PEMIUTANG PENGHAKIMAN AFFIN ISLAMIC BANK BERHAD PENGHUTANG PENGHAKIMAN CHYE YIAN SOANG

Case Significance

Confirms the strict seven-day limit under section 3(1)(i) of the Insolvency Act 1967 for setting aside a bankruptcy notice, and that a guarantor pursued after the principal debtor's winding-up cannot resist a bankruptcy notice and petition absent a substantive defence or clear abuse of process.

This High Court decision at Johor Bahru concerns a judgment debtor's appeal against a Senior Assistant Registrar's refusal to set aside a bankruptcy notice and creditor's petition, and it turns on the mandatory time limit for such an application and the absence of any substantive defence. The judgment debtor was a guarantor of the repayment of financing facilities granted by the judgment creditor, Affin Islamic Bank Berhad, to a principal debtor company, Travelers Tours Malaysia Sdn Bhd. After the principal debtor was wound up in January 2023, the bank obtained the court's leave in June 2023 to commence bankruptcy proceedings against the guarantor under sections 5(3)(b) and 5(4) of the Insolvency Act 1967, and issued a bankruptcy notice, non-compliance with which gave rise to an act of bankruptcy and the subsequent creditor's petition. The guarantor applied to set aside the notice and petition. The court held, first, that the application to set aside the bankruptcy notice had been filed outside the mandatory seven-day period prescribed by section 3(1)(i) of the Insolvency Act 1967 and rules 92(1)(c), 92(2)(a) and 93 of the Insolvency Rules 2017, so it was incompetent and time-barred. Secondly, it held that the bank had "exhausted all means" required by section 5(4), the evidence showing that proceedings against the guarantor were taken only after the principal debtor's default was confirmed through winding-up, and that the debtor's contrary assertion was unsupported. Thirdly, applying Re Lim Sow Hoon; Ex parte Malayan Banking Bhd, it held that a bankruptcy notice or petition will be set aside only where there is clear evidence of abuse of process or a prejudicial defect, and that the guarantor had shown no substantive defence to the debt, which arose from a valid and subsisting judgment that had not been set aside, stayed or reversed. The court dismissed the appeal, affirmed the Senior Assistant Registrar's decision, and awarded costs of RM5,000 to the bank.