LAND LAW II

(CHARGE)
ORDER FOR SALE
 Remedies available to chargee

 In the event of default by chargor, the

registered chargee may exercise his right-
A. OFS; or
B. taking possession; or
C. Assignment to Danaharta

2
 A. OFS
Procedures towards obtaining OFS:
1. Statutory notice;
2. Foreclosure proceeding; and
3. OFS;
 1. Statutory notice
• Mandatory requirement- to be complied by
chargee before applying for OFS from Court/LA

• National Bank of Australia Ltd v United Hand

in Hand (1879) 4 AC 391
– Consequences of failure to give notice:-
• Sale cannot be effected;
• Registrar may refuse to register any transfer;
• Chargor may obtain an injunction preventing the sale from the
proceeding.

4
 Factors affecting validity of
notice:

 3 factors that will affect the validity of a

statutory notice:
1) The form (type) of notice used;
2) The content of the notice; and
3) The service of the notice.
 Form 16D
(Sec 254 NLC)
• Chargee is to served onto the chargor form
16D when:
1. There is a breach of any express/implied
obligations by chargor under the loan agreement.
(sec 253(1))
 Form of breach:
i. breach of any charge provision; and/or
ii. Implied provision (sec 249, 250, 251 & 252)

6
 Cont…
2. The breach has continued at least one
month or more.( issuance of notice
before breach-immature proceeding) OR
• Such alternative period as stated in the
charge but must not be lesser than 1 month.
(sec 254(1))
 Form 16E
(Sec 255 NLC)
• Chargee is to served onto the
chargor form 16E when:

 if the charge agreement states that

the chargee is entitled to demand the
principal sum at any time.

8
 Cont…
The phrase usually found in the agreement
would states(“payable on demand”)

Chargee is allowed to demand for the

principal sum, even without breach on part
of chargor.
 How to demand?
– By serving on the chargor a notice in Form
16E of his intention to demand for principal
sum within 1 month from the date of the
notice is served on the chargor.
 Cases:

Eliathamby v Sheikh Mohd Said [1970]

2MLJ 194
• There’s no provision in the charge agreement
that allows the chargee to demand for principal
sum but in the event of default chargee used
Form 16E to demand for outstanding amount.

Held: Form 16E was wrongly used.

11
 Cont…
VAM Hussain v BP Malaysia Sdn Bhd
[1970] 2MLJ 69
• The charge agreement provides that the
principal sum secured was payable on demand.
The chargee used Form 16E.
Held: the Respondent had used the correct form
i.e. Form 16E
 Cont…
• In circumstances where there has been a breached as well as a
clause demanding for principal sum, EITHER Form 16D or 16E
can be used:-

– Jacob v Overseas Chinese Banking Corporation [1974] 2MLJ 161(FC)

– Mary Michael v UMBC [1971] 1MLJ 172 (FC)

13
 Cont…
• Central Malayan Finance v Loke Kok
Lai [1975] 1MLJ 160
– The charge agreement provides that in the event of
default, the chargee would give notice under
Section 254 NLC. The chargee issued Form 16E
instead of 16D when the borrower defaulted in the
payment. It was contended that the notice is void.
Held: the notice was defective since it was
covenanted to proceed under Section 254

14
 2. Content of Notice

Must be in accordance with NLC and

the loan agreement

15
 16D
1.shallindicate the amount due i.e principal
and interest / the breach that has been
done

– ( Co-operative Central Bank Ltd v

Meng Kuang Properties Bhd [1991] 2
MLJ 283)
2. Requiring the chargor to remedy the breach
within the time stipulated in the charge
agreement

