Lecture 2: Insolvency: Individual:

Bankruptcy Notice (BN)

Prepared and revised by Mr. HS Wong

© No part of these lecture notes shall be reproduced or distributed in any manner whatsoever.

LEARNING OUTCOME:
Evaluate the law of bankruptcy and companies winding up

Cognitive: Level 4
Stages in Bankruptcy:
There are 4 stages to a bankruptcy
action

1. Pre- bankruptcy - new voluntary arrangement

introduced under the Insolvency Act 1967 and
the Insolvency Voluntary Arrangement Rules
2017
2. The bankruptcy notice - commencement of
bankruptcy proceedings
3. The bankruptcy petition
4. Discharge from bankruptcy
*Creditor who has obtained a Final Judgment
 2.1 The Bankruptcy Notice & Setting Aside
• s.5(1)(a) IA 1967 The amount claimed in the bankruptcy notice must not
be less than RM100,000/- with interest quantified up to date of issue of
bankruptcy notice.
• Refer to the Insolvency (Amendment) Act 2020. Threshold to present bankruptcy petition
raised to RM100,000.
• Form 34 (Rule 89) IR 2017 – bankruptcy notice is issued by the Court (Rule
89) and served by the Creditor who has obtained final judgment against
the debtor. Notice must carry an endorsement that if the debtor has any
set-off/ counter claim he must file an affidavit within 7 days. [See the
sample]
• Form 35 (R90) IR 2017 the bankruptcy notice must be accompanied by a
request to the registrar to issue a bankruptcy notice.
• S.3(1)(i) and (2) IA 1967 specifies the requirement for a bankruptcy notice.
• A BN can only be issued on the application of a creditor :
• (i) who has obtained a final judgment or final order against the debtor; and
• (ii) who is in a position to execute the judgment or order.
• Final Judgment - A bankruptcy notice can only be issued
on a debtor against whom a final judgment has been
obtained or order of a court designated under the
Subordinate Courts Act 1948 (Act 92) or the Court of
Judicature Act 1964 (Act 91) against the debtor.

• BN can only be issued by the creditor against the debtor

when the creditor has obtained a final judgment or order.
Hence the term “judgment creditor” (JC) and “judgment
debtor” (JD).
• What do you understand with….

• A final judgment

• An interlocutory judgment

• A judgment in default

• Summary judgment

• Consent judgment

• and etc…
2.1 The Bankruptcy Notice & Setting Aside
Requirements for a Bankruptcy Notice & Setting
Aside the Notice

•What is a final judgment?

• Case: Re Udos ak Rigging exp Seabanc Kredit S/B [1994] 3
MLJ 383
• Case: Re Lim Chan Kwang, exparte Public Bank Bhd.
[2007] 9 CLJ 353
• Case: Khoo Kay Hoe v Chor Phairk Har & Anor. [2002] 1CLJ
317
• Case: Re Sashidaran a/l K V Nair [2006] 6 AMR 439
• Case: Sri Jeluda S/B v Pentalink S/B [2008] 4CLJ 359

Let’s think: Is ‘pending appeal’ a ground for setting

aside a bankruptcy notice?
2.1 The Bankruptcy Notice & Setting Aside
Requirements for a Bankruptcy Notice & Setting
Aside the Notice
• Case: Re Udos ak Rigging exp Seabanc Kredit S/B [1994] 3
MLJ 383: not decided by the merit of the case. 30 days.
• Case: Re Lim Chan Kwang, exparte Public Bank Bhd.
[2007] 9 CLJ 353- Summary judgment.
• Case: Khoo Kay Hoe v Chor Phairk Har & Anor. [2002] 1CLJ
317
• Case: Re Sashidaran a/l K V Nair [2006] 6 AMR 439. a final
judgment on which execution has not been stayed is a
final judgment or final order and the judgment creditor is
entitled to enforce it.
• Case: Sri Jeluda S/B v Pentalink S/B [2008] 4CLJ 359-
Summary judgement remains a good judgment until it has
been set aside on appeal.
2.1 The Bankruptcy Notice & Setting Aside
• A judgment or order is final if it disposes of the rights of the
parties finally or no further step is necessary to perfect it.
• Case: Peninsular Land Development Sdn Bhd v K Ahmad
(No.2) [1970] 1 MLJ 253 at page 254 (FC)

• A judgment or order is final if it disposes of the rights of the

parties finally or no further step is necessary to perfect it.
• Case: Re Lo Kon Wah; Ex P Jupiter Securities Sdn Bhd
[2000] 5 MLJ 180
2.1 The Bankruptcy Notice & Setting Aside
• A judgment after a full trial or the decision of the appellate
court is a final judgment even if it is being appealed against.
• Case: Re Tan Ah Poi [1999] 2 MLJ 555

• A JID on a liquidated amount is a final judgment.

• Re Tan Hwee Earn; Ex P The People’s Insurance Co (M) Sdn
Bhd (HC)[1999] 4 MLJ 248 See page 253 paragraphs A-F
2.1 The Bankruptcy Notice & Setting Aside
• Case: Khoo Kay Hoe v Chor Phairk Har & Anor.
[2002] 1CLJ 317- the allocator was a final order
within the meaning of s. 3(1)(i), and it followed
that the bankruptcy notice which was founded on
the allocator was a valid notice. The allocator
referred to the order of court which required costs
to be taxed and the allocator was the result of
such taxation. Therefore, the allocator was in
accordance with the terms of the court's final
order and therefore did not need to be cured.
2.1 The Bankruptcy Notice & Setting Aside
• Read also:
• Perwira Habib Bank Berhad v Samuel Pakianathan [1993] 2 MLJ 423
at page 429
• Re MSA Zachariah [1993] MLJU 479 at 5
• Lee Bak Soon@ Lee Pak Choon v RHB Bank Bhd [2008] 1 MLJ 762
(COA)
• Vijendran Ponniah v MBF Country Homes & Anor [2002] 1 MLJ 535
• Re Rusli AB Ghani; Ex Parte: CIMB Bank Berhad [2018] 1 LNS 1528
HC
• P Mukundan PK Kunchu Kurup & Ors v Daniel Anthony & Another
Appeal [2018] 3 CLJ 496
2.1 The Bankruptcy Notice & Setting Aside
(a) Date - Formal bankruptcy proceedings
commence upon issue of the bankruptcy notice.

