MUHAMMAD & PARTNERS

ADVOCATES & SOLICITORS UNIT NO 35-5-1, 20TH FLOOR, WISMA UOA DAMANSARA, 50 JALAN DUNGUN, DAMANSARA HEIGHTS 50490 KUALA LUMPUR, MALAYSIA P.O. BOX 11965 50732 KUALA LUMPUR MALAYSIA MOHAMMAD NOR ZIKRY BIN MOHAMAD LLB (HONS) LLBS IIUM MOHD AIZAN BIN MOHAMMAD SALLEH LLB (HONS) LLBS IIUM MUHAMMAD SHAFIQ BIN MUHAMAD SHARIF LLB (HONS) LLBS IIUM MUHAMMAD FARID BIN ARIFFIN LLB (HONS) LLBS IIUM (1013443) (1019527) (1011137) (1018897)

Working hours: Monday Fridays: 8.30 a.m. 6.00 p.m. Saturday: 8.30 a.m. 12.45 p.m. Sunday & Public Holiday: Close TEL: 03 - 2279 7634 FAX: 03 - 2279 7653 Email: muhammad@muhammad.com Website: www.muhammad.com

Our Ref Your Ref

: PP/MP/002/1013/ADLI/opinion :

22 November 2013 Encik Adli Sharidan bin Sahar NO.78, JALAN ZAMRUD, TAMAN PERMATA, 67800 AMPANG, SELANGOR.

By Email & Post

Dear Sir,

RE : LEGAL OPINION

Pursuant to our meeting on 8 November 2013 (Friday, 12.00 pm) at the office of Muhammad & Partners, we have been instructed to advise you on matter with regards to bankruptcy.

2.

In preparing this opinion, we have referred to the Bankruptcy Act 1967 and Bankruptcy Rules 1969.

3.

The facts of the case as we understood are as follows: On 6 November 2013, you had been served with a Creditors Petition which stated that, you need to apppear before the Mahkamah Tinggi Shah Alam for a bankruptcy suit amounting to RM34000.00. The creditors petition was issued by the CIMB Bank Bhd. 3.2. From the Creditors Petition, you need to appear before the Mahkamah Tinggi Shah Alam on 24 November 2013.

3.1.

MUHAMMAD & PARTNERS UNIT NO 35-5-1, 20TH FLOOR, WISMA UOA DAMANSARA, 50 JALAN DUNGUN, DAMANSARA HEIGHTS50490 KUALA LUMPUR, MALAYSIA P.O. BOX 11965, 50732 KUALA LUMPUR, MALAYSIA TEL : 03 - 2279 7634 FAX : 03 - 2279 7653 Email : muhammad@muhammad.com Website:: www.muhammad.com

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3.3

From the interviews session, what we can gather is that, you have never file an application for loan from the CIMB Bank Sdn and yet to have any transaction with the bank recently. However, three years ago from the date of the interview, you are a guarantor for the loan amounting to RM 27000.00 made by your brother-in-law named Azhar, who obtained it for the purpose of buying a Proton Iswaras car.

3.4

CIMB Bank had approved the application of the said loan provided that there is a guarantor. You on the false pretense that guarantor would not be a subject to bankruptcy, agreed to become Azhars guarantor.

3.5

Over the past three years, you have never made a contact with Azhar, and he also yet to contact and inform you his default on payment of the loan that he made.

3.6

On top of that, you had change your residence address for four times and your contact number also has changed numerously.

4.

From the aforesaid facts, we are thus on the view that the issues of your case are as follows: Whether the Creditors Petition was properly served to you? Whether the guarantor will be liable for bankruptcy if the principal debtor default in payment?

4.1 4.2

5.

Based on the issue above, this our opinion based on relevant statutes and decided cases as follows:

5.1

Bankruptcy is a process where a debtor is declared a bankrupt pursuant to an Adjudication Order made by the High Court against the debtor if he is unable to pay his debts of at least Rm 30,000.

5.2

The High Court makes a Receiving Order and Adjudication Order after a bankruptcy petition has been presented. It is usually presented either by Creditor Petition or Debtors Petition. In your current situation, you have been served with creditors petition. The creditors petition may be presented only upon the commission of an act of bankruptcy by the debtor which must have taken place within six months prior to the presentation based on Section 3(1) of the Bankruptcy Act 1967. Creditors Petition may be served in two ways which are through personal service and substitute service by virtue of Rules 109 and 110 of Bankruptcy Rules respectively.