– Citibank Bhd v Mohamed Khalid B. Farzalur Rahman & Anor

[2000] 4MLJ 96
– “…when Parliament enacted s 254(1) of the Code and
employed therein the words 'or such alternative period
as may be specified in the charge', it clearly intended by
that phrase to alter the law by enabling a chargee to
impose a period of less than a month. The Code in s 254
therefore expressly permits a chargor by contract to
accept a statutory notice of less than one month”
- Malayan Banking Berhad v. United Cartel Sdn Bhd [2006] 5 MLJ 548
3.To give warning that failure to comply with
statutory notice chargee will proceed to obtain
OFS
 16E
1. shall indicate the amount of principal
sum demanded
2. requiring the chargor to make payment
within one month from the date of
service of the notice
 Effect of non-compliance with the
provision of the loan agreement or
provision of NLC

• Perwira Affin Bank v Saad Abdullah (1999) 6MLJ 418

– Facts: Ds (RP) executed a 1st legal charge in favor of P to secure
banking facilities to Saad Sdn Bhd (borrower) up to the sum of
RM 80k together with interest thereon. By the way of 2nd charge,
Ds executed a 2nd legal charge to secure banking facilities to the
borrower up to the sum of RM 50k together with interest.

20
 Cont…
• Subsequently P sent to Ds a notice in Form 16D under
section 254. There was no response from Ds in relation to
form 16D. P made an application for an OFS. Ds
submitted that Form 16D was invalid because the sum
claimed and specific in it was not the sums secured under
the charge. The alleged claim of principal and interest
clearly exceeded the sums secured under the terms of the
charge annexure. There was no evidence of notice of
variation of interest being served on the Ds.
– Held: dismissing the application.
– There was a variation of interest in the
notice from the loan agreement. The
Court decided that the variation of
interest might affect the notice if there
is no notification of the variation to the
chargor (the burden was on the P to
show that Form 16D was issued in
accordance with the charge).
 Effect of non-compliance with the
provision of the loan agreement or
provision of NLC
• Cempaka Finance Bhd v Abbas bin Yaakob
(1999) 2MLJ 411
– Facts: D (RP) charge his land to P in order to obtain
loan facility together with interest at 2%pa. Clause
8(1)(a) of the annexure to the charge dealt with the
right of the charge in the event of default in payment
of installment. Whereas Clause 8(1)(b) dealt with
event of default to make payment of the balance sum.

23
• Upon D’s failure to repay the loan, P filed an application
to sell the land by way of public auction. In its notice of
demand, P demanded that the sum owed, together with
interests be paid within 14 days from the date of the
notice. D submitted that the notice of demand had relied
on Clause 8(1)(b) of the annexure and therefore should be
dismissed as D had in fact been paying the installment.
• It was the defendant's contention that the demand should
be made pursuant to clause 8(1)(a) of the annexure. The
plaintiff, on the other hand, contended that its claim was
not based on clause 8(1)(b) but was based on clause 8(1)
(a).
 Cont…
• Held: dismissing the application.
• The notice of demand did not show the exact breach that
caused the said notice to be sent. In the absence of any clear
mention of a default in payment of installment, the notice
must be sent pursuant to clause 8(1)(b)of the annexure, since
clause 8(1)(a) referred to a notice requiring payment within 7
days from the date thereof. In the circumstances, since a
proper demand is a pre-requisite to P’s right to enforce its
claim and since the notice of demand did not comply with the
terms of the annexure, the application which premised on the
faulty notice of demand must be dismissed.

25
 3. Service of Notice
• The method and forms of service of notices are
referred to in Section 430-433 NLC
• Section 431-notice can be delivered by way of
personal delivery, by leaving the notice at the
person’s last known address, pre-paid registered
post, substituted service.

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 Cont…
• Notice must be served to the last known
address of chargor.
• Once notice has been validly served, time
begins to run.
• After expiry of date in the notice, chargee
is at liberty to apply for OFS
Effect of non- compliance

– the notice can be challenged

– Standard Chartered Bank (M) Bhd v Tunku
Mudzaffar Tunku Mustapha [2005] 1MLJ
604
• “Just because the provisions of s 431(1)(c)(i) of the NLC
contain the word 'leaving', it cannot be the law that the
plaintiff's process server is at liberty to literally leave the
Form 16D notice 'anywhere' or 'anyhow' at the address of
the defendant in the manner he might have thought
permissible, and thereafter to just mention the word '
meninggalkan' in his affidavit of service. As such, it is the
duty of this court to ensure that service was done properly
and fairly (Hishamudin J, para 31).