• Case: Fadzil b Othman v Malayan Building Ltd. [1994] 3

MLJ 474.
• Eg. Notice dated 7 November 2017 served on debtor on 15
November 2017. Time starts running from 16 November
2017.
• s.3(1)(i) – Form 36 (R93) IR2017– content – most common
section for applications to set aside.
2.1 The Bankruptcy Notice & Setting Aside

(b) Amount claimed

• 1). Accurate - The bankruptcy Notice should particularize the

amount including the interest which should be accurately
quantified. – Exact sum.
• Case: UOBB v Loke Lai Ying & Anor. [2003] MCCLR 248
• Case: Fawzia b Osman v Bank Bumiputra Malaysia Bhd. & Anor.
[1991] 1MLJ 426- The notice is bad as it does not quantify the
sum payable and it included sum which have yet to fall due.
• continuous interest - Ghazali Mat Noor v Southern Bank
Ltd.[1989] 2 MLJ 142- Interest must be quantified up to the date
of issue of BN. “BN stated: To pay further interest...”
• Case: Re Ismail b Daud and Haja Qameriah [1989] 2CLJ 1043- JC
is claiming interest which has not yet due.
 2.1 The Bankruptcy Notice & Setting Aside

(c) Subsequent Agreement

• Subsequent agreement - The bankruptcy Notice should be
based on the terms of the final judgment and should not be
based on any mutual agreement arrived at by the parties
subsequently.
• Case: Datuk Md. Sari v Norwich Winterthur Insurance
[1992] 2 MLJ 344- the terms of the judgment are
controlled by that outside agreement.
• Case: Mohd Kamal Bin Omar v United Overseas Bank (M)
Bhd And Other Appeals [2018] MLJU 600- an order made
by the court under a JDS application filed pursuant to the
Debtors Act 1957 does have the effect of modifying an
original Judgment.
2.1 The Bankruptcy Notice & Setting Aside

(d) Part payment

• Case: Soo Kok Loong v Hong Kong Bank Bhd [2009] 6 CLJ
62- all part payment should be deducted from the
principal sum in its original currency.
• Case: Loh Kok Huah v Bann Hin Lee Bank exp.[1992] 1 MLJ
687- JD can carry on making payments on the
judgment sum even where bankruptcy has
commenced.
• Case: Azlin Azrai bin Lan Hawari v United Overseas Bank
(M) Bhd. [2017]10 CLJ 18- Any part payment towards the
debt whether before or after theBN should be taken into
account, so long as the amount outstanding is not below
the statutory limit.
2.1 The Bankruptcy Notice & Setting Aside
(e) Liquidated
• If the amount is not calculated it will not be deemed to be
‘liquidated’ and cannot be cured – Case: Low Mun v Chung
Khiaw Bank Ltd.[1988] 1 MLJ 263
• Case: J Raju M Kerpaya v Commerce International
Merchant Bankers Bhd.[2000] 3 CLJ 104- There was no
mention of a penalty, interest or stamp duty in the
judgment, but this was included in the BN.
• Case: Re Wong Su Tiung exp Yeo Hiap Seng Trading S/B
[1989] 2MLJ 435- Not enough to stipulate the rate of
interest but to quantified exactly.
• Exact sum as at the date of issue of the bankruptcy notice –
Case: Ghazali Mat Noor v Southern Bank Ltd.[1989] 2 MLJ
142
2.1 The Bankruptcy Notice & Setting Aside
(f) Limitation s. 6(3) LA 1953
• Interest claimed cannot exceed 6 years – Case: UMBC v
Ernest Cheong Yong Yin [2001] 1MLJ 561
• See also P Mukundan PK Kunchu Kurup & Ors v Daniel
Anthony & Another Appeal [2018] 3 CLJ 496- bankruptcy
proceeding is an action to enforce a judgment within the
meaning of Section 6(3)of the Limitation Act 1953 and O.
46, r. 2(1)(a) of the Rules of Court 2012 does not apply. (no
longer a good law- See the case Dr. Shamsul Bahar Abdul
Kadir v Another Appeal v RHB Bank Bhd)
• Case: Moscow Norodny Bank Ltd. v Ngan Chin Wen[2004]
2 CLJ 241- date on which interest becomes due is the
judgment date.
 Bankruptcy Notice: Calculation of interest
Judgment date: 23.10.1987. BN issued on 28.3.1996
Judgment: The defendant to pay the plaintiff RM2,963,054.86 with interest thereon at
the rate of 16.5% from 1/12/1985 until the date of realization. Qn: Until what year is
interest to be calculated for the BN?
Judgment sum RM2,963,054.86
Add Interest:
prejudgment interest
16.5% per annum from 1.12.1985 (merged into judgment debt)

