Najib’s lawyer says asking court to set aside IRB’s bankruptcy notice over former’s RM1.7b tax arrears

Datuk Seri Najib Razak arrives at the Court of Appeal, Putrajaya April 27, 2021. — Picture by Shafwan Zaidon
Datuk Seri Najib Razak arrives at the Court of Appeal, Putrajaya April 27, 2021. — Picture by Shafwan Zaidon

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KUALA LUMPUR, May 5 — Datuk Seri Najib Razak has not been recorded as bankrupt even as the Inland Revenue Board (IRB) today sought to have the court record that an act of bankruptcy has occurred, his lawyer said.

Muhammad Farhan Muhammad Shafee, one of Najib’s lawyers, shared the updates of a case management on the IRB’s court bid to have Najib declared bankrupt over his failure to pay nearly RM1.74 billion in taxes and interest claimed by the IRB.

Today was the first case management of the IRB’s case via the Malaysian government against Najib at the High Court in Kuala Lumpur before deputy registrar Ida Rahayu Sharif.

Farhan said the case management today was to confirm the filing of several documents, and for the court to fix deadlines for the substantive part of the bankruptcy case.

He said the case management was also to fix deadlines for applications that Najib would be filing in court, namely an application to stay the bankruptcy proceedings and an application to set aside the IRB’s notice of bankruptcy on grounds of abuse of process.

Farhan said the IRB’s lawyer Athari Faris Ammery Hussein had today asked the High Court to record an act of bankruptcy in Najib’s case.

“Notwithstanding that today was fixed only for a case management, counsel for LHDN suggested that a bankruptcy event has occurred and therefore moved for the act of bankruptcy to be recorded by court immediately,” he said, referring to IRB by its Malay initials LHDN.

He added that Najib’s lawyer Wee Yeong Kang had then argued that the IRB’s position was “incorrect and misguided in light of the clear rules that govern bankruptcy proceedings”.

“Accordingly, the court agreed that act of bankruptcy has not occurred at this stage,” he said.

Farhan added that the High Court then fixed May 24 for another case management for lawyers to update the court on the status of the various applications and affidavits, and that a hearing date would subsequently be fixed for the case.

The IRB as the creditor had started bankruptcy proceedings against Najib through a bankruptcy notice issued to him on February 4.

The process to have a debtor declared bankrupt typically involves the serving of the bankruptcy notice on the debtor, with failure by the debtor to respond or oppose within seven days automatically resulting in an act of bankruptcy occurring. In such a situation at the end of the seven days, the creditor can file a petition against the debtor.

The debtor can also seek to set aside the bankruptcy notice but the court could either grant or dismiss such a bid. If the debtor fails to set aside the bankruptcy notice, an act of bankruptcy would have occurred and the creditor can then file a petition against the debtor. 

The next process would be the court hearing of the creditor’s petition if the debtor fails to set aside the creditor’s petition, with the court able to either dismiss or allow or grant a stay on the creditor’s petition. The court will issue a bankruptcy order if it allows the creditor’s petition, which would result in the debtor being declared as bankrupt.

Malay Mail understands that Najib’s lawyers have filed an affidavit within the seven-day period to oppose the bankruptcy notice.

On June 25, 2019, the IRB via the government of Malaysia filed a lawsuit against Najib in the High Court in Kuala Lumpur, claiming a total of RM1,692,872,924.83 or RM1.69 billion in unpaid taxes from him for the years 2011 to 2017.

On July 22, 2020, High Court judge Datuk Ahmad Bache ruled in favour of the IRB, by granting a summary judgment to allow the IRB to collect the RM1.69 billion of tax arrears from Najib.

Najib was ordered to pay the RM1.69 billion along with an interest of five per cent per annum from the date of the court order until it was paid, and RM15,000 in costs.

The judge said that Najib’s challenge within the lawsuit against the tax assessment should be made to the Special Commissioners of Income Tax instead of the courts, as his challenge involves questions of facts.

Najib has since filed an appeal against the High Court decision where he was ordered to pay the RM1.69 billion sum, with his appeal scheduled to be heard at the Court of Appeal next month (June 16).

On June 11, the High Court is also set to hear Najib’s application for a stay against the court decision for him to pay the RM1.69 billion. Najib had asked for a stay of the High Court’s order while waiting for the appeal to be heard and decided by the Court of Appeal.

In April this year, the IRB had served Najib with the bankruptcy notice dated February 4.

The bankruptcy notice notified Najib that he was required to pay RM1,738,804,204.16 or almost RM1.74 billion to the IRB, which comprised of the RM1.69 billion sum he was ordered to pay and also RM45,916,279.33 or RM45.9 million in interest plus RM15,000 in costs.

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