28
– Kekatong Sdn Bhd v Bank Bumiputra (M)
Bhd [1998] 2MLJ 440

• It was decided that although the notice in Form 16D

was correct in substance, yet the address at which it
was served was incorrect (chargee served to the
address at Jalan Conlay KL (the address that they
knew it was no longer being occupied by the
chargor) instead of its new registered address at
Beach Street, Penang.
COA (Gopal Sri Ram JCA) held that the word
‘may’ is not merely directory. It is imperative.
 Cont…
• (Substitute service)
– Re Cheong Ah Moi [2000]
• Facts: Substituted service on bankruptcy notice
• Held: in making order for substitute service, the
primary consideration of the court is ‘how the
matter can best be brought to the personal
attention of the person on chargor”

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2. Foreclosure proceeding

A.Tribunal empower to grant

OFS; and

B.“existence of cause to the

contrary”.
 A. Relevant tribunal

• To determine which tribunal to

initiate a foreclosure proceeding,
depends on the title of the land.

32
 Cont…
• High Court (Sec 256 NLC):- Registry title
i.e. Final Title (Sec 86 NLC)-Grant/ state
lease, Qualified Title (Sec 177)-usually
written as QT(R), HS(D), PN.
 Cont…
• Land Office/Land Adminstrator (Sec 263
NLC):- Land Office Title (Sec 87 NLC) i.e
Mukim Grant/ Mukim lease, Qualified
Title-usually written as QT(M), HS(M),
PM.
 Cont…
• Registry Title-High Court by way of
originating summon.
• Land Office Title-Land Administrator,
using form 16G

35
– Tan Teng Pan v Wong Fook Shang (1973) MLJ 31
• Land held under an EMR (Entry in the Mukim
Register) was charged by way of registered charge.
On default, the chargee applied to the High Court
for OFS. This was refused on the basis that the
court had no jurisdiction in view of ss261 and 262
held: that in the case of land held under Land
Office Title, the court has no jurisdiction to order
sale of that land in the instances of an application
by a chargee.
 B. Existence of “Cause to the
Contrary”
• No definition provided by NLC.
• Word appear in Section 256(3) & 263(1) NLC
• Literally:
– refers to a situation where if the judge or land administrator is
satisfied that there is a valid reason or valid objection to the
application, then order for sale will not be granted.

37
• The judges decided:-
– “means the court or land office will not grant
an order for sale if granting that order will be
against any rule of law or any rules of equity” (
Keng Soon Finance Bhd v MK Retnam Holding
s Sdn Bhd [1989] 1MLJ 458
 Cont…
• In Low Lee Lian v Ban Hin Lee Banking Bhd [1997]
1MLJ 77, Federal Court (Gopal Sri Ram) adopted three
categories of cases in which ‘cause to contrary’ might
be established:-
i. When a chargor was able to bring his case within any of the
exceptions to Section 340, indefeasibility;
ii. Where the chargor could established that the chargee had
failed to meet the conditions precedent for the right to seek
OFS; and
iii. Where the chargor could show that granting OFS would be
contrary to any rule of law or equity.

39
 Cont...
• Examples of “cause to the contrary”
• Contrary to any rule of Law:-
– Charge is not registered:-
• Oriental Bank v Chup Seng Restaurant (Butterworth) Sdn Bh
d [1990] 3MLJ 493 (HC)
– Defective or improper statutory notice of demand:- (vs
sec 254)
• Co-operative Central Bank Ltdv Meng Kuang Properties [199
1] 2MLJ 283
& Multi-Purpose Bank Bhd vMaimoon Bte Abdul Razak
[1999] 6MLJ 215 (HC)