23.10.1987
Date of Judgment
Interest to be calculated
22.10.1993 6 years from date of judgment.

Date of issuance of BN (statute-

28.3.1996
barred)
 Bankruptcy Notice: Calculation of interest
Example 1
Judgment on 1.1.2018:
Defendant to pay Plaintiff RM100,000 with interest of 5% per annum thereon from date of judgment until full
realization and cost RM1500.
BN issued on 31.12.2020 (3 years after judgment was obtained)
Calculation in BN
Judgment sum RM100,000.00
Add: 5% interest per annum on RM100,000
from 1.1.2018 – 31.12.2018 RM5000.00
Add: 5% interest per annum on RM100,000 RM5000.00
from 1.1.2019 – 31.12.2019
Add: 5% interest per annum on RM100,000
from 1.1.2020 – 31.12.2020 (base on s.3(1)(i)) RM5000.00
Cost: RM1500
Total amount due as at 31.12.2020 RM116, 500.00
 Bankruptcy Notice: Calculation of interest
Example 2
Judgment on 1.1.2020:
Defendant to pay Plaintiff RM100,000 with interest of 4% per annum thereon from date of service of writ until
31.12.2019, and interest of 5% per annum from date of judgment until full realization and cost RM1500.
Writ was served on 1.1.2018
BN issued on 28.8.2020
Calculation in BN
Judgment sum RM100,000.00
Add: 4% interest per annum on RM100,000
from 1.1.2018 – 31.12.2018 RM4000.00
Add: 4% interest per annum on RM 100,000
from 1.1.2019 – 31.12.2019 RM4000.00
Add: 5% interest per annum on RM108,000
from 1.1.2020 – 28.8.2020 (base on s.3(1)(i))
(5% x 108,000 x 241/366) RM3555.74
Cost: RM1500
Total amount due as at 28.8.2020 RM113055.74
 Bankruptcy Notice: Calculation of interest
Example 3
Judgment on 1.1.2015:
Defendant to pay Plaintiff RM100,000 with interest of 5% per annum thereon from date of judgment
until full realization and cost RM1500.
BN issued on 31.12.2022 (8 years after judgment was obtained)
Calculation in BN
Judgment sum RM100,000.00
Add: 5% interest per annum on RM100,000
from 1.1.2015 – 31.12.2015 (1st year) RM5000.00
Add: 5% interest per annum on RM100,000
from 1.1.2016 – 31.12.2016 (2nd year) RM5000.00
Add: 5% interest per annum on RM100,000
from 1.1.2017 – 31.12.2017 (3rd year) RM5000.00
 Bankruptcy Notice: Calculation of interest
Add: 5% interest per annum on RM100,000
from 1.1.2018 – 31.12.2018 (4th year) RM5000.00
Add: 5% interest per annum on RM100,000
from 1.1.2019 – 31.12.2019 (5th year) RM5000.00
Add: 5% interest per annum on RM100,000
from 1.1.2020 – 31.12.2020 (6th year)
(Applying 2nd limb of s.6(3) Limitation Act) RM5000.00
Cost: RM1500
Total amount due as at 31.12.2022 (Date BN issued) RM131, 500.00
 2.1 The Bankruptcy Notice & Setting Aside

(g) Rate of conversion of currency

• Case: Re Chan Teik Huat, ex p Oversea-Chinese Banking

Corporation Ltd [2008] 7 CLJ 617- Where foreign
currency is involved, exchange rate as on the day
of judgement is to be adopted for judgment debt in
foreign currency.
• Read also:
• Wong Li Fatt William (an infant) v Haidawati bte Bolhen & Anor
[1994] 2 MLJ 497
• Re Kang Chong Yeow; ex p Mivan Far East Sdn Bhd [2001] 3 MLJ 98
• See Hua Daily News Bhd v. Tan Thien Chin & 35 Ors [1986] 2 MLJ
107
• Kay Hian Pte Ltd. v Ma Boon Lan [2014] 1 CLJ 464 CA
 2.1 The Bankruptcy Notice & Setting Aside

(g) Rate of conversion of currency

• Case: Kay Hian Pte Ltd. v Ma Boon Lan [2014] 1 CLJ 464
CA- The JD must know the exact amount due at the date of
the BN and he was not required to make calculations or
enquiries on what was the actual exchange rate from SGD
to MYR as at the date of the judgment.
2.1 The Bankruptcy Notice & Setting Aside
(h) Two or more judgments cannot be combined
in one notice
• R 89(2) IR: 2 or more judgments cannot be combined in one notice
to satisfy the statutory minimum of RM100,000/-.
• Case: Re Chan Chong Fatt Willy ex parte Hitachi Lease [1987] 1
MLJ 94- a bankruptcy petition cannot be founded on two separate
judgments although it may obtain in same suit. In this case, there
were one consent judgment and one contested judgment in same
suit.
• Case: Haroun Al Rashid b Md. Yusop exp Daya Leasing S/B [1996] 5
MLJ 317- there was one final judgment dated 28 June 1988 and an
order dated 27 July1988 in respect of costs pursuant to the
judgment on 28 June 1988. Therefore, in the caseof costs, the
effective judgment was the decree of the court on 28 June 1988
itself, and not the order dated 27 July 1988 quantifying the
amount.
2.1 The Bankruptcy Notice & Setting Aside
(h) Two or more judgments cannot be combined
in one notice
• Read also Case: Dr. R Ramachandran Exp Ganeshwary A/P
Ponnudurai [2003] 5 MLJ 84- A creditor is entitled to apply
for the issuance of a BN against a debtor, subject only to
one final judgment or order. Any BN based on more than
one final judgment or order will vitiate any bankruptcy
proceeding.
2.1 The Bankruptcy Notice & Setting Aside
Where 2 or more persons are jointly liable to pay the
judgment debt, the notice may be issued against one
without including the others.
• However in Case: Yeo Ah Wong v UMBC [1995] 1 AMR 38- It was held
that if the judgment is against 2 or more persons who are jointly
liable, then notice must be issued to both.
• Read also Sumathy Subramaniam v Subramaniam Gunasegaran &
Another Appeal [2018] 2 CLJ 305 CA- Appellant had obtained
summary judgment against the principal debtor and guarantor under
a friendly loan. He then filed two separate BNs against the judgment
debtors. Where liability is joint, each of the JD shares that liability
equally. Therespondent had a right to enforce only half the judgment
sum against each appellant; and wasnot entitled to enforce the full
sum against both of them, certainly not at the same time.
 2.2 Setting Aside the Bankruptcy Notice
Service of the Notice