5.3

5.4

5.5

Substitutes service may be served by three methods which are creditor need to post the petition to the last known address, secondly paste on the courts notice board and lastly on the local newspapers. In your situation, you have been served by way of substitute service.

5.6

This service however only applicable when the petition has been failed to be served to the debtor through personal service after two attempts have been made.

5.7

Once the serving of the petition has been completed, the debtor has failed to take any action against the petition, the creditor may apply to the court for the issuance of Receiving Order and

MUHAMMAD & PARTNERS UNIT NO 35-5-1, 20TH FLOOR, WISMA UOA DAMANSARA, 50 JALAN DUNGUN, DAMANSARA HEIGHTS50490 KUALA LUMPUR, MALAYSIA P.O. BOX 11965, 50732 KUALA LUMPUR, MALAYSIA TEL : 03 - 2279 7634 FAX : 03 - 2279 7653 Email : muhammad@muhammad.com Website:: www.muhammad.com

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Adjudicating Order.

5.9

In answering the second issue, a financial institution has the discretion to commence legal action against the borrower and guarantor either at the same time or after exhausting all legal avenues against the borrower.

5.10

However, with the latest amendment of the Bankruptcy Act, it provides that for social guarantors, i.e. a person who provides a guarantee for purposes such as: Loan, scholarship or grant for educational or research purposes Hire-purchase transaction for vehicle for personal or non-business use Housing loan solely for personal dwelling A creditor shall not be entitled to commence bankruptcy action unless he proves that he has exhausted all avenues to recover all debts owed to him by the borrower. This means that if the creditor can recover the debt from the principal debtor, thus the guarantor should take the liability. As, in this situation, it can be said that the liability to pay the debt is now shifted to you since the creditor cannot claim from the debtor.

6.

Based on the facts and authorities stated above, this is our recapitulation and recommendation for your problem as follows: 6.1 Based on the latest amendment of the Bankruptcy Act, bankruptcy proceedings are concerned the changes only extend protection to the social guarantor. If a person is not a social guarantor the position remains as it always was on terms of exposure to bankruptcy. Thus, a petition creditor must have exhausted all avenues against the principal debtor before he may proceed against a social guarantor. 6.2 As a guarantor, you have the right to call upon the borrower to pay off the loan to release you from all your liabilities under the guarantee. A guarantor can only be rendered liable under a guarantee if the borrower is in default of any payment to the financial institution and the financial institution makes a demand on the guarantor. 6.3 Therefore, it is prudent for you to pay the debt to the creditor as stated in the creditors petition. This because as a guarantor you are fully liable to the debt if the principal debtor failed to pay the amount within stipulated date stated by the creditor in the agreement. 6.4 The financial institution can take bankruptcy action against you to recover the debt. You will be released by the financial institution from your obligations under a guarantee upon full payment of the debt owing to them. 6.5 As a guarantor also, you have the right to be indemnified by the borrower for any payment made to the financial institution. This means that you can sue the borrower for
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MUHAMMAD & PARTNERS UNIT NO 35-5-1, 20TH FLOOR, WISMA UOA DAMANSARA, 50 JALAN DUNGUN, DAMANSARA HEIGHTS50490 KUALA LUMPUR, MALAYSIA P.O. BOX 11965, 50732 KUALA LUMPUR, MALAYSIA TEL : 03 - 2279 7634 FAX : 03 - 2279 7653 Email : muhammad@muhammad.com Website:: www.muhammad.com

the amount that you have paid to the financial institution.

We hope that we have answered all your queries with regards to the above matters. Should you need any further explanation and clarification, please do not hesitate to contact us.

Thank you.

Yours faithfully,

..................................................... (MUHAMMAD FARID ARIFFIN) Parner, Muhammad and Partners.

CC. file

MUHAMMAD & PARTNERS UNIT NO 35-5-1, 20TH FLOOR, WISMA UOA DAMANSARA, 50 JALAN DUNGUN, DAMANSARA HEIGHTS50490 KUALA LUMPUR, MALAYSIA P.O. BOX 11965, 50732 KUALA LUMPUR, MALAYSIA TEL : 03 - 2279 7634 FAX : 03 - 2279 7653 Email : muhammad@muhammad.com Website:: www.muhammad.com

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