40
 Cont…
• Fraud:-
– Tai Lee Finance Co. Sdn Bhd v Official Assignee [1983] 1MLJ 81(FC)
• An application for OFS of land in Q will not be granted by the courts in cases
where the chargee has been fraudulent or where the chargee and the chargor
have acted in collusion to defraud 3 rd party. (Abdul Hamid FJ)
– Public Finance Bhd v Narayanaswamy [1971] 2MLJ 32

• Contravention of statutes:-
– Phuman Singh v Kho Kwang Choon [1965] 2MLJ 189 (FC)

• Invalid service of statutory notice (vs sec 254)

– Malayan United Finance v Tan Ah Moi [1993] 2 CLJ 427 (HC)
• The service of statutory notice was invalid by virtue of section 431 (1)(c)
post.
Court refused to grant OFS.

41
 Cont…
• Application made to wrong tribunal:-
– Tan Teng Pan v Wong Fook Shang (1973)
MLJ 31

• Charge was registered contrary to

restriction in interest:-
– United Malayan Banking Corp Bhd v Syarikat
Perumahan Luas Sdn Bhd [1988] 3MLJ 352

42
 Cont…
• Contrary to any rule of Equity:-
• Granting an OFS when chargee had
knowledge that the land was previously
sold to the 3rd parties prior to the
registration of the charge in their favour.
– Overseas Chinese Banking Corporation Ltd v
Lee Tan Hwa & Anor [1989] 1MLJ 261 (HC)

43
 Cont…
• When chargor turned to the 3rd party to
redeem the charged property and had
in fact collected the redemption sums
from the 3rd party they are under some
equitable duty.

44
 Cont…
– Kuching Plaza Sdn Bhd v Bank Bumiputra
Malaysia Bhd [1991] 3MLJ 163
• Facts: Developer charged the land for
development and parcels in the building
were sold to sub-purchaser. Developer is
unable to make repayment of the loan and
chargee applies order for sale.
• Supreme Court decided that in this case, from the
evidence the court deduced chargee had looked
toward the sub-purchase of the parcels to redeem
the property charged by developer. There is
evidence that the chargee collected the redemption
sums from the sub-purchaser to satisfy the loan.
Therefore they cannot turn around to say that
developer had breach the term of payment for the
loan.
• Held: the court is of the opinion that these are valid
circumstances and it would be unjust for chargee to
foreclosure the charge because if the court granted
the order it would be contrary to the rule of equity.
 Cont…
 Vs rules of equity
• Delay:-
– Public Finance Bhd v Hock Seng Housing
Development Sdn Bhd [1992] 1MLJ 442
• An application for consolidation of accounts and for OFS was
sought after foreclosure action against one charge had
commenced and an OFS for it was made. The application was
dismissed on the ground that the delay to consolidate was
inequitable to the purchasers and, in turn, amounted to a cause
to the contrary.

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 Registry Title (High Court)
• Charge (registered)
↓
Default of repayment
↓
Serve Form 16D/16E
↓ 1 month/
specified time)
↓
Application to court (originating Summons & affidavit)-Order 83 RHC
↓
Hearing (before judge in chambers-to object/oppose-show cause to the contrary)
↓→→
OFS } sale by private treaty
↓→→
Application to Registrar for direction (fix reserve price/auction date/ public
auctioneer/ terms of sale etc)

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 Cont…
↓
Auction-Public auction
↓
→x buyer/bidder-postponed as many time
↓
Buyer (Contract for sale
↓
Paid full purchase price (paid to chargee, residue refund to chargor,
shortfall from chargor)
↓
Certificate of sale (Form 16F)
↓
Completion of sale (interest vest on new purchaser)

49
 Land Office Title-Land
Administrator
• Charge (registered)
↓
Default of repayment
↓
Serve Form 16D/16E
↓ 1 month/
specified time)
↓
Application to Land Office (Form 16G)-Section 263 NLC
↓
Hearing/Inquiry (before Land Administrator-to object/oppose-show cause to the
contrary)-power of LA: default proven-any dispute refer to court
↓→→
OFS (Form 16H)LA functus officio } sale by private treaty
↓→→