• Service of the Notice – R64, R95 & R108 IR 2017, the

bankruptcy notice must be served personally and be
proved by an affidavit of service.
• S93 (4) IA 1967 court has discretion to extend time where
service could not be effected within the prescribed time the
creditor may apply for an extension of time.
• “ Where by this Act or by general rules the time for doing
any act or thing is limited, the court may extend the time
,either before or after the expiration thereof, upon such
terms, if any, as to the court seems fit “
2.2 Setting Aside the Bankruptcy Notice
• Case: Koh Thuan Kuang v UMBC [1994] 3 MLJ 509- Debtor
was evading service. The fact that the debtor was able to
affirm an affidavit 2 days after the substituted service
showed the efficacy of the substituted service.
• Case: Yap Heng Cheong v Citi Bank Bhd [1999] 4 CLJ 365 –
There was failure to serve BN against JD since the JD had
moved from the addresses used for service. JC applied for
an order to serve the notice by way of ss and for an order
to extend BN by 9 months. S.93(4) provides for a wide
discretion on the court to extend time. SAR’s decision to
extend the time for service of BN by further 9 months is
justified and it is necessary for service to be effected by
way of SS.
2.2 Setting Aside the Bankruptcy Notice
• Case: Re KV Sathasivam ex p Phileoallied Bank (M)
Bhd (2004) 5 CLJ 549 – The object of ss is to bring BN
to the knowledge of the debtor and if that object is
achieved, the service must be deemed good and sufficient.
On the facts, the debtor admitted that BN was brought to
his knowledge, thus, the service was good.
2.2 Setting Aside the Bankruptcy Notice
• Section 93(4) IA If personal service is not possible within
time, the creditor must apply to court for extension of
time to serve:
• Case: Kamaruddin b Md. v UMW (M) S/B[1982] 1MLJ 126-
Order for substituted service required in addition to
advertisement, posting on the notice board at the HC KL
and judgment debtor’s premises within the prescribed
time. Since BN was brought to debtor’s knowledge, the
service was deemed to be good and sufficient.
• Case: Siow Fook Keong v Lim Ean Chye [2015] MLJU 931
• Case: Rohani Hamidah b Nor v Sincere Leasing S/B[1993].
1 AMR 6 – There must be special circumstances and good
cause for extension of time for service.
2.2 Setting Aside the Bankruptcy Notice
• R 94 IR 2017: a bankruptcy notice is valid for 3 months
from date of issue and shall be served within three months
from the issue of the bankruptcy notice. If unable to serve –
may apply for extension of notice – Yap Heng Cheong v Citi
Bank Bhd. [1999] 4 CLJ 365 & Aris bin Massod ex p UOL
Factoring Sdn Bhd [1999] 3 MLJ 358.
• Must show special circumstances and good cause for
extension- Rohani Hamidah b Nor v Sincere Leasing S/B
[1993] 1 AMR 225
• Re KV Sathasivam exp Phileoallied Bank (M) Bhd. [2004] 5
CLJ 549
2.2 Setting Aside the Bankruptcy Notice
• Application for an order for substituted service:
• ss 3(2A), 3(2B), 3(2C) IA 1967 -
• Rule 109 IR 2017
• Practice Note 1 of 1968

• Case: Chang Nyit Yin @ Chang Nyet Ling v Lee Nyuk Fong
[2019] MLJU 1776- process server had gone to the
Judgement Debtor (JD) registered address at 3
different occasions but failed to locate the JD and phone
call had been made regarding the service of Bankruptcy
Notice(BN). The court ruled that the substituted
service is to be effected under Rule 109 since prompt
personal service cannot be effected.
Bankruptcy Notice : Compliance
Since computation of the date for compliance with a BN excludes the
day of service, thus, when service is affected will be relevant. This is
governed by r.64 IR.
r.64 IR (1) - For weekdays service must be affected before. 3.30pm
r.64 IR(2) - If service is affected after 3.30pm, service is deemed to be
affect on the following day.
r. 64 IR(1) - For days before weekly holiday service must be affected
before 12 noon.
r.64 IR(3) - If service is affected after 12 noon it is deemed to be
affected on the day following the weekly holiday.
s.66 Interpretation Act 1948 and s. 2 Holidays Act 1951 - “weekly
holiday” means Sunday, or in the States where Friday is observed as the
weekly holiday, Friday.
 Bankruptcy Notice : Compliance
BN can be served on a Saturday
Dato’ Hj Yusuf Kamari v. CIMB Bank Bhd [2009] 9 CLJ 209
Tan Thean Chooi v. Kuwait Finance House (Malaysia) Bhd &
Another Case [2013] 7 CLJ 405
- In calculating the days for compliance, the ROC should be applied
in particular Ord 3 r2(5)
- The day before the weekly holiday, the weekly holiday, and any
public holiday is excluded from the computation of time of the 7
days period to comply with the BN
Bank Islam Malaysia Bhd v Gnasegar a/l G Vengadasamy [2023] 1
MLJ 50 affirmed by the FC in the Civil Appeal No.: 03-1-04/2022(P)-
COA held that the calculation of 7 days period shall exclude
weekendsand holidays as per stated in O 3 R 2 (5) ROC because
Rules 284 of Insolvency Ruleshas expressly stated to resort to ROC
in the event of lacuna. Therefore, since the s 54(1)(d) of
InterpretationAct applies as a general rule, it is not applicable in
this bankruptcy case.
Illustration 1
The BN is served on the JD at 3pm on 1st April, Monday.
Service is affected on 1st April, Monday
Period of compliance (7 days after service of BN)
Day 1 Begins on 2nd April Tuesday

Day 2 3rd April Wednesday

Day 3 4th April Thursday

Day 4 5th April Friday

✘ 6th April Saturday

✘ 7th April Sunday

Day 5 8th April Monday

Day 6 9th April Tuesday

Day 7 10th April Wednesday

Act of bankruptcy occurs on 11th April, Thursday

Illustration 2
The BN is served on the JD at 4pm on 1st April, Monday.
Service is affected on 2nd April, Tuesday
Period of compliance ( 7 days after service of BN)
Day 1 Begins on 3rd April Wednesday

