A guarantor's liability is independent and separate from the principal debtor, and the prohibition on claiming interest post-winding up under section 8(2A) of the Bankruptcy Act does not extend to guarantors.

[1] This is an appeal by the appellant against the decision of the Court of Appeal in allowing the respondent's appeal against the decision of the High Court entering judgment in favour of the respondent in the sum of RM1,022,134.75 being the amount due as at the date of the winding up order of a company known as Monzo (M) Sdn Bhd ("Monzo").

Background Facts

[2] The relevant background facts of this case may be summarised as follows:

(i) The respondent, a licensed bank, granted a term loan of RM1,000,000.00 ("the loan") to Monzo at the interest rate of 1.75% per annum in addition to the respondent's prevailing Base Lending Rate.

(ii) The loan was secured by a charge over two pieces of land situated in the Mukim of Plentong, District of Johor Bahru. The loan was also secured by a Letter of Guarantee and Indemnity executed by the appellant and one Mok Hwee Huan.

(iii) Monzo defaulted in payment and it was subsequently wound up by a separate action in the Kuala Lumpur High Court on 19 June 2002.

(iv) The respondent then commenced this suit against the appellant and Mok Hwee Huan. However, Mok Hwee Huan was adjudged bankrupt in Singapore on 25 October 2002. The respondent obtained the order for sale of the charged lands on 25 July 2006.

(v) The respondent applied for summary judgment against the appellant. The appellant contested the respondent's application only with regard to the amount due to the respondent.

(vi) Among the issues before the High Court is whether the respondent can, in law, claim interest after 19 June 2002, that is the date of winding up order of Monzo, by virtue of s 8(2A) of the Bankruptcy Act 1967 ("the Act") read together with s 4(1) of the Civil Law Act 1956 . The evidence shows that the amount due to the respondent as at 19 June 2002 is RM1,022,134.75.

Findings Of The High Court

[3] On 21 October 2009, the learned High Court Judge entered judgment in favour of the respondent in the sum of RM1,022,134.75, the amount due as at the winding up order of Monzo and ordered each party to bear their own costs. The learned High Court Judge held that subsection 8(2A) of the Act acts as a statutory clamp on secured creditors prohibiting them from claiming any further interest on the debt after the winding up of a company if the secured creditors fail to realise their security within the period of six months as mandated by that subsection. The prohibition attaches to the debt so as to prohibit the secured creditors from claiming interest beyond that period, not only from the borrower, but also from the guarantors.

Findings Of The Court Of Appeal

[4] Dissatisfied with the decision of the High Court, the respondent appealed to the Court of Appeal. On 14 July 2011, the Court of Appeal allowed the respondent's appeal with costs and held that the interpretation of subsection 8(2A) of the Act is that it merely limits the secured creditor's right to continue to impose interest on the amount outstanding to him vis-a-vis the bankrupt or wound up debtor and the property of that debtor.

Leave To Appeal To The Federal Court

[5] Aggrieved by the decision of the Court of Appeal, the appellant sought for leave to appeal to the Federal Court. On 5 December 2011, the Federal Court granted the appellant leave to appeal on the following question of law:

"Can a secured creditor in law, claim interest, inter alia, from a guarantor, and/or person whose liability is pursuant to a guarantee and/or indemnity, and/or a third party chargor,