Description of debts provable in bankruptcy
(1) Demands in the nature of unliquidated damages arising otherwise than by reason of a contract, promise or breach of trust shall not be provable in bankruptcy.
(2) A person having notice of any act of bankruptcy available against the debtor shall not prove under the bankruptcy order for any debt or liability contracted by the debtor subsequent to the date of his so having notice.
(3) Save as provided in subsections (1) and (2) all debts and liabilities present or future, certain or contingent, to which the debtor is subject at the date of the bankruptcy order, or to which he may become subject before his discharge by reason of any obligation incurred before the date of the bankruptcy order shall be deemed to be debts provable in bankruptcy.
(4) An estimate shall be made by the Director General of Insolvency of the value of any debt or liability provable under subsection (3) which, by reason of its being subject to any contingency or contingencies, or for any other reason, does not bear a certain value.
(5) Any person aggrieved by any such estimate may appeal to the court.
(6) If in the opinion of the court the value of the debt or liability is incapable of being fairly estimated the court may make an order to that effect, and thereupon the debt or liability shall for the purposes of this Act be deemed to be debt not provable in bankruptcy.
(7) If in the opinion of the court the value of the debt or liability is capable of being fairly estimated, the court may assess the same and may give all necessary directions for this purpose, and the amount of the value when assessed shall be deemed to be a debt provable in bankruptcy.
Mutual credit and set-off
(1) Where there have been mutual credits, mutual debts, or other mutual dealings between a debtor against whom a bankruptcy order is made under this Act and any other person proving or claiming to prove a debt under such order, an account shall be taken of what is due from the one party to the other in respect of such mutual dealings, and the sum due from the one party shall be set-off against any sum due from the other party, and the balance of the account and no more shall be claimed or paid on either side respectively.
(2) A person shall not be entitled under this section to claim the benefit of any set-off against the property of a debtor in any case where he had at the time of giving credit to the debtor notice of an act of bankruptcy committed by the debtor and available against him.
Rules as to proof of debts
The rules in Schedule C shall be observed with respect to the mode of proving debts, the right of proof by secured and other creditors, the admission and rejection of proofs and other matters.
Priority of debts
(1) In the distribution of the property of a bankrupt there shall be paid in priority to all other debts—
(a) all local rates and land tax due from the bankrupt at the date of the bankruptcy order and having become due and payable within twelve months next before that time;
(b) income tax and other assessed taxes assessed on the bankrupt up to the 31 December next before the date of the bankruptcy order and not exceeding in the whole one year’s assessment;
(c) all wages or salary of any clerk, servant, labourer or workman not exceeding one thousand ringgit for each whether payable for time or piece work or whether or not payable wholly or in part by way of commission in respect of services rendered to the bankrupt during the period of five months next before the date of the bankruptcy order or the date of the termination of his service if the latter occurs within twelve months of and precedes the date of the bankruptcy order:
Provided that, where any clerk, servant, labourer or workman has entered into a contract for the payment of his wages or any part thereof in a lump sum at the end of the year of hiring, the priority under this section shall extend to the whole of such sum, or a part thereof, as the court may decide to be due under the contract, proportionate to the time of service up to the date of the bankruptcy order;
(d) all amounts due in respect of contributions payable during the twelve months before the date of the bankruptcy order by the bankrupt as the employer of any person under any law relating to provident funds; and
(e) all amounts due in respect of workmen’s compensation under any law relating to workmen’s compensation accrued before the date of the bankruptcy order.
(2) The foregoing debts shall rank equally between themselves, and shall be paid in full unless the property of the bankrupt is insufficient to meet them, in which case they shall abate in equal proportions between themselves.
(3) In the case of partners the joint estate shall be applicable in the first instance in payment of their joint debts, and the separate estate of each partner shall be applicable in the first instance in payment of his separate debts. If there is a surplus of the separate estates it shall be dealt with as part of the joint estate. If there is a surplus of the joint estate it shall be dealt with as part of the respective separate estates in proportion to the right and interest of each partner in the joint estate.
(4) Subject to this Act all debts proved in the bankruptcy shall be paid pari passu.
(5) If there is any surplus after payment of the foregoing debts, the surplus shall not be applied in any payment of interest after the date of the bankruptcy order to any creditor on any debt proved in the bankruptcy, except for the payment of interest to a secured creditor under subsection 8(2A).
Interest on debts
(6) Where a debt has been proved upon a debtor’s estate and such debt includes interest or any pecuniary consideration in lieu of interest, such interest or consideration shall for the purposes of dividend be calculated at a rate not exceeding six per centum per annum up to the date the bankruptcy order is granted by the court.
