In all loan recovery banking cases, upon the Facility being recalled due to the Borrower's default or breach, a civil suit will be commenced against the Borrower for the outstanding sum owing.
The Bank will firstly obtain a Judgment against the Borrower and if necessary a bankruptcy proceeding ensues.
The pertinent facts may be briefly stated as follows. By a Consent Judgment dated 10.10.2000, the Appellant was ordered to pay RM554,000.00 to the Respondent, by way of the following instalments:
a) RM54,000.00 to be paid on or before 15.11.2000;
b) followed by consecutive monthly payments of RM20,000.00 each, from 15.11.2000 until full settlement.
The Appellant failed to settle the Judgment Sum. The Respondent on 03.01.2011 issued a Bankruptcy Notice. The Appellant applied to set aside the Bankruptcy Notice on the ground that the Bankruptcy Notice was invalid, it being issued without the leave of Court.
The main question of law for the Federal Court's determination is as follows:
whether upon a true and proper interpretation of s.3(1)(i) of the Bankruptcy Act 1967, it is a mandatory requirement that a judgment creditor who intends to commence Bankruptcy proceedings after more than six years from the date of Judgment, must obtain prior leave of Court pursuant to O.46 r.2 Rules of Court 2012 at the material time of filing the Bankruptcy Notice?
The Federal Court unanimously decided that prior leave should be obtained to issue a Bankruptcy Notice based upon a Judgment that is more than six (6) years.
The earlier Federal Court case of Tan Tem Son [2013] 3 MLJ 179 was not followed.
The principle established in Dr.Shamsul Bahar's case is summarized as:
Leave of Court must be obtained pursuant to O.46 r.2 Rules of Court 2012 to issue a Bankruptcy Notice by a Judgment Creditor based upon a Judgment recorded more than six (6) years. Conversely, if leave is not obtained, the Bankruptcy Notice issued will be rendered invalid.