Day 2 4th April Thursday

Day 3 5th April Friday

✘ 6th April Saturday

✘ 7th April Sunday

Day 4 8th April Monday

Day 5 9th April Tuesday

Day 6 10th April Wednesday

Day 7 11th April Thursday

Act of bankruptcy occurs on 12th April, Friday

Bankruptcy Notice : Compliance
Time for compliance of the BN cannot be extended even
though by s.93(4) IA
See: Low Mun v Chung Khiaw Bank [1988] 1 MLJ 263
- Where the debtor pays the amount as demanded under the
BN within the stipulated time under the BN, no act of
bankruptcy is committed.
- Where only part payment is made within the period of
compliance, it would reduce the amount owing but an act of
bankruptcy would still be committed at the end of the period
as full payment has not been made. (subject to the minimum
threshold).
Setting aside the bankruptcy notice
Grounds to set aside BN
A. Setting aside the BN on the grounds that the debtor has
a counterclaim, set-off or cross-demand - s.3(1)(i) IA
B. Setting aside the BN by reason that the sum specified in
the BN exceeds the amount actually due – s.3(1)(2)(ii)
IA
▪ Setting aside the BN on jurisdictional challenge.

C. Setting aside the BN by reason of irregularity – s.131 IA

D. Settlement of debt
Procedure
▪ r.93 IR and Form 36
▪ Notice (s.3(2)(ii) read with s.3(1)(i) IA)
▪ R.17 IR (SIC supported by affidavit)
 Setting aside the bankruptcy notice
A. Setting aside the BN on the grounds that the debtor has
a counterclaim, set-off or cross-demand - See s.3(1)(i) IA
Meaning of counterclaim
Permodalan Plantation Sdn Bhd v Rachinta Sdn Bhd [1985] 1
MLJ 157 (FC)
A counterclaim….is also a cross-claim which a defendant has
against a plaintiff but in respect of which the defendant can
bring a separate action against the plaintiff if he wishes to do
so. Thus, to all intents and purposes a counterclaim is a
separate and independent action by the defendant, which the
law allows to be joined to the plaintiff’s action in order to
avoid multiplicity or circuity of suits.
See O15 r.2 ROC 2012
 Setting aside the bankruptcy notice
Meaning of set off
A set off has the effect of extinguishing either the whole
or part of the plaintiff’s claim.