(7) This section shall have effect subject to any written law relating to partnership in force in any part of Malaysia.
(8) Where an interim receiver has been appointed before the making of the bankruptcy order the date of such appointment shall for the purposes of this section be deemed to be the date of the bankruptcy order.
Preferential claim in case of apprenticeship and in respect of passage money
(1) Where at the time of the presentation of the bankruptcy petition any person is apprenticed or is an articled clerk to the bankrupt, the adjudication of bankruptcy shall, if either the bankrupt or apprentice or clerk gives notice in writing to the Director General of Insolvency to that effect, be a complete discharge of the indenture of apprenticeship or articles of agreement.
(2) If any money has been paid by or on behalf of the apprentice or clerk to the bankrupt as a fee, the Director General of Insolvency may, on the application of the apprentice or clerk or of some person on his behalf, pay such sum as the Director General of Insolvency, subject to an appeal to the court, thinks reasonable out of the bankrupt’s property to or for the use of the apprentice or clerk, regard being had to the
amount paid by him or on his behalf and to the time during which he served with the bankrupt under the indenture or articles before the commencement of the bankruptcy and to the other circumstances of the case.
(3) Where it appears expedient to the Director General of Insolvency he may, on the application of any apprentice or articled clerk to the bankrupt, or of some person on his behalf, instead of acting under subsection (1) or (2) transfer the indenture of apprenticeship or articles of agreement to some other person.
(4) Where at the date of the bankruptcy order any person is in the employment of the bankrupt who came to Malaysia for the purpose of entering into such employment either—
(a) under any contract to serve the bankrupt for a period of not less than one year, which period has not elapsed three months before the date of such order; or
(b) under a contract either absolutely or conditionally that such person shall be provided with a passage to another country on the determination of his employment,
and such person has not obtained other employment and is desirous of leaving Malaysia, the court may, if it seems just and expedient under all the circumstances of the case, direct the Director General of Insolvency to provide for such person such passage as he is entitled to under the contract, or if he is not so entitled then a suitable passage to the country whence he came for the purpose of entering into such employment, or in either case any other not more costly passage which such person may desire.
Power to landlord to distrain for rent
(1) Subject to any law relating to the recovery of rent by way of distress, the landlord or other person to whom any rent is due from the bankrupt may, at any time either before or after the commencement of the bankruptcy, distrain upon the goods or effects of the bankrupt for the rent due to him from the bankrupt with this limitation, that if such distress for rent is levied after the commencement of the bankruptcy it shall be available only for three months’ rent accrued due prior to the date of the bankruptcy order, but the landlord or other person to
whom the rent is due from the bankrupt may prove under the bankruptcy for the surplus due for which the distress may not have been available.
(2) This section shall with the necessary modifications apply in the case of an order for the administration of the estate of a deceased person who died insolvent and for the purposes of this section the term “bankruptcy order” shall be deemed to include an order for such administration.
Postponement of husband’s or wife’s claims
(1) Where a married woman has been adjudged bankrupt her husband shall not be entitled to claim any dividend as a creditor in respect of any money or other property lent or entrusted by him to his wife for the purposes of her trade or business until all claims of the other creditors of his wife for valuable consideration in money or money’s worth have been satisfied.
(2) Where the husband of a married woman has been adjudged bankrupt any money or other property of such woman lent or entrusted by her to her husband for the purpose of any trade or business carried on by him or otherwise shall be treated as assets of his estate and the wife shall not be entitled to claim any dividend as a creditor in respect of any such money or other property until all claims of the other creditors of her husband for valuable consideration in money or money’s worth have been satisfied.
Property Available for Payment of Debts
Relation back of Director General of Insolvency’s title
(1) The bankruptcy of a debtor, whether the same takes place on the debtor’s own petition or upon that of a creditor, shall be deemed to have relation back to and commence at the time of the act of bankruptcy being committed on which a bankruptcy order is made against him, or if the bankrupt is proved to have committed more acts of bankruptcy than one to have relation back to and to commence at the time of the first of the acts of bankruptcy proved to have been committed by the bankrupt within six months next preceding the date of the presentation of the bankruptcy petition.
(2) No bankruptcy petition or bankruptcy order shall be rendered invalid by reason of any act of bankruptcy anterior to the debt of the petitioning creditor.