50
 Cont….
Application to Registrar for direction (fix reserve price/auction date/ public
auctioneer/ terms of sale etc)
↓
Auction-Public auction
↓
→x buyer/bidder-2x refer to court
↓
Buyer (Contract for sale)
↓
Paid full purchase price (paid to chargee, residue refund to chargor, shortfall
from chargor)
↓
Certificate of sale (Form 16I)
↓
Completion of sale (interest vest on new purchaser)

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NEXT…
 Function of Land
Administrator (OFS)
• Limited power compare to power of court.
• LA has a mandatory duty to make an OFS
unless there is a ‘cause to the contrary’.
 Cont…
• Power of LA is only to determine whether
the chargor has defaulted his repayment of
loan and if it is proven that default has
occurred, LA shall grant OFS.
 Cont….
• After granting OFS, LA has no power to
vary OFS.
• Any cancellation or alteration to order by
LA only be made by the Court.
 Cont….
• Gurpal Singh v Kananayer [1976] 2MLJ 34
– LA had considered allegations of fraud, mistake and other
vitiating factors. He refused OFS.
– Held: “LA ‘has no power to adjudicate on the pleadings which
ordinarily heard in the courts. …it would appear…that the
power of the Collector in the enquiry should be limited. He
should not go behind the charge in view of s340(1)…relating to
indefeasibility…and only HC possesses the power to set aside
any registered interest of the proprietor, chargee or lessee in any
land title” (Mohamed Zahid J)
(the court has the power to investigate the validity of the charge,
and its priority)
 Cont….
• Suppiah v Ponnampalam [1963] MLJ 202 (CA)
– Thomson CJ explained “the Collector was bound to
accept the register and once he was satisfied that the
charge with which he was concerned was on the
register then the only question for him to decide was
whether or not there had been default in the payment
provided for it. If he was not satisfied he could make
no order, if he was so satisfied, he was obliged to
make an order…in other words the LA should not go
behind the register”
 Cont….
• Lim Yoke Foo v Eu Finance Bhd [1985] 1 MLJ 17
– Fed Court held that LA had no power to cancel the OFS as the
LA is functus officio save as to his power under s264(3) NLC
1965 to postpone the sale ordered or to formally rectify the first
order within the purview of s33 with no power to make another or
subsequent order under this section.
– Privy Council agreed that LA had no power to cancel OFS. In
referring to the LA’s lack of authority to cancel the order. PC
noted that he only could postpone the date of the sale (s264(3))
or to correct certain error under s 33.
 OFS v Civil Suit

OFS v Civil Suit

– The chargee may take 2 actions against borrower at
the same time (simultaneously).
– CHAN BOI LOI v PUBLIC BANK BERHAD &
ANOR [2011] 1 MLJ 478
 Discharge of Charge b4
conclusion of sale
(right of chargor)
• Section 266, 278, 279 & 280 NLC.
• In Lee Ah Chin v Wong Yoon Chai [1981]
2MLJ 32 -Any chargor may stop the sale
by tendering the full amount due under the
charge ‘before the conclusion of the
sale’, including accrued interest and
expenses. The chargor would then be
entitled to discharge of the charge and
return of IDT
 Cont…
• “before the conclusion of the sale”-
not defined.
• However by reference to the words
in the proviso, right to tender would
last until the signing of the
contract of sale (sale to 3rd party).
 266. Right of chargor to tender
payment at any time before sale.

