JUDGMENT

Muhammad Kamil Awang J:

The creditor obtained judgment against Ting Nguk Yong (the debtor) in a sum of RM1.5 million together with interest and costs. Based on this judgment, an order of adjudication and receiving order were made against the debtor on 20 January 1996. In 1997 one Mr. Paul Chin Sing, a third party had approached and entered into negotiation with the creditor, whereby they agreed that the third party would pay the creditor a sum of RM500,000 towards the debtor's debt in full settlement of the debt. The payment was made in five monthly instalments of RM100,000 each. On 15 January 1998 the creditor had informed the third party that it had received the RM500,000 as a full settlement of the debt. The debtor then filed a notice of motion under s. 105 of the Bankruptcy Act 1967 for the annulment of the adjudication.

The official assignee opposed this application on the grounds that the debtor had not settled the debt in full, and that no payment had been made to the official assignee. He further contended that the application under s. 105 was misconceived, it should have been an application made under s. 18 of the Bankruptcy Act.

The jurisdiction to annul is discretionary, and it would not, in the absence of special circumstances, be a good exercise of discretion to make an order of annulment where, if the bankrupt were applying for an order of discharge, an order of discharge would not be granted: Re Keet [1905] 2 KB 666 per Sirling LJ at p. 677.

Where the funds for payment of debts are being provided by a third party the terms of sub-s. (1) read with sub-s. (4) of s. 29 Bankruptcy Act 1914, would appear to require him to commit his money unconditionally by payment to the trustee, so that the court can ascertain that the debts are paid or funds are available for payment, but presumably the court could give leave for conditional deposit to be made, to abide its decision on merits of the application, namely, its assessment of the bankrupt's conduct.

Our Bankruptcy Act 1967 is modeled along the English Bankruptcy Act 1914 and the phrase in the second limb of s. 105(1) of our Act is in pari materia with the words in the second limb of s. 29 of the 1914 Act. Section 105(1) of the Bankruptcy Act 1967 states:

Where in the opinion of the court a debtor ought not to have been adjudged bankrupt, or where it is proved to the satisfaction of the court that the debts of the bankrupt are paid in full, or where it appears to the court that the proceedings are pending in the Republic of Singapore for the distribution of the bankrupt's estate and effects among his creditors under the bankruptcy or insolvency laws of the Republic of Singapore and that the distribution ought to take place in that country, the court may annul the adjudication.

Here we are concerned with the second limb of sub-s. (1) of s. 105. As the bankruptcy law is penal in nature, the court has to apply a strict construction as is required in a criminal legislation. The relevant second limb reads, "where it is proved to the satisfaction of the court that the debts of the bankrupt are paid in full ... the court may annul the adjudication." The phrase means what it says, when the debts are paid in full then the court may exercise its power under s. 105. It leaves the court with no discretion whether or not to accept a sum less than the proved debts in full settlement of the debts in the estate of the bankrupt. This is well illustrated in the Federal Court case of Kwong Yik Bank Bhd v. Hah Chiew Yin Yin [1985] 2 MLJ 452. In that case, the respondent, in 1981, owed the bank (the appellant) a sum of $30,000 and thereupon she was adjudged a bankrupt. Subsequently, her husband approached the appellant and paid a sum of $16,000 to the appellant in full settlement of the respondent's debt. The respondent thereupon filed a motion to have the adjudication annulled on the ground that the debts of the bankrupt had been paid in full. The learned trial judge found on