Description of bankrupt’s property divisible amongst creditors
(1) The property of the bankrupt divisible among his creditors, and in this Act referred to as the property of the bankrupt—
(a) shall not comprise the following:
(i) property held by the bankrupt on trust for any other person;
(ii) the tools, if any, of his trade and the necessary wearing apparel and bedding and other like necessaries of himself, his wife and children to a value inclusive of tools and apparel and the other things aforesaid as may be prescribed;
(b) shall comprise the following:
(i) all such property as belongs to or is vested in the bankrupt at the commencement of the bankruptcy or is acquired by or devolves on him before his discharge;
(ii) the capacity to exercise and to take proceedings for exercising all such powers in or over or in respect of property as might have been exercised by the bankrupt for his own benefit at the commencement of his bankruptcy or before his discharge; and
(iii) subject to the law for the time being in force relating to bills of sale, all goods being at the commencement of the bankruptcy in the possession, order or disposition of the bankrupt by the consent and permission of the true owner under such circumstances that he is the reputed owner thereof.
(2) Things in action other than debts due or growing due to the
bankrupt in the course of his trade or business shall not be deemed goods within the meaning of this section.
Provisions as to second bankruptcy
(1) Where a second or subsequent bankruptcy order is made against a bankrupt, or where an order is made for the administration in bankruptcy of the estate of a deceased bankrupt, then for the purposes of any proceedings consequent upon any such order, the Director General of Insolvency shall be deemed to be a creditor in respect of any unsatisfied balance of the debts provable in the last preceding bankruptcy against the property of the bankrupt in the subsequent bankruptcy.
(2) In the event of a second or subsequent bankruptcy order made against a bankrupt or in the event of an order being made for the administering in bankruptcy of the estate of a deceased bankrupt, any property acquired by him since he was last adjudged bankrupt, which at the date when the subsequent petition was presented had not been distributed amongst the creditors in such last preceding bankruptcy, shall (subject to any disposition thereof made by the Director General of Insolvency in that bankruptcy, without knowledge of the presentation of the subsequent petition) vest in the Director General of Insolvency on account of the subsequent bankruptcy or administration in bankruptcy as the case may be.
(3) Where the Director General of Insolvency in any bankruptcy receives notice of a subsequent petition in bankruptcy against the bankrupt or after his decease of a petition for the administration of his estate in bankruptcy, the Director General of Insolvency shall hold any property then in his possession which has been acquired by the bankrupt since he was adjudged bankrupt until the subsequent petition has been disposed of, and, if on the subsequent petition a bankruptcy order or an order for the administration of the estate in bankruptcy is made, he shall hold all such property or the proceeds thereof (after deducting his costs and expenses) to the account of the subsequent bankruptcy or administration in bankruptcy, as the case may be.
Effect of Bankruptcy on Antecedent Transactions
Restriction of rights of creditor under execution or attachment
(1) Where a creditor has issued execution against the goods or lands of a debtor, or has attached any debt due, or property belonging to him, he shall not be entitled to retain the benefit of the execution or attachment against the Director General of Insolvency unless he has completed the execution or attachment before the date of the bankruptcy order and before notice of the presentation of any bankruptcy petition by or against the debtor, or of the commission of any available act of bankruptcy by the debtor.
(2) For the purposes of this Act—
(a) an execution against goods or land is completed by seizure and sale, or in the case of an equitable interest in land by the appointment of a receiver;
(b) an attachment of a debt is completed by receipt of the debt;
(c) an attachment of property is completed by the sale of such property and the satisfaction out of the proceeds of such sale of the judgment in execution of which the attachment was made.
Property taken in execution
(1) Where any property of a debtor is taken in execution and before the sale or realization thereof, or the delivery to the execution creditor of any moneys seized or paid in order to avoid sale, notice is served on the Court that a bankruptcy order has been made against the debtor, the Court shall deliver the property or the possession thereof and any such moneys to the Director General of Insolvency, but the costs of and incidental to the execution shall be a first charge on such property or moneys, and the Director General of Insolvency may sell the property or an adequate part thereof for the purpose of satisfying the charge.
Duty as to money received on seizure or subsequently thereto
(2) Where an order of execution has been made in respect of a judgment for a sum exceeding one hundred ringgit the Court shall hold all moneys coming to its hands under such writ of seizure and sale for fourteen days from the receipt thereof, and if within that time notice is served on it of a bankruptcy petition having been presented against or by the debtor and a bankruptcy order is made against the debtor thereon or on any other petition of which the Court has notice, the Court shall deduct the costs of and incidental to the execution and pay the balance to the Director General of Insolvency, who shall be entitled to retain the same as against the execution creditor.