• (1) Any chargor against whom an order for sale

has been made under this Chapter may, at any
time before the conclusion of the sale, tender
the amounts specified in sub-section (2) to the
Registrar of the Court or, as the case may be,
Land Administrator (or, if the tender is made on
the day fixed for the sale, to the officer having
the direction thereof), and the order shall
thereupon cease to have effect.
 Cont….
• (2) The amounts referred to in sub-
section (1) are-
• (a) the amount shown in the order as due
to the chargee at the date on which the
order was made;
• (b) such further amounts (if any) as have
fallen due under the charge between the
date of the order and the date of the
tender; and
 Cont….
• (c) an amount sufficient to cover all
expenses incurred in connection with the
making, or carrying into effect, of the
order.
• (3) Where any order for sale ceases to
have effect by virtue of this section, the
Registrar of the Court or, as the case may
be, Land Administrator shall give notice
thereof to every chargee of the land or
lease in question.
 278. Discharge otherwise than
by payment.
• (1) Any chargee may, by an instrument in
Form 16N discharge the land or lease to
which his charge relates (or, if it relates
to more lands or leases than one, all or any
of them) from all further liability
thereunder, and the discharge shall take
effect as from the date on which the
instrument is registered.
 Cont…
• (2) In the absence of express
provision therein to the contrary,
no instrument of discharge shall
release the chargor from his
personal liability under the charge.
 279. Discharge by payment to
Registrar in cases of death, absence
or disability.
• (1) Any chargor may apply to the Registrar for
relief under this section on the grounds that he is
entitled to pay off the charge but-
• (a) the chargee is dead, or cannot be found
within the Federation, or evades or refuses to
accept payment thereof, or is under a legal
disability, AND
• (b) he is unable to trace any person or body
authorised to receive payments on the chargee's
behalf.
 Cont….
• (2) Where the grounds specified in any
such application, and the precise amount
due under the charge, are established to
his satisfaction, the Registrar shall
authorise the chargor to deposit the
amount in question with him; and upon the
making of the deposit, the land or lease to
which the charge relates shall be
discharged from all liability thereunder.
 Cont….
• (3) The receipt of the Registrar for
any monies deposited with him
under this section shall, as respects
the personal liability of the chargor,
be a sufficient discharge therefor;
and any such monies-
• (a) shall be placed by the Registrar in
the custody of such public officer as
he may think proper;
 Cont…
• (b) may be claimed by the person or
body entitled thereto at any time
within six years of the date of
deposit; and
• (c) if not so claimed, shall thereafter
be paid into the Consolidated Fund of
the State.
280. Memorialisation on discharge by
payment.

• Where any land or lease has become

discharged from liability under any
charge by payment to the Registrar
under section 279, the registration
of the charge shall be cancelled by
the Registrar pursuant to section
314;
 Cont…
• and any chargor may apply to the
Registrar pursuant to section 314;
and any chargor may apply to the
Registrar under that section for
cancellation of the registration of
the charge on the grounds that a
discharge has been effected by
payment to the chargee.
 Public Auction
• Section 257(1)(g)
• Section 268
• Section 268A
• Section 301
• United Malayan Banking Corp v Chong Bun
Sun [1994] 2MLJ 221
– It was decided that once OFS has been made by the
court, it can only grant an OFS by way of public
auction (section 257).
 257. Matters to be dealt with
by order for sale.
• (1) Every order for sale made by the
Court under section 256 be in Form 16H
and shall-
• a) provide for the sale to be by public
auction;
• (b) require the sale to be held on, or as
soon as may be after, a date specified
therein, being a date not less than one
month after the date on which the
order is made;
 Cont…
• c) specify the total amount due
to the chargee at the date on
which the date on which the
order is made;
 Cont…
• (d) required the Registrar of the
Court to fix a reserve price for the
purpose of the sale, being a price
equal to the estimated market value
of the land or lease in question;
 Cont…
• (e) specify that no bidder shall be
allowed to bid in the sale unless the
officer of the Court is satisfied
that the bidder possesses, at the
time of the sale, the sum
equivalent to ten per centum of the
reserve price specified under
paragraph(d) ;
 Cont…
• (f) specify that where the full amount of
the purchase price is not paid after the
fall of the hammer by the successful
bidder, the sum specified in paragraph
(e) shall be paid as deposit to the
chargee and forthwith credited into the
account of the chargor pending the
settlement of the balance of the purchase
price;
 Cont…
• (g) specify that the balance of the
purchase price shall be settled on a
date not later than one hundred and
twenty days from the date of the
sale and that there shall be no
extension of the period so specified;
and
 Cont…
• (h) specify that where the balance of
the purchase price is not settled on a
date specified under paragraph (g),
the sum paid as deposit under
paragraph (f) to the chargee shall
be forfeited and disposed of in the
manner specified under section
267A.
268. Application of purchase money.