Meaning of cross-demand
It is wider than a set off and a counter-claim but a claim
that equals or exceeds the amount of the judgment sum
 Setting aside the bankruptcy notice
Three requirements to be fulfilled:
1. The counterclaim, set-off or cross-demand must equal or
exceed the amount of the judgment debt. See s.3(1)(i) IA
2. The counter claim, set-off or cross-demand could not be
set up in the action in which the judgment or order was
obtained by the creditor as a basis of the BN. See s.3(1)(i) IA
3. The counterclaim, set-off or cross-demand must be
quantified and be made in good faith and have reasonable
probability of success. (case law)
 Setting aside the bankruptcy notice
Perwira Habib Bank Malaysia Bhd v Samuel Pakianathan [1993] 2 MLJ 423 (FC)
Facts:
The bank gave credit facilities to San Hong Brick Sdn Bhd, the principle debtor,
pursuant to a loan agreement
Mr Samuel together with 3 other directors in their personal capacity entered into a
contract of guarantee with the bank for the credit facilities.
San Hong Brick Sdn Bhd defaulted in the loan payment and winding up proceedings
were initiated by the bank against the company.
The bank also obtained a summary judgment of RM11.2m on 26 February 1988
against Mr Samuel under the contract of guarantee.
The bank took a bankruptcy action against Mr Samuel arising from the summary
judgment and Mr Samuel raised several issues to challenge the bankruptcy action.
One of the issues raised by Mr Samuel was he had a counter-claim which exceeded
the judgment sum of RM11.2m on which the bankruptcy action was based on. This
is because prior to the hearing of the summary judgment application, Mr Samuel
had filed a statement of defence and counter-claim against the bank for the sum of
RM 6.25m as special damages and an unspecified sum in general damages. These
damages were claimed because Mr Samuel contended that the bank facilitated the
misuse of the credit facility by the other directors causing loss to him and the co.
 Setting aside the bankruptcy notice
The HC agreed that Mr Samuel’s counter-claim exceeded or equaled the judgment sum
of RM11.2m on which the bankruptcy notice was based on.
The bank appealed against the HC’s decision.
The Supreme Court held:
1. The counterclaim must be capable of being quantified in terms of money and Mr
Samuel must quantify it.
o The counterclaim was for special damages of RM6.25m and an unspecified sum in general
damages. Therefore, the only quantified sum is RM6.25m. There was no other sum to
show that the counterclaim exceeded or equaled the judgment sum.
2. The counterclaim must be put forward in good faith and have reasonable
probability of success
3. It must be shown that the counterclaim could not have been set up in the action in
which the judgment was obtained by the creditor as a basis for the BN.
o The counterclaim was filed against the bank contending that the bank facilitated the
misuse of the credit facility by the other directors causing loss to him and the co.
Therefore, it is related to the credit facility and the contract of guarantee by Mr Samuel.
o Therefore, it cannot be said that the counterclaim could not be set up in the O14
application that resulted in the summary judgment which was the basis of the BN
 Setting aside the bankruptcy notice : Procedure
Procedure to set aside the BN on the grounds that the debtor has a counterclaim, set-off or
cross-demand
• The debtor may file an application to set aside the BN by way of affidavit claiming that he
has a set-off, counterclaim or cross demand against the creditor which equals or exceeds
the claim made by the creditor.
See r. 93 IR and Form 36 IR.
• An affidavit that does not conform to the Form 36 IR is defective and cannot operate as an
application to set aside the BN. (Case: Perwira Habib Bank v Samuel Pakianathan)
• The affidavit must be filed within 7 days after service of the BN to the debtor (s.3(1)(i) IA).
• The filing of the affidavit operates as an application to set aside the BN and the registrar
must proceed to fix a hearing date for the application (r.93(1) IR)
• The period of compliance to the BN by the debtor is deemed to be extended until the
application is heard. No act of bankruptcy is committed until the disposal of the
application.(r.93(2) IR)
• If a bankruptcy petition is filed before the disposal of the application to set aside the BN
on this ground, it is invalid.
 Setting aside the bankruptcy notice
B. Setting aside the BN on the basis that the amount specified in the BN exceeds the
amount actually due - See s.3(2)(ii) IA
The BN shall not be invalidated by reason only that the sum specified in the BN is excessive
than the actual amount due, unless the debtor has given notice within 7 days of the service
of the BN that he disputes the validity of the BN on the grounds of such mistake.
Re Loh Kok Huah [1992] 1 MLJ 687
Notice must be given to the creditor within 7 days after the service of the BN, that he
disputes the validity of the BN on the ground that the amount claimed exceeded the amount
actually due. If notice is not given, the BN must be allowed to stand notwithstanding there is
an excessive demand.
See also: Abdul Rahim bin Abdul Rahman v Malaysia Debt Ventures Bhd [2022] MLJU 3308
Re Arunachalam; ex p Indian Overseas Bank Ltd [1968] 1 MLJ 89
Judgment was entered against the debtor for a sum of $4,344.64 together with interest and
costs. The debtor paid $300 in part payment of the judgment sum. The JC, nevertheless, took
out a BN in which it claimed the full judgment sum.
The debtor wrote a letter to the JC’s solicitor disputing the amount within 7 days as specified
in the BN.
Held: Where the amount in the BN is in excess and notice is given to the JC within the
prescribed time, the BN becomes invalid.
No specific form of notice is prescribed. In Re Arunachalam it is in the form of a letter.
 Setting aside the bankruptcy notice
Notice must not merely allege that the sum claim is excessive or erroneous. It
must provide particulars of the amount due.
Datuk Lim Kheng Kim v Malayan Banking Bhd [1993] 2 MLJ 298 (SC)
2 May 1989: BN was served on the debtor for RM2.6 million
6 May 1989: The debtor filed an affidavit (enclosure 3) purportedly to set aside
the BN. Among others the affidavit at para 3 stated “I deny and further dispute
that I am indebted to the judgment creditors in the sum of RM2.603,913.89 as
stated therein. In this respect, I state that the figure was based on an erroneous
calculation and grossly exaggerated”.
The Court held:
Enclosure 3 at para 3 merely disputes his indebtedness in the said sum ‘based
on an erroneous calculation and grossly exaggerated’ without condescending to
particulars of the amount actually due. Thus, the said affidavit does not attract
the proviso under s.3(2)(ii) IA.
 Setting aside the bankruptcy notice
Where the BN is set aside on jurisdictional challenge.
The amount claim in the BN not based on sums provided by the judgment or order.
J Raju M Kerpaya v Commerce International Merchant Banker Bhd [2000] 3 CLJ 104
(COA)
On 8.9.1988 the respondent obtained a summary judgment against the appellant:
- for the sum of RM2,104,78.26;
- Interest on the sum at the rate of 4% above the cost of funds with monthly rests from
15 April 1986 until the date of realization.
On 31.8.1989, the respondent issued a BN against the appellant. The BN stated there is a
sum of RM3,013,221.07 due from appellant as at 31 October 1989. This sum was
calculated based on:
- the principle sum due on judgment dated 8.9.1988;
- several sums of penalty interest calculated at varying rates; and
- a claim of RM80 as stamp duty.
There was no mention of cost of funds.
 Setting aside the bankruptcy notice
The appellant took out a SIC to set aside the BN under r18 of the Bankruptcy Rule
1969 (now r.17 of the IR). It was submitted that the bankruptcy notice was not in
accordance with the judgment and was therefore null and void ab initio.
The respondent submitted that this was merely an instance where a larger sum had
been specified in the notice. Therefore, the appellant’s case came within s.3(2)(ii) of
the Bankruptcy Act 1967 and the appellant must follow the provisions provided
under s.3(2)(ii).
The Court decided that:
▪ The complaint by the appellant was that the BN was not in accordance with the
judgment. It is not merely that the BN claimed more than what was actually due.
▪ The appellant had acted correctly in accordance with the procedure prescribed
under r.18 of the Bankruptcy Rules (now r.17 of the IR), that is SIC supported by
affidavit.
▪ The BN was a nullity as at the date of its issue.
Note: read page 188 paragraph (B) to (H) – summarizes the different procedures you
need to follow when setting aside a BN.
 Setting aside the bankruptcy notice
Where the BN requires the judgment debtor to pay an amount which
includes illegal, or statute barred amount:

See:
Tan Ah Tong v Dato Seri Dr Kuljit Singh [2002] 6 MLJ 39 where
excessive interest was demanded in breach of s.6(3) of the Limitation
Act 1953.
 Setting aside the bankruptcy notice
C. Setting aside the BN for irregularities. See s. 131 IA
Any formal defect or irregularity will not invalidate the bankruptcy proceedings.
However, if the objection on defect or irregularity is raised and the court is of
the opinion that substantial injustice has been caused by the defect or
irregularity and injustice cannot be remedied by any order of the court, the BN
will be set aside.
An application to set aside the BN may be made by SIC supported by affidavit
pursuant to rule 17 IR
Example where formal defect or irregularity did not invalidate the bankruptcy
proceedings:
Spelling error in judgment debtor’s name. (See: Re Kasiah binti Kasbah: Ex-parte
Sime Bank Berhad [2003] 2 AMR 303)
 Setting aside the bankruptcy notice
Examples of challenges under this ground which has been successful are -
✔there is no final judgment or order;
✔the basis of the BN are two or more judgment or orders combined.
✔Bankruptcy notice demanded for unspecified sum.