Execution levied by seizure and sale not invalid by reason of seizure being an act of bankruptcy
(3) An execution levied by seizure and sale on property of a debtor is not invalid by reason of the seizure being an act of bankruptcy, and a person who purchases the property in good faith under a sale by the Court out of which such execution has issued shall in all cases acquire a good title to it against the Director General of Insolvency.
(4) Where the act of bankruptcy upon which a bankruptcy petition is founded is the seizure of any property under a judgment, and the debtor has had a bankruptcy order made against him on such petition, then the costs of the judgment creditor incurred by him in obtaining such judgment during the thirty days next preceding the taking of the property in execution shall be payable out of the assets of the bankrupt in the same manner and in the same order of priority as the costs of the petitioning creditor.
(5) For the purposes of this section a notice served on the Registrar or the Magistrate of a Court shall be deemed to have been served on the Court.
Avoidance of voluntary settlement
(1) Any settlement of property, not being a settlement made before and in consideration of marriage or a settlement made in favour of a purchaser or incumbrancer in good faith and for valuable consideration, or a settlement made on or for the wife or children of the
settlor of property which has accrued to the settlor after marriage in right of his wife, shall, if the settlor becomes bankrupt within two years after the date of the settlement, be absolutely void against the Director General of Insolvency, and shall, if the settlor becomes bankrupt at any subsequent time within five years after the date of the settlement, be void against the Director General of Insolvency, unless the parties claiming under the settlement can prove that the settlor was at the time of making the settlement able to pay all his debts without the aid of the property comprised in the settlement, and that the interest of the settlor in such property had passed to the trustee of such settlement on the execution thereof.
(2) Any covenant or contract made in consideration of marriage for the future settlement on or for the settlor’s wife or children of any money or property wherein he had not at the date of his marriage any estate or interest, whether vested or contingent, in possession or remainder, and not being money or property of or in right of his wife, shall, on his becoming bankrupt, before the property or money has been actually transferred or paid pursuant to the contract or covenant, be void against the Director General of Insolvency.
(3) For the purposes of this section “settlement” includes any conveyance or transfer of property, bill, bond, note, security for money or covenant for the payment of money and any gift of money.
(4) For the purposes of this section a settlor who dies insolvent shall be deemed to have become bankrupt at the date of his death.
Avoidance of preferences in certain cases
(1) Every conveyance or transfer of property or charge thereon made, every payment made, every obligation incurred and every judicial proceeding taken or suffered by any person unable to pay his debts, as they become due, from his own money in favour of any creditor or any person in trust for any creditor shall be deemed to have given such creditor a preference over other creditors if the person making, taking, paying or suffering the same is adjudged bankrupt on a bankruptcy petition presented within six months after the date of making, taking, paying or suffering the same and every such act shall be deemed fraudulent and void as against the Director General of Insolvency.
(2) This section shall not affect the rights of any person making title in good faith and for valuable consideration through or under a creditor of the bankrupt.
(3) For the purposes of this section “creditor” includes a surety or guarantor for the debt due to that creditor.
Avoidance of assignment of book debts
(1) Where a person engaged in any trade or business makes an assignment of his existing or future book debts or any class or part thereof and subsequently becomes bankrupt, the assignment shall be void as against the Director General of Insolvency in respect of any book debts that had not been paid at the date of an available act of bankruptcy.
(2) This section shall not apply to an assignment of book debts registered pursuant to any written law if the assignment is valid under that law.
(3) Nothing in this section shall render void any assignment of book debts due at the date of the assignment from specified debtors or of book debts included in the transfer of a business, such transfer being made bona fide and for valuable consideration.
(4) For the purposes of this section “assignment” includes assignment by way of security or other charge on book debts.
Property or proceeds therefrom deemed to be property of Director General of Insolvency
(1) Where a person has acquired property of the bankrupt under a transaction that is void or under a voidable transaction (that is subsequently set aside) and sold, disposed of, realized or collected the property or any part of it, the money or other proceeds from any such dealing, whether further disposed of or not, shall be deemed to be the property of the Director General of Insolvency.
(2) The Director General of Insolvency may recover the property referred to in subsection (1) or its value or the money or other proceeds therefrom from the person who acquired it from the bankrupt or from
any other person to whom the person may have sold, resold or transferred the property or paid over the money or other proceeds therefrom as fully and effectually as the Director General of Insolvency could have recovered the property if it had not been so sold, transferred, disposed of, realized or collected.
