JUDGMENT

Mohamed Dzaiddin J:

By this Notice of Originating Motion the plaintiffs seek a declaration that the defendant is not entitled to freeze their accounts maintained in the defendant's bank and for loss and damage as a result of the defendant's action and costs.

The brief facts of the matter are these. Both plaintiffs are customers of the defendant at its Bayan Baru branch. The 1st plaintiff maintains a personal account, whilst the 2nd plaintiff has fixed deposit account with the defendant. Sometime in April 1987, another bank i.e. United Asian Bank sued Pen Trading Co. and both plaintiffs, being partners of the said firm, for recovery of money owed by the firm under the letter of hypothecation dated 11 March 1981. The service of the summons against them was effected by substituted service in "The Star" newspaper dated 15 October 1987. Despite the advertisement, the plaintiffs did not enter appearance or defence and as a result the United Asian Bank obtained a default judgment against them in the sum of RM25,085.71 with interest and costs. Subsequently, the said bank issued bankruptcy notice vide Bankruptcy No. 29-2146-89 against both plaintiffs, also by way of substituted service in "The Star" dated 10 September 1990. In the meantime, the defendant bank became aware of this advertisement and by letter dated 21 September 1990, the defendant informed the plaintiffs that their respective accounts have been frozen until further notice. On enquiries made by the plaintiffs, the defendant informed them that the bank acted under s. 47(2) of the Bankruptcy Act 1967 (the Act). This subsection reads as follows:

No bankruptcy petition, receiving order adjudication shall be rendered invalid by reason of any act of bankruptcy anterior to the debt of the petitioning creditor.

The crucial issue in this application is whether or not the bank is justified in freezing the accounts of the plaintiffs soon after it has notice of the bankruptcy notice appearing in "The Star" on 10 September 1990.

Encik Chew, for the defendant, submitted that it was justified for the bank to freeze both accounts because being aware of the bankruptcy notice having been issued against the plaintiffs, the doctrine of "relation back" under s. 47 would apply against the bank and it could not later avail itself of the protection provided under s. 54(1)(b) of the Act. In short, it meant that under s. 47(1) the bankruptcy of a debtor related back to and commenced at the time of the act of bankruptcy being committed. Encik Teja, for the plaintiffs, on the other hand, submitted that s. 47 would only apply after the making of the adjudication order and until such time the plaintiffs are entitled to deal freely with their money in their respective accounts.

As has been seen, under s. 47(1) of the Act, the bankruptcy of a debtor shall be deemed to have "relation back" to and commence at the time of the act of bankruptcy being committed on which a receiving order is made against the bankrupt. Hence, the property of the bankrupt shall vest in the Official Assignee only upon the making of the adjudication order. However, the title of the Official Assignee, under the doctrine of "relation back", is related back from the date of adjudication to the commencement of the bankruptcy. See: Catherine Tay Swee Kian on Bankruptcy, The Law and Practice, Butterworth p. 56. Therefore, any dealings by or with the bankrupt after the commencement of the bankruptcy is prima facie invalid and can subsequently be set aside by the Official Assignee. However, under s. 54(1) of the Act, certain transactions entered into by the bankrupt are protected from the operation of the doctrine of "relation back". Section 54(1) reads as follows:

(1) Subject to the foregoing provisions of this Act with respect to the effect of bankruptcy on an execution or attachment, and with respect to the avoidance of certain settlements and preferences, nothing in this act shall invalidate in the case of bankruptcy:

(a) a