IA 2017 does not prescribe a time frame for an application to set aside a BN on
the basis of irregularity. However, it should be done within reasonable time and
any delay must be explained and justified.
See: Ahmad Shamsul Baharin bin Mohd Hanapiah lwn Ex-parte: Bina Struktur
Sdn Bhd [2018] MLJU 2030
 Setting aside the bankruptcy notice
D. No debt owing by the debtor to the creditor.
This can arise where the judgment creditor accepted:
- A smaller sum as settlement to the judgment sum; or
- Settlement of the judgment sum by a 3rd party.
Chin Swee Onn v Puchong Reality Sdn Bhd [1990] 1 MLJ 108 (SC)
In this case, the creditor had obtained judgment by default of appearance against the
debtor. Subsequently, the creditor had agreed to refrain execution on the judgment and the
debtor agreed to instruct a third party to pay the judgment debt by instalment of $2,000 a
month to the creditor.
The creditor had received $10,000 from the third party. Nevertheless, the creditor took out
a bankruptcy notice against the debtor and subsequently a CP was served on the debtor.
The debtor applied to set aside the bankruptcy notice, but this application was dismissed in
the High Court. A bankruptcy order was made against the debtor on the CP. The debtor
appealed against the bankruptcy order.

54
 Setting aside the bankruptcy notice
Held, allowing the appeal of the debtor:
(1) The creditors, having accepted the performance of the debtor's
obligation to pay his debt by a third party, were precluded from
enforcing the judgment against the debtor.
(2) The bankruptcy notice and petition were bad and irregular. The
bankruptcy notice and bankruptcy petition must therefore be set
aside.
Procedure: By filing an affidavit in Form 36, see first paragraph

55
 Setting aside the bankruptcy notice
Summary:
✔ To set aside a BN on the grounds that the debtor has a counterclaim, set-off
or cross-demand which cannot be raised on the action which is the basis of
the BN:
✔ The JD may file an affidavit stating that the JD has a counterclaim, set-off or cross
demand which equals or exceeds the claim by the JC. See r.93 and Form 36 (paras 2 &
3) IR.
✔ To set aside a BN on the grounds that the sum claimed in the BN is excessive:
• a notice must be given within 7 days of the service of the BN. See s.3(2)(ii) IA.
• There is no prescribed form for the notice.
• Where no notice is given the JD is barred from challenging the BN on the ground of
excess. The BN is not invalidated despite the excess.
• If the notice is by way of a letter it is followed by a Summons in Chamber with
supporting affidavit (r.17IR) for the matter to be heard in court.
 Setting aside the bankruptcy notice
Summary:
✔ To set aside the BN on the grounds of jurisdictional challenge, for example, the BN is not
based on sums provided by the judgment or order:
• JD must file a SIC supported by affidavit (r.17 IR) (because this is regarded outside the
ambit of s.3(2)(ii) IA, thus notice is not required)
✔ To set aside the BN on grounds that the debt is fully settled:
• filing an affidavit in Form 36, first paragraph.
✔ Formal defects and irregularities in BN do not invalidate a BN unless the court is of the
opinion that substantial injustice has been caused and that injustice cannot be remedied
by an order of the court. See s.131 IA. Application to set aside the BN on the basis of
irregularities is by way of SIC supported by affidavit (r.17 IR) It should be done within
reasonable time and any delay must be explained and justified.
✔ When there is an application to set aside the BN, the application will be heard and
determined. No act of bankruptcy shall be deemed to have been committed under the BN
until the application is disposed of.
See r.93 IR
Datuk Lim Kheng Kim v Malayan Banking Bhd [1993] 2 MLJ 298 (SC), page 305 para D
Sok Bok Yew v Cindee Developments Sdn Bhd [1977] 1 MLJ 242 at p243G per Wan
Suleiman FCJ
– the act of bankruptcy was completed the very moment the court dismissed the
application to set aside the notice.
2.3 Formal Defects & irregularities

• Formal Defects & irregularities – S.131 IA 1967 - procedural

irregularities shall not invalidate proceedings unless court is of the
opinion that substantial injustice has been caused by the defect.
• “No proceeding in bankruptcy shall be invalidated by any formal
defect or by any irregularity, unless the court before which an
objection is made to the proceeding is of opinion that substantial
injustice has been caused by the defect or irregularity and that the
injustice cannot be remedied by any order of that court.“
• Case: Re Arif b Sionggong ex p Arab Malaysian Finance Bhd. [1995]
3 MLJ 252- An act of bankruptcy is complete at the last moment of
the last day prescribed for payment of the debt, excluding the date
of service. The misstatement was merely an irregularity/formal
defect and was remediable under s.131 as no substantial injustice
has been caused by it.
• Read also Case: Stephen Wong Leong Kiong v HSBC Bank Malaysia
Bhd [2009] 6 CLJ 466 CA.
2.3 Formal Defects & irregularities
• Case: Re Fadzil b Othman ex p MBB [1991] 2 MLJ 474- BN was
served on 8 June 1993 but bankruptcy petition stated that act
of bankruptcy was committed on 15 June 1992. The petition
was incorrect. As Form 5 had been used, time for compliance
had to be exclusive of the day of service. Non-compliance was
fatal and the notice should be set aside.
• Read also Re Rengasamy Pillai ex parte The Comptroller of
Income Tax Kuala Lumpur [1968] 1 MLJ 103 / [1970] 1 LNS 139
• Case: Re Abdul Rahman b Md. Ex p Public Finance Bhd. [2000] 4
MLJ 618- The omission to state the date/ a wrong date of the
act of bankruptcy cited in Form 6 is a mere formal
defect/irregularity which can be cured by an amendment at the
hearing of the petition. It does not render the petition
defective.
2.4 Setting Aside Bankruptcy Notice : Procedure &
Grounds
• Rules 94 (1) (b) and 95(2) : A judgment debtor may apply to set
aside a bankruptcy notice on the following grounds:-
• a) he has a counter claim, set-off or cross demand which equals, or
exceeds the amount claimed by the judgment creditor,
• b) defects in the bankruptcy notice eg. non – compliance with the
form of judgment
• c) defective service of bankruptcy notice Procedure: Rule 93 of
Insolvency Rules 2017 - Form 36 (affidavit); Westech Sdn Bhd v
Thong Weng Lock [2017] 5 MLJ 368
• HOW??? On all other grounds -R 17 IR by way of Summon in
Chambers supported by affidavit: R.95(1) JD should file a summons
in chambers supported by affidavit within 7 days of service of the
bankruptcy notice as per Form 7.
• Excessive sum in Bankruptcy Notice
• Bad in law. Null ab initio. All subsequent proceedings also a
nullity – Case: Ghazali b Mat Noor v Southern Bank [1989]
• Debtor must give notice within 7 days of the service of the
bankruptcy notice excluding the day of service. Failure to
do so will validate the notice even if intrinsically defective.
• R.95(1) – debtor may file an application by way of affidavit.
• Case: Re KV Sathasivam ex p Phileoallied Bank (M) Bhd.[2004] –
debtor alleged several irregularities – irregularity in substituted
service.