• (1) The purchase money arising on any sale

under this Chapter shall be applied as
follows-
• (a) firstly, in the payment of rent to the
State Authority or the lessor (according
as the charge was a charge of land or of a
lease) and, so far as no person other than
the chargor was responsible therefor, any
other outgoings payable to the State
Authority or any local authority;
• (b) secondly, in the payment of the
expenses (as certified by the
Registrar of the Court or Land
Administrator, as the case may be)
incurred in connection with the
making and carrying into effect, of
the order for sale;
• (c) thirdly, in the payment to the
chargee of the total amount due
under the charge at the time of the
sale;
 Cont…
• (d) fourthly, in the case of a charge
to secure the payment of an annuity
or other periodic sum, in accordance
with any provision for the
satisfaction of payments
subsequently falling due included
therein pursuant to paragraph (b) of
sub-section (2) of section 242; and
 Cont…
• (e) fifthly, in the payment off of
subsequent charges, if any, in the
order of their priority.
• (2) The reference in paragraph (e) of
sub-section (1) to the payment off of
subsequent charges is a reference-
 Cont…
• (a) in the case of a charge to secure
the re-payment of a debt, or the
payment of any sum other than a
debt, to the payment to the chargee
of the principal sum thereby secured
(or so much thereof as is then
outstanding) together with any
interest then due, if any;
 Cont…
• (b) in the case of a charge to secure
the payment of an annuity or other
periodic sum, to the payment to the
chargee of all sums then due, and the
giving effect to any provision for the
satisfaction of payments
subsequently falling due included
therein as mentioned in paragraph (d)
of sub-section (1).
 Cont…

• (3) The residue, if any, of the

purchase money shall, subject to sub-
section (3) of section 339, be paid to
the chargor.
268A. Application of purchase money
by chargee who is a financial
institution.
• (1) Upon receipt of the full payment of the
purchase money of the sale, the chargee who is a
financial institution shall immediately certify in
writing to the Registrar of the Court or the Land
Administrator, as the case may be, that the full
payment has been received.
 Cont…
• (2) The chargee shall apply the purchase
money in the manner specified as follows:
• (a) firstly, in the payment of the moneys
due specified in paragraphs (a) and (b) of
sub-section (1) of section 268 not later
than fourteen days from the date of the
receipt of the full purchase money of the
sale; and
 Cont…
• (b) secondly, in the payment of
moneys due to the persons or bodies
in the order of priority specified in
paragraphs (c) , (d) and (e) of sub-
section (1) of section 268 not later
than twenty-one days after receipt
of the full amount of the purchase
money.
 Cont…
• (3) A statement of accounts of the
payments received and paid out as
specified in sub-section (2) shall be
submitted not later than thirty days
after the receipt of the full
purchase money to the Registrar of
the Court or the Land Administrator,
as the case may be.
301. When an instrument is fit
for registration.
• An instrument shall be fit for registration
under this Part if, but only if, the following
conditions are satisfied-
• (a) that it is one of the classes of
instrument set out in sub-section (1) of
section 292 as authorised to be so
registered;
 Cont…
• (b) that it complies with-
• (i) the provisions of Part Thirteen as to
the form, content, execution and
attestation of instruments of dealing
generally, and the persons and bodies
capable of taking thereunder, and
• (ii) the provisions of Parts Fourteen to
Seventeen with respect to instruments of
the particular class in question;
 Cont…
• (c) that the dealing which it effects
is not contrary to any prohibition or
limitation imposed by this Act or any
other written law for the time being
in force, or to any restriction in
interest to which the land in question
is for the time being subject;
 Cont…
• (d) that it does not declare or,
except as permitted by section 344,
disclose the existence of any trust;
and
• (e) that it is duly stamped in
accordance with the provisions of the
Stamp Act, 1949;
 Cont…
• Provided that where a certificate of
sale has been given to a purchaser in
respect of any charged land or lease
under sub-section (3) of section 259 or
sub-section (4) of section 265, any
requirement to obtain the consent of the
State Authority relating to the
restriction in interest to such land or
lease in question shall not be applicable
 Sale by Private Treaty
• Private treaty: private arrangement by the chargor to sell
the charge property to a willful purchaser with the
consent from the chargee. (normal sale and purchase
transaction between two individuals- vendor and
purchaser)
– Before OFS; or After OFS

