A judgment creditor must exhaust all modes of execution against the borrower before initiating bankruptcy proceedings against a guarantor, as clarified by the court.

[1] The Respondent stood as a guarantor for one YYR & Associates ("borrower") for an overdraft facility granted by the Appellant on 28 May 1996 for a sum of RM80,000.00 (all inclusive). The borrower, however had been dissolved on 26 May 2011 pursuant to s 308 of the Companies Act 1965 . The Appellant vide A72NCC-24720-10/2013 sought to recover a sum of RM66,701.69 with interest as at 30 June 2013 from the Respondent. Having failed to file his defence, the Appellant entered a default judgment on 5 December 2013.

[2] The Appellant subsequently initiated a bankruptcy petition against the Respondent vide Bankruptcy No: BA-29NCC-2464-04/2018 to obtain leave to commence a bankruptcy proceeding. The Respondent not being a social guarantor, hence the action in the court below was made pursuant to subsection 5(3)(b) of the Insolvency Act 1967 ("the Act") and subrule 97(1) of the Insolvency Rules 2017 ("the Rules").

[3] The Respondent was served with the cause papers however he failed to attend the hearing before the learned Senior Assistant Registrar ("SAR") on 24 May 2018. Nevertheless, the learned SAR dismissed the application. The Appellant has appealed against the dismissal.

[4] The reason for the dismissal according to the learned counsel for the Appellant was that the learned SAR ruled that the Appellant has to exhaust all other modes of execution as stipulated under subsection 5(4) of the Act.

Issue

[5] The issue before this court in this appeal as proposed by the learned counsel for the Appellant is:

"Notwithstanding the fact that the borrower company had already been struck off from the Companies Register and dissolved under s 308 of the Companies Act 1965 , must the Judgment Creditor, before commencing bankruptcy action against a guarantor also has to satisfy the court that the Judgment Creditor has also resorted to all modes of execution which include Writ of Seizure and Sale, Judgment Debtor Summons, Garnishment proceedings against the guarantor first?".

[6] It was submitted by the learned counsel that subsection 5(4) of the Act uses the words "modes of execution" and "debtor" and the definition under subsection 5(6) of the Act refers to the borrower Nowhere it mentions the word "guarantor". Thus, he contended that subsection 5(6) of the Act does not include a guarantor It was further argued that subsection 5(4) of the Act refers to debtor Therefore, the word "debtor" should mean just the borrower and does not include a guarantor Reference was made to Hong Leong Bank Berhad v. Khairulnizam Bin Jamaludin , and Bank Bumiputra Malaysia Bhd v. Esah Binti Abdul Ghani ; ; [1985] CLJ (Rep) 41.

[7] The Respondent who appeared in person in response argued that the Appellant ought to have obtained leave to file the Bankruptcy Notice before pursuing with this application. It was further contended that there was a delay in filing this application.

Decision

[8] A Bankruptcy Notice is issued pursuant to subsection 3(2) of the Act and in accordance with the procedure provided under r 89 of the Rules and thereafter to be followed by a bankruptcy petition. Nowhere in both the Act or the Rules require the petitioner to apply for leave for the issuance of a Bankruptcy Notice. The Appellant has complied with the requirements of the Rules in applying for the issuance of the Bankruptcy Notice - Enclosure 1. Having failed to comply with the notice the Respondent has committed an act of bankruptcy as stipulated under subsection 3(1)(i) of the Act, hence the leave application filed by the Appellant vide encl 3 by way of summons in chambers. I fail to see any irregularity in the process adopted by the Appellant or any delay in filing this application.