(3) Notwithstanding subsections (1) and (2), where any person, (not being the person who acquired the property from bankrupt) to whom the property was sold, resold or otherwise disposed of, had paid or given therefor valuable consideration and acted in good faith such person shall not be subject to the operation of this section and the Director General of Insolvency’s recourse for recovery of the consideration so paid or given or its value shall be solely against the person who entered into the transaction with the bankrupt.
(4) Where the consideration payable for or upon any sale or resale of such property or any part thereof remains unsatisfied the right of the Director General of Insolvency shall be subrogated for that of the vendor to compel payment or satisfaction.
Fair market value may be fixed on review
(1) Where a person who has sold, purchased, leased, hired, supplied or received property or services, as the case may be becomes bankrupt within twelve months of that transaction, the court may, upon the application of the Director General of Insolvency, review that transaction and inquire whether the bankrupt gave or received fair market value in consideration for the property or services at the time of that transaction.
(2) Where the court finds that the consideration given or received by the bankrupt in the transaction under review was conspicuously in excess of or conspicuously lower than the fair market value of the property or services at the time of the transaction, the court may give judgment in favour of the Director General of Insolvency against the other party to the transaction or against any other person who was privy to the transaction with the bankrupt or against all such persons and such judgment shall be for the difference between the value of the consideration given or received by the bankrupt and the fair market value of the property or services at the time of the transaction as determined by the court in accordance with subsection (3).
(3) In making an application under this section, the Director General of Insolvency shall state what in his opinion was the fair market value of the property or services at the time of the transaction and what in his opinion was the value of the consideration given or received by the bankrupt in the transaction, and the values on which the court makes any finding pursuant to this section shall be the values so stated unless other values are proven.
Protection of bona fide transactions without notice
(1) Subject to the foregoing provisions of this Act with respect to the effect of bankruptcy on an execution or attachment, and with respect to the avoidance of certain settlements and preferences, nothing in this Act shall invalidate in the case of a bankruptcy—
(a) any payment by the bankrupt to any of his creditors;
(b) any payment or delivery to the bankrupt;
(c) any conveyance or assignment by the bankrupt for valuable consideration;
(d) any contract, dealing or transaction by or with the bankrupt for valuable consideration:
if—
(i) the payment, delivery, conveyance, assignment, contract, dealing or transaction, as the case may be, takes place before the date of the bankruptcy order; and
(ii) the person other than the debtor to, by, or with whom the payment, delivery, conveyance, assignment, contract, dealing or transaction was made, executed or entered into has not, at the time of the payment, delivery, conveyance, assignment, contract, dealing or transaction, notice of any available act of bankruptcy committed by the bankrupt before that time.
(2) For the purpose of this section “valuable consideration” means a consideration of fair and reasonable money value in relation to—
(a) the value of the property conveyed, assigned or transferred; or
(b) the known or reasonably anticipated benefits of the contract, dealing or transaction.
(3) For the purposes of this section “notice” includes knowledge of an act of bankruptcy or of any bankruptcy proceedings or of facts sufficient to indicate to the person dealing with the debtor the commission of an act of bankruptcy.
Realization of Property
Possession of property by assignee
(1) The Director General of Insolvency shall after a bankruptcy order has been made take possession of the deeds, books and documents of the bankrupt and all other parts of his property capable of manual delivery.
(2) The Director General of Insolvency shall, in relation to and for the purpose of acquiring or retaining possession of the property of the bankrupt, be in the same position as if he were a receiver of the property appointed by the court, and the court may on his application enforce such acquisition or retention accordingly.
(3) Where any part of the property of the bankrupt consists of stock, shares in ships, shares or any other property transferable in the books of any company, office or person, the Director General of Insolvency may exercise the right to transfer the property to the same extent as the bankrupt might have exercised it if he had not become bankrupt.
(4) Where any part of the property of the bankrupt consists of things in action, such things shall be deemed to have been duly assigned to the Director General of Insolvency.
(5) Any treasurer or other officer or any banker, attorney or agent of a bankrupt shall pay and deliver to the Director General of Insolvency all money and securities in his possession or power as such officer, banker, attorney or agent which he is not by law entitled to retain as against the bankrupt or the Director General of Insolvency. If he does not, he shall be guilty of a contempt of court, and may be punished
accordingly on the application of the Director General of Insolvency.
Seizure of property of bankrupt
(1) Any person acting under warrant of the court may seize any part of the property of a bankrupt in the custody or possession of the bankrupt or of any other person, and with a view to such seizure may break open any house, building or room of the bankrupt where the bankrupt is supposed to be, or any building or receptacle of the bankrupt where any of his property is supposed to be.
