MUHAMMAD MUSHRIN BIN ESA

2011739935 (PLK 9)
a) What is the grounds upon which the bankruptcy notice may be
challenged?
The issue in the case is whether the bankruptcy notice can be challenged by
Aniq?
There are few grounds that should be considered by Aniq in order to
challenge the bankruptcy notice. According to section 3(1)(i) of Bankruptcy
Act, Aniq can challenge the Bankruptcy Notice (BN) by way of irregularities;
First, the debtor may set aside the BN as there is no final judgement by the
court. This can be seen in the case of Re Udos, the fact is the petitioner
obtained judgment in default against the debtor. The debtor applied to set
aside judgment. While awaiting the hearing of the application, the petitioner
served a bankruptcy notice on the debtor. The court set aside the bankruptcy
notice. The court held for the purpose of bankruptcy proceeding, a default
judgment is not final because it is not decided on the merits. Any judgment
not given on merit is liable to be set aside on application and does not finally
dispose the rights of the parties. And if the debtor has not appealed within
time, the default judgment would have crystallized into a final judgment. The
case in hand, the debtor had filed his application to set aside the default
judgment within time and the judgment would only be final after he had
exhausted his remedy given by law. Therefore, no act of bankruptcy
committed. In Aniqs case, it is indeed clear that there is no act of
bankruptcy when Aniq applied to set aside the default judgment.
Secondly, according to section 3(2)(ii), the demand of the BN is void if the
demand is excessive than the real value, or unspecified or being modified
sum which is not accordance with the term of judgement. In this situation,
the amount interest ordered by court at 8% but it is stated in the BN at 9.5%
per annum. Thus, the demanded in bankruptcy notice is false. Therefore,
Aniq can challenge this BN by referring to section 3 (2)(ii) of the Bankruptcy
Act 1967 in order to set aside the BN.
Thirdly, Under the Bankruptcy Rule 1969, r 109, a creditors petition shall be
personally served and service shall be effective by an officer of the court or
by the creditor. This can be seen in the case of Subri Arshad where affidavit
sworn on 7 Feb 2015; meanwhile the petition is on the 9 Feb 2015. It is clear
that affidavit cannot be sworn before the petition served. Therefore, the
petition has to be served first followed by affirming the affidavit. In Aniqs
situation, he can also challenge the BN on the ground of defect service as
the fact that the BN was served on Aniqs wife and not serve personally on

Aniq as a debtor. Rule 110(1) states that, if there are good reasons if the
service cannot be done personally; therefore, the creditor can apply to the
court to serve it through substituted service.
Furthermore, the bank failed to serve the BN on Aniq within 3 months from
the date of the issue. By referring to Rule 96; a bankruptcy notice shall be
served within 3 months from the issues thereof. If it not complies within 3
months, the creditors may apply for extension for service of notice and the
court may extend the time upon such terms as it seems fit based on Section
93(4) of Bankruptcy Act 1967. In this situation, the bank (HBBH) did not
apply for the extension of time.
Next, in the case of Re Sharma Kumari, the fact is the counter demand must
equal or exceed the sum claimed in the bankruptcy notice. In fact, Aniq has a
counterclaim amounting to RM200,000 against the bank and the amount was
exceeded the sum claimed by bank. Aniq must file an affidavit and form 7
for his counter claim. The counter claim, set off or cross demand must be
effective at the time of the hearing of the application to set aside bankruptcy
notice. Therefore, Aniq can set aside the BN on the ground that he has
counterclaim.
Under section 3 (1)(i) of Bankruptcy Act 1967, Aniq had made payment for 3
months through monthly installment of 10k per month and the bank indeed
accept the payment and also provided the receipt of payments. Therefore, it
is wise to say that Aniq cannot be declared insolvent.
Therefore, it is wise to say that Aniq can challenge the BN.

b) The procedures on setting aside the bankruptcy notice:

There are ways to setting aside the BN. It can be by way of counter claim or
counter demand. Under these options, the debtor may file an application by
way of affidavit claiming that he has such claims which equals or excess the
claim made by the creditor. The debtor must file the application by way of an
affidavit under Rule 95 by form 7 within 7 days after the date of BN service.
This is according to section 3(2)(ii) of the Bankruptcy Act 1967 where it
states that debtor must give notice to the creditor within 7 days of the
service of BN.
Under section 3(1)(i) of Bankruptcy Act, the BN can be set aside by way of
irregularities. Under Rule 18(1), debtor can file summon in chamber
supported by affidavit with any evidence and can be filed at any time.

c) The grounds upon which creditors petition may be challenged

If the debtor intends to show cause against a petition, he or she must file a
notice under form 16 Notice of Debtor Intention to oppose Petition (rule
17), with the registrar specifying the statements in the petition which he
intend to deny or dispute. Therefore, by filing an affidavit merely in opposing
the petition has been held to be insufficient notice under Rule 117. Thus, it is
fatal and not curable under Section 131 of Bankruptcy Rules.
The general rule can be seen in the case of Re Ngan Ching Wen, it explained
regarding the Creditors petition which can be challenged in respect of the
requirements contained in section 5(1) and section 6(2) of the Act. On the
other hand, in the case of D&C v Datuk Ong, the issue arose is whether the
respondents affidavit should have been treated as a notice to oppose the
creditors petition under rule 117 of the rules. It was held that the
respondents affidavit in opposition which challenged the validity of the
bankruptcy notice cannot be treated as a notice to show cause against the
creditor petition.
d) The procedure on setting aside
If the debtor intends to set aside the creditor's petition, Rule 18 of
Bankruptcy rule must be complied. For example, summon in chamber and
affidavit in support. This can be seen in the case of OCBC Bank (M) Bhd v
Sethu A/L Ambalagara Thevar, the judgment debtor can prove that the sum
of the notice by creditor's had been satisfied, thus the judgment debtor is
solvent, that it can be used as the ground to set aside petition and creditor's
cannot set aside because it had been tendered.

The ground for setting aside the petition are:

I.
II.
III.
IV.
V.
VI.
VII.
VIII.
IX.

no debt owning
the debt is less than statutory amount
debt not liquidated sum
debt time barred
ability to settle the debt
no act of bankcrupt
petition presented after 6 months from the act of Bankrupt
debtor not in Malaysia
petition or affidavit defect