• Case: Tan Thean Chooi v. Kuwait Finance House (Malaysia) Bhd &
Another Case [2013] 7 CLJ 404
• Serving the bankruptcy notice on a Saturday did not violate r. 66 BR
1969 (see Dato' Hj Yusuf Kamari v. CIMB Bank Bhd,). Further, under
O. 13 r. 1(1) of the Rules of the High Court 1980, the JC had obtained
a final judgment in default of appearance (see Adzmi Ali & Anor v.
Mohamed Isa Kasad; Re Tan Hwee Earn, Ex P the People's
Insurance Company (M) Sdn Bhd,).
Is leave of Court is required to issue a BN 6 years
after judgment?
• s. 6(3) of the Limitation Act 1953
• “An action upon any judgment shall not be brought after the
expiration of 12 years from the date on which the judgment became
enforceable and no arrears of interest in respect of any judgment
debt shall be recovered after the expiration of 6 years from the date
on which the interest became due.”

• Case: Wee Chow Yong, Ex-parte; Public Finance Bhd [1990] 3 CLJ
Rep 349
• Case: Re: Mohamad Fadzimi Yaakub, Ex-parte UMBC [1998] 1 CLJ
783
• Case: United Malayan Banking Corp Bhd v Ernest Cheong Yong Yin
[2002] 2 MLJ 385(FC)
Is leave of Court is required to issue a BN 6 years
after judgment?
• HOWEVER…
• Case: Perwira Affin Bank v Lim Ah Hee [2004] 3 MLJ 253 (FC)
• Case: AmBank (M) Bhd. v. Tan Tem Son & Another Appeal [2013] 3 CLJ
317 (FC)

• BUT….
• Case: Dr, Shamsul Bahar Abdul Kadir & Another Appeal v. RHB Bank
Bhd. [2015] 4 CLJ 561 (FC)
TUTORIAL 2
Question 1:
Ms. Nanas, a member of Parliament for Petaling obtained a housing loan for
RM300,000 from Bank Kaya Bhd, for the purchase of a condominium. However,
Ms. Nanas was not able to pay the loan instalments amounting to RM200,000.
Bank Kaya Bhd. commenced a civil suit and obtained Judgment in Default
against Ms.Nanas for the amount of RM200,000 with interest at 5% per annum
from the date of judgment to full and final realisation. Ms. Nanas failed to set
aside the Judgment in Default. On 4.3.2022, Bank Kaya Bhd. wrote to you
seeking your legal advice on whether they can issue a Bankruptcy Notice to Ms.
Nanas based on the Judgment in default obtained on 1.3.2013.

(i) Advise Bank Kaya Bhd. whether a Bankruptcy Notice can be issued against
Ms. Nanas?
(ii) How will the interest be calculated for the purpose of the Bankruptcy Notice?
(iii) What is the procedure to issue a Bankruptcy Notice?
(iv) Can substituted service be effected by electronic methods?
(v) What will be your advice to Bank Kaya Bhd if the total judgment sum against
Ms. Nanas is only RM85,000?
TUTORIAL 2
Question 2:

Advise the following debtors on the period to comply with

the bankruptcy notice:

(i) The bankruptcy notice was served on Mr. Lambat at

10.30 am on 5.1.2024.
(ii) The bankruptcy notice was served on Mr. Cepat at 3pm
on 15.1.2024
(iii) The bankruptcy notice was served on Mr. Perlahan at
4pm on 25.3.2024.
TUTORIAL 2
Question 3:
Kucing bought a house for RM500,000 and obtained a loan of RM450,000 from
Bank Kaya Berhad. Kucing's mother, Kitty, stood as guarantor for the loan.
Kucing also had a credit card facility with Bank Kaya Berhad. Kucing is currently
jobless and is unable to pay Bank Kaya Berhad the balance of the loan
amounting to RM350,000. Bank Kaya Berhad sued Kucing and Kitty and
obtained Judgment in Default against both on 5.1.2022 for the sum of
"RM350,000 and interest thereon calculated from the date of judgment until the
date of full realisation."

Meanwhile, Kucing was also unable to pay the credit card balance and
Judgment in Default was then entered by Bank Kaya Berhad on 8.2.2022 for the
sum of "RM155,000 and interest thereon calculated from the date of judgment
until the date of full realisation". Bank Kaya Berhad issued a Bankruptcy Notice
dated 10.4.2022 against Kucing demanding for payment of the sum of "RM350,
000 and interest (hereon calculated from the date of judgment until the date of
full realisation and the sum of RM155,000 and interest thereon from the date of
judgment until the date of realisation.

… continued
TUTORIAL 2
Question 3:
Bank Kaya Berhad also issued a Bankruptcy Notice dated the same day,
10.4.2022 against Kitty demanding for payment of the sum of "RM350,000 and
interest thereon calculated from the date of judgment until the date of full
realization". Both Bankruptcy Notices dated 10.4.2022 were served on Kucing
and Kitty on 11.6.2022 by leaving it in their post box.

What is your advice to Kucing and Kitty to oppose the bankruptcy proceedings?