(2) Where the court is satisfied that there is reason to believe that property of the bankrupt is concealed in a house or place not belonging to him, the court may if it thinks fit grant a search warrant to any police officer or officer of the court, who may execute it, according to its tenor, in the same manner and subject to the same privileges in and subject to which a search warrant for property supposed to be stolen may be executed according to law.
Appropriation of portion of pay or salary to creditors
(1) Where the bankrupt is an officer of the Armed Forces or a public officer or otherwise employed or engaged in the civil service of any government in Malaysia the Director General of Insolvency shall receive for distribution amongst the creditors so much of the bankrupt’s pay or salary as the court, on the application of the Director General of Insolvency, directs.
(2) (Repealed by Act A364).
(3) Where a bankrupt is in the receipt of a salary or income other than as aforesaid, or is entitled to any half-pay or pension or compensation granted by any Government of Malaysia the court, on the application of the Director General of Insolvency, shall, subject to any written law for the time being regulating the grant and payment of pensions, from time to time make such order as it thinks just for the payment of the salary, income, half-pay, pension or compensation or of any part thereof to the Director General of Insolvency, to be applied by him in such manner as the court directs.
(4) Nothing in this section shall take away or abridge any power of
any such Government to dismiss a bankrupt or to declare the pension, half-pay or compensation of any bankrupt to be forfeited.
Vesting and transfer of property
(1) The property of the bankrupt shall pass from Director General of Insolvency to Director General of Insolvency, and shall vest in the Director General of Insolvency for the time being during his continuance in office, without any conveyance, assignment or transfer whatever.
(2) All dealings with property which has been, is, or shall be vested under this Act in the Director General of Insolvency for the time being, and all deeds, agreements, instruments, acts and things necessary or expedient for the purposes of such dealings as aforesaid, shall, if the same have been or shall be transacted, made, entered into, signed, perfected or done by an officer appointed for the time being under section 70 to act for or in the place of the Director General of Insolvency, be deemed to have been and shall be of the same force and effect and as valid for all intents and purposes as the same would have been or would be if transacted, made, entered into, signed, perfected or done by the Director General of Insolvency personally.
Disclaimer of onerous property
(1) Where any part of the property of the bankrupt consists of land of any tenure burdened with onerous covenants, of shares or stock in companies, of unprofitable contracts or of any other property that is unsaleable or not readily saleable by reason of its binding the possessor thereof to the performance of any onerous act or to the payment of any sum of money, the Director General of Insolvency, notwithstanding that he has endeavoured to sell or has taken possession of the property or exercised any act of ownership in relation thereto, but subject to this section, may, by writing signed by him, at any time disclaim the property.
(2) The disclaimer shall operate to determine as from the date of disclaimer the rights, interests and liabilities of the bankrupt and his property in or in respect of the property disclaimed, and shall also discharge the Director General of Insolvency from all personal liability in respect of the property disclaimed as from the date when the property vested in him, but shall not, except so far as is necessary for the purpose of releasing the bankrupt and his property and the Director General of
Insolvency from liability, affect the rights or liabilities of any other person.
(3) The Director General of Insolvency shall not be entitled to disclaim a lease without the leave of the court, except in any cases which may be prescribed or where all persons interested in the property consent to such disclaimer, and the court may, before or on granting such leave, require such notices to be given to persons interested and impose such terms as a condition of granting leave and make such orders with respect to fixtures, tenant’s improvements and other matters arising out of the tenancy as the court thinks just.
(4) The Director General of Insolvency shall not be entitled to disclaim any property, in pursuance of this section, in any case where an application in writing has been made to him by any person interested in the property, requiring him to decide whether he will disclaim or not, and he has for a period of twenty-eight days after the receipt of the application, or such extended period as is allowed by the court, declined or neglected to give notice whether he disclaims the property or not; and in the case of a contract if the Director General of Insolvency, after the application, does not within the said period or extended period disclaim the contract, he shall be deemed to have adopted it.
(5) The court may, on the application of any person who is, as against the Director General of Insolvency, entitled to the benefit or subject to the burden of a contract made with the bankrupt, make an order rescinding the contract on such terms as to payment by or to either party of damages for the non-performance of the contract or otherwise as to the court seems equitable; and any damages payable under the order to any such person may be proved by him as a debt under the bankruptcy.
