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2010 MarsdenLR 4468
HIGH COURT MALAYA KUALA LUMPUR
PER: SOO SHUI CHING; EX PARTE: MALAYAN BANKING BERHAD & ANOTHER APPEAL
[Bankruptcy No: D4-29-1854-2005 & Bankruptcy No: D4-29-1855-2005]
A debtor unable to pay debts can contest bankruptcy orders; courts may allow installment payments if reasonable, balancing the rights of creditors and debtor's entitlements under the Bankruptcy Act.
Headnote:(A) Bankruptcy Act 1967 - Section 6(3) - Federal Constitution - Article 5(1) - This is an appeal against the receiving and adjudicating orders from the bankruptcy proceedings. The appellant contests the judgment creditor's rejection of a settlement proposal. The court affirms that a bankruptcy order cannot be made if the debtor can pay debts. The appeal is allowed with directions to permit installment payment of proposed settlement, ensuring justice is attained for both parties as enshrined within the Bankruptcy Act and constitutional rights. (Paras 1, 2, 5, 6)
(B) Judicial Discretion in Bankruptcy - Courts possess discretion in handling bankruptcy orders and may consider a debtor's ability to pay before deciding on a bankruptcy petition, emphasizing the balance of justice in both creditor's and debtor's rights. (Paras 5(a), 5(b), 5(c))
Facts of the case:
The debtor has defaulted on a bankruptcy notice requiring payment of RM 481,200.76, which includes security held by the creditor. The debtor proposed to pay in installments, but this was rejected by the creditor. The court evaluates the debtor’s capacity to repay debts under bankruptcy law.
Findings of Court:
The bankruptcy order is subject to appeal, and the debtor's proposal to pay installments of the debt is considered reasonable, pending approval and oversight by the senior assistant registrar.
Issues: The main issues encompass the debtor's ability to pay, the validity of the proposed installment payments, and the creditor's entitlement to accrued statutory interest.
Ratio Decidendi: The court concluded that it has discretion under the Bankruptcy Act to allow installment payments of the judgment debt, provided the arrangements are reasonable and justice requires it. The creditor’s entitlement to interest must be separately considered and does not negate the debtor's ability to offer payments.
Result: Appeal allowed with directions.
| Table of Content |
|---|
| 1. bankrupt's appeal overview (Para 1) |
| 2. arguments regarding the bankruptcy notice and settlement (Para 2 , 3 , 4) |
| 3. court's reasoning and interpretation of powers under the bankruptcy act (Para 5) |
This is my judgment in respect of enclosure 40 the bankrupt's appeal against the receiving and adjudicating orders granted on 14 December 2009.
Brief Facts
[1] The judgment creditor (J.C.) had obtained summary judgment against the borrower and the guarantors. And one of the guarantors is the appellant in these proceedings. The judgment debtor (J.D.) complains: (i) the J.C. holds security in respect of the banking facilities (ii) the J.C. has offered to settle the amount stated in Bankruptcy Notice (B.N.) amounting to RM 481,200.76 as set out in B.N. by way of 20 installments and is stated in enclosures 27 and 32 (iii) with leave of court on 13 May 2010 have filed an application to set out the 'without prejudice' offer to settle amount of RM 481,200.76 inclusive of costs of RM 26,000.00 by way of an initial payment of RM 100,000.00 followed by 20 monthly installments (iv) the offer has been rejected by the J.C.
[2] Learned counsel for the J.D. in essence says that the J.D. is able to pay the debt within the meaning of s 6(3) of Bankruptcy Act 1967 (BA 1967) and in consequence says the creditor's petition must be dismissed.
[3] The learned counsel for the J.C. argues that I should not have granted leave to introduce the 'without prejudice' conversation at the appeal stage and relies on the case of Oh Kuang Liang v. Associated Wood Industries Sdn Bhd , [1995] 4 MLJ 390 which in the first instance I will say have nothing to do with bankruptcy proceedings.
[4] In addition the learned counsel says the granting of leave was in breach of RHC O 56 r 1(3A)(a)(b) of 1980. The J.C. complains (i) the J.D. only wants to settle RM 481,200.76 which does not include the statutory interest of 6% which the judgment creditor is entitled to (ii) the proposed settlement needs the approval of Director General of Insolvency (iii) the bankrupt's ability to settle debt is to be considered at the time before the expiry of 7 days after service of B.N. and not at the hearing of creditor's petition or appeal thereof.
[5] I have read the relevant application, affidavits and submission of the parties in detail. I take the view that appeal must be allowed with directions. My reasons inter alia are as follows:
(a) It is trite that court is given wide discretion and latitude to deal with the question whether a person should be made a bankrupt, pursuant to Bankruptcy Act and Rules. No creditor can insist as a matter of right a person must be made a bankrupt when the proposed bankrupt can show for other sufficient cause no order ought to be made against him. I have dealt with this area of jurisprudence in a number of cases. To name a few are as follows: (i) Re Siow Ah Moi; Ex P United Leasing Company Bhd , [2007] 3 MLJ 713 ; (ii) PT Bank Mandiri (Persero) TBK v. Karambunai Corp Bhd; [2007] 10 CLJ 636 ; (iii) Re Naspu Daud; Ex P Affin Bank Bhd ; [2007] 5 MLJ 767 ; [2008] 1 CLJ 723 ; (iv) Re Haji Khalid Abdullah; Ex Parte Danaharta Urus Sdn Bhd ; [2006] 7 MLJ 427 ; (v) Re Teoh Heng Han; Ex Parte OCBC Bank (Malaysia) Berhad; [2010] 9 CLJ 328 Bankruptcy No: D3-29-1523-2007, Hamid Sultan Bin Abu Backer, J Kuala Lumpur High court, 21 April 2010.
(b) Section 6(3) sets out some instances where the court may dismiss the petition. That section reads as follows:
If the court is not satisfied with the proof of the petitioning creditor's debt or of the act of bankruptcy or of the service of the petition, or is satisfied by the debtor that he is able to pay his debts, or that for other sufficient cause no order ought to be made, the court may dismiss the petition.
(c) The court may make any suitable orders or give directions as the justice of the case may require to balance the right of the J.C. as well as the right of J.D. to attain a just solutio
