PEMIUTANG PENGHAKIMAN CIMB BANK BERHAD PENGHUTANG PENGHAKIMAN SHAHRUL AZILA BINTI MOHD SALLEH

Case Significance

Illustrates that leave under section 5(3)(b) of the Insolvency Act 1967 to continue bankruptcy proceedings against a guarantor may be granted where the principal borrower has been wound up, leaving no other avenue of execution.

This High Court decision, delivered in Bahasa Malaysia on a bankruptcy matter, concerns two competing applications arising from a bankruptcy notice issued against a guarantor. CIMB Bank Berhad, a licensed bank and the judgment creditor ("pemiutang penghakiman"), had obtained a judgment in default against a company borrower and its guarantor for an outstanding financing sum, after which the borrower company was wound up. The bank then issued a bankruptcy notice against the guarantor, the judgment debtor ("penghutang penghakiman"). Two applications came before the court: the creditor's application for leave to continue bankruptcy proceedings against the guarantor under section 5(3)(b) of the Insolvency Act 1967 ("Akta Insolvensi 1967"), and the guarantor's application to set aside the bankruptcy notice on the ground that the creditor had failed first to obtain the court's leave. The central question was whether leave under section 5(3)(b) was required and, if so, whether the creditor's application satisfied it. The court reasoned that because the principal borrower had already been wound up ("telah digulungkan"), the creditor had no other means of execution available except to proceed against the guarantor, which supported granting leave. It dismissed the guarantor's application to set aside the bankruptcy notice and allowed the creditor's application for leave to continue the bankruptcy action against the guarantor under section 5(3)(b), ordering costs of RM1,000.00 to be paid by the judgment debtor subject to allocatur. The judgment illustrates how the courts apply the leave requirement in section 5(3)(b) of the Insolvency Act 1967 where a creditor pursues a guarantor after the principal debtor's winding up has closed off other avenues of recovery. The court noted that the guarantor's liability had been fixed by an earlier judgment entered in default of appearance, and that the winding up of the principal borrower had removed any realistic prospect of recovery from the company itself, so that continuing the bankruptcy action against the guarantor was the creditor's only remaining route to enforcement. It treated the leave requirement as a procedural safeguard that was satisfied on these facts rather than a bar to the creditor's claim.