(6) The court may, on application by any person either claiming any interest in any disclaimed property or under any liability not discharged by this Act in respect of any disclaimed property, and on hearing such persons as it thinks fit, make an order for the vesting of the property in or delivery thereof to any person entitled thereto or to whom it seems just that the same should be delivered by way of compensation for the liability or a trustee for him and on such terms as the court thinks just; and on any such vesting order being made, the property comprised therein shall vest accordingly in the person therein named in that behalf, without any conveyance or assignment for the purpose.
(7) Where the property disclaimed is of a leasehold nature the court shall not make a vesting order in favour of any person claiming under the bankrupt, whether as under-lessee or as mortgagee by demise, except upon the terms of making such person subject to the same liabilities and obligations as the bankrupt was subject to under the lease in respect of the property at the date when the bankruptcy petition was filed, and any mortgagee or under-lessee declining to accept a vesting order upon such terms shall be excluded from all interest in and security upon the property, and if there is no person claiming under the bankrupt who is willing to accept an order upon such terms, the court shall have power to vest the bankrupt’s estate and interest in the property in any person liable, either personally or in a representative character, and either alone or jointly with the bankrupt, to perform the lessee’s covenants in such lease, freed and discharged from all estates, incumbrances and interests created therein by the bankrupt.
(8) Any person injured by the operation of a disclaimer under this section shall be deemed to be a creditor of the bankrupt to the extent of the injury, and may accordingly prove the same as a debt under the bankruptcy.
Powers of Director General of Insolvency to deal with property
Subject to this Act, the Director General of Insolvency may—
(a) sell all or any part of the property of the bankrupt, including the goodwill of his business, if any, and the book-debts due or growing due to him, by public auction or private contract, with power to transfer the whole thereof to any person or company or to sell the same in parcels;
(b) give receipts for any money received by him, which receipts shall effectually discharge the person paying the money from all responsibility in respect of the application thereof;
(c) prove, rank, claim, and draw a dividend in respect of any debt due to the bankrupt;
(d) exercise any powers, the capacity to exercise which is vested in the Director General of Insolvency under this Act,
and execute any powers of attorney, deeds and other instruments for the purpose of carrying into effect this Act;
(e) deal with any property to which the bankrupt is beneficially entitled sui juris, or other owner of an estate of inheritance less than an estate in perpetuity, in the same manner as the bankrupt might have dealt with it; and any such dealing with any property to which the bankrupt is before his discharge so entitled shall, although the bankrupt is dead at the time of that dealing, be as valid and have the same operation as though the bankrupt were then alive.
Powers exercisable by Director General of Insolvency subject to orders of court
The Director General of Insolvency, subject to any general or special orders of the court, may—
(a) carry on the business of the bankrupt so far as is necessary for the beneficial winding up of the same;
(b) bring, institute or defend any action or other legal proceeding relating to the property of the bankrupt;
(c) employ, with the permission in writing of the Attorney General, a solicitor to take any proceedings or do any business;
(d) accept, as the consideration for the sale of any property of the bankrupt, a sum of money payable at a future time, subject to such stipulations as to security and otherwise as he thinks fit;
(e) mortgage, charge or pledge any part of the property of the bankrupt for the purpose of raising money for the payment of his debts;
(f) refer any dispute to arbitration, compromise all debts, claims and liabilities, whether present or future, certain or contingent, liquidated or unliquidated, subsisting or supposed to subsist, between the bankrupt and any person who may have incurred any liability to the bankrupt, on the
receipt of such sums payable at such times, and generally on such terms as are agreed on;
(g) make such compromise or other arrangement as is thought expedient with creditors or persons claiming to be creditors in respect of any debts provable under the bankruptcy;
(h) make such compromise, or other arrangement, as is thought expedient, with respect to any claim arising out of or incidental to the property of the bankrupt, made or capable of being made on the Director General of Insolvency by any person or by the Director General of Insolvency on any person;
(i) divide in its existing form, amongst the creditors according to its estimated value, any property which from its peculiar nature or other special circumstances cannot be readily or advantageously sold.
Distribution of Property
Declaration and distribution of dividends
(1) Subject to the retention of such sums as may be necessary for the costs of administration or otherwise, the Director General of Insolvency shall, with all convenient speed, declare and distribute dividends amongst the creditors who have proved their debts.
(2) The first dividend, if any, shall be declared and distributed within twelve months after the bankruptcy order has been made, unless the Director General of Insolvency, for reasons to be given to creditors, decides to postpone the declaration to a later date.