• Before OFS:- the chargor may before OFS is

pronounced and with the consent of the chargee sell
the charged property by way of private treaty.
 Cont…
• Aft OFS-Section 266(1) NLC provides that any
chargor whom an OFS has been granted may at
any time before the conclusion of the sale,
tender the outstanding amounts to Registrar of the
Court or LA (as the case may be)-(or if the tender
is made on the day fixed for the sale, to the officer
having the direction thereof), and the order shall
thereupon cease to have effect.
 Cont…
• After OFS
– Initially- in The Chartered Bank v Packiri Maideen
[1963] MLJ 276 (HC)- it was decided that the chargee
could sell by private treaty on default but that once he
took proceeding under the legislation (i.e. OFS) then a
public auction must be ordered.
– The present approach: even after OFS the chargor may
still sell the charge property by way of private treaty in
the light of Section 266 NLC.
 Cont…
– Malayan United Finance Bhd v Tay Lay Soon
[1991] 1 MLJ 504 (SC)
• “There is no statutory provision for the discharge of
the charge by the chargor…However, under section
266(1) any chargor may at any time before the
conclusion of the judicial sale of a charged land
tender the amounts due to the Registrar of the
court or the Collector”. (Jemuri Serjan SCJ)
 Cont…
– MJ Frozen Food Sdn Bhd v Siland Sdn Bhd [1994] 1
MLJ 294 (SC)
• “the chargor does not abrogate all his rights to the chargee
at the making of the OFS. He is merely compelled to abide
by the court’s order for his property to be sold in accordance
with the statutory safeguards on his interest as provided under
ss 257 and 258 of the NLC …the divesting of the chargor’s
right occurs only on the completion of the contract of sale
and conveyance…”
• (conclusion of sale means until full payment by the bidder is
received by the chargee)
 Rights of Chargor after
OFS
• Proprietary rights in the land do not pass to or vest in the purchaser
until registration and after the issuance of certificate given under
section 259(3)/ 264(4) NLC.
• Still the legal owner of the land (Section 267/268 NLC)
– Right to intervene if the sale has been prejudice of the
chargor;
– Right to object to any variation of the terms and conditions of
the sale;
– Rights to balance of purchase price;
– Right to have the land sold at the market value prevailing on
the date of the sale (Asia Commercial Finance (M) Bhd v
Development Realtor Sdn Bhd [1992] 2 MLJ 504}; and
– Right to discharge the charge under Section 266(1) of NLC.
 Cont…
– MUI Bank v Cheam Kim Yu [1992]2MLJ 642

• “Under NLC, they’re nothing to prevent a chargor

with the consent of the chargee to sell the charged
property by private treaty. There are no specific
provisions in the Code for such sale but if such sale
is concluded as a purely business arrangement, it is
for the chargee to discharge the charge to give full
effect to the sale. That was not done here” (Harun
Hashim)
 Cont…
– United Malayan Banking Corporation v Chong Bun
Sun [1994] 2 MLJ 221
• It was held that so long as the chargee’s interest is not
adversely affected, a chargor, may before an OFS has been
made or even after an OFS has been ordered, until the sale of
the charged property to a third party at a public auction is
concluded and with the consent of the chargee, sell the
charged property by way of private treaty.
• (chargor is entitled to tender outstanding amount at any time
before the conclusion of the sale)
106