargee, could file POD to the DGI without first surrendering their security to the DGI.

[9] All cases referred to by the Petitioner i.e BSC Elevators Sdn Bhd v. Sineo Enterprise Sdn Bhd & Anor; Affin Bank Berhad Re: Malgran Resources Sdn Bhd ; [2021] 1 LNS 2317 and K Balasubramaniam (Likuidator bagi Kosmopolitan Credit & Leasing Sdn Bhd) v. MBF Finance Bhd & Ors; 2005 MarsdenLR 2266 ; ; are not in point with the issue of third party secured creditor.

Submission By DGI

[10] Apart from submission on the issue that the Petitioner's application has been made out of time, DGI's stands are that:

(a)the Petitioner is in fact a secured creditor based on the security documents inter alia the Form 16A (Land Charge under the National Land Code )registered on 27 September 2012.

(b) being a secured creditor, the Petitioner falls squarely in the definition of "secured Creditor" under s 2 of the Insolvency Act 1967 . Hence, the provisions of Item 9, 10 & 11 of Schedule C of (which is in pari materia with Section s 524(1) of the Companies Act 2016 are applicable to the Petitioner.

(c) based on s 524(1)(c) of the Companies Act , in order to file full POD on the debt due to the Petitioner, the Petitioner must first surrender the security to the DGI. This had not been done by the Petitioner. Hence, the DGI rejected the POD filed by the Petitioner.

Analisys And Decision Of The Court

[11] On the issue of filing of this Notice of Motion out of time, this Court accepted the submission by the Petitioner that the Petitioner's solicitor received the Notice of Rejection on 9 August 2023 and hence the filing