(3) Subsequent dividends shall, in the absence of sufficient reason to the contrary, be declared and distributed at intervals of not more than twelve months.
(4) Before declaring a dividend the Director General of Insolvency shall cause notice of his intention to do so to be gazetted and shall also send reasonable notice thereof to each creditor mentioned in the bankrupt’s statement who has not proved his debt.
(5) When the Director General of Insolvency has declared a dividend he shall send to each creditor who has proved a notice showing the amount of the dividend, and when, and how it is payable.
(6) No dividend shall be paid to any creditor which does not amount to five ringgit.
(7) Where the Director General of Insolvency makes any payment of dividends upon production of a certificate of identity in the form prescribed in the rules, he shall thereupon be discharged from all liability in respect of that payment.
Joint and separate dividends
(1) Where one partner of a firm is adjudged bankrupt, a creditor to whom the bankrupt is indebted jointly with the other partners of the firm, or any of them, shall not receive any dividend out of the separate property of the bankrupt until all the separate creditors have received the full amount of their respective debts.
(2) Where joint and separate properties are being administered, dividends of the joint and separate properties shall, subject to any order to the contrary that is made by the court on the application of the Director General of Insolvency or any person interested, be declared together.
(3) The expenses of and incident to such dividends shall be fairly apportioned by the Director General of Insolvency between the joint and separate properties, regard being had to the work done for and the benefit received by each property.
Provision for creditors residing at a distance, etc.
(1) In the calculation and distribution of a dividend the Director General of Insolvency shall make provision for debts provable in bankruptcy appearing from the bankrupt’s statements or otherwise to be due to persons resident in places so distant from the place where the Director General of Insolvency is acting that in the ordinary course of communication they have not had sufficient time to tender their proofs or to establish them if disputed, and also for debts provable in bankruptcy the subject of claims not yet determined.
(2) The Director General of Insolvency shall also make provision for any disputed proofs or claims and for the expenses necessary for the administration of the estate or otherwise, and, subject to the foregoing provisions, he shall distribute as dividend all money in hand.
Right of creditor who has not proved debt before declaration of a dividend
Any creditor who has not proved his debt before the declaration of any dividend or dividends shall be entitled to be paid, out of any money for the time being in the hands of the Director General of Insolvency, any dividend or dividends he has failed to receive before that money is applied to the payment of any future dividend or dividends, but he shall not be entitled to disturb the distribution of any dividend declared before his debt was proved by reason that he has not participated therein.
Final dividend
(1) When the Director General of Insolvency has realized all the property of the bankrupt, or so much thereof as can, in his opinion, be realized without needlessly protracting the proceedings in bankruptcy, he shall declare a final dividend.
(2) Before so doing he shall give notice as prescribed to the persons whose claims to be creditors have been notified to him, but not established to his satisfaction, that if they do not establish their claims to the satisfaction of the court within a time limited by the notice he will proceed to make a final dividend without regard to their claim.
(3) After the expiration of the time so limited, or if the court, on application by any such claimant, grants him further time for establishing his claim, then on the expiration of such further time, the property of the bankrupt shall be divided among the creditors who have proved their debts without regard to the claims of any other persons.
No action for dividend
No action for a dividend shall lie against the Director General of Insolvency, but if he refuses to pay any dividend the court may if it thinks fit order him to pay it.
Power to allow bankrupt to manage property
(1) The Director General of Insolvency may appoint the bankrupt himself to superintend the management of the property of the bankrupt, or of any part thereof, or to carry on the trade, if any, of the bankrupt for the benefit of his creditors, and in any other respect to aid in administering the property in such manner and on such terms as the Director General of Insolvency directs.
Allowance to bankrupt for maintenance or service
(2) The Director General of Insolvency may make such allowance as he thinks just to the bankrupt out of his property for the support of the bankrupt and his family, or in consideration of his service if he is engaged in winding up his estate, but the court may reduce any such allowance and limit the time for which it may be made.
(3) Where the bankrupt has died, the Director General of Insolvency may make an allowance to the bankrupt’s family for their support.
(4) The Director General of Insolvency may also make an allowance towards the funeral expenses of a bankrupt.
Right of bankrupt to surplus
The bankrupt shall be entitled to any surplus remaining after payment in full of his creditors, with interest as by this Act provided, and for the costs, charges and expenses of the proceedings under the bankruptcy petition.
Source: Laws of Malaysia, Attorney General's Chambers of Malaysia (lom.agc.gov.my). Not a copy of the Gazette printed by the Government Printer (Interpretation Acts 1948 and 1967, s 61).
