Malay Reserve Land: Can It Be Charged To A Non-Malay?

In West Malaysia, a Malay reserve land CANNOT be charged to a Non-Malay individual/ corporate entity. The only exception is Kedah. This exception was discussed in the recent Federal Court case of Affin Bank Bhd v Jamaludin Jaafar; The Association of Banks in Malaysia & Anor (Interveners).

Brief facts of the case

Teh Two Kea applied for a banking facility/loan (and was granted) from Affin Bank. In return for the loan, a charge was created over a Malay reserve land in Kedah that belongs Jamaludin bin Jaafar (“the land”).

Lo and behold, Teh did not pay the loan. Left with no other alternative, Affin Bank filed a legal action against both Teh and Jamaludin in court to recover the loan. At the end of the hearing, a judgment in default was granted against Jamaludin- he was ordered by the court to pay almost a million ringgit with interest rate to Affin Bank. Affin Bank also filed a bankruptcy notice and subsequently a creditor’s petition against Jamaludin.

The petition was opposed by Jamaludin. He applied to set aside the default judgment and an application to stay the hearing of the creditor’s petition pending the disposal of the setting aside application. 

In his application to set aside the default judgment, Jamaludin contended that:

1. The land is Malay Reservation Land; and
2. The land can only be charged to a Malay, as stated in section 6 of the Kedah Malay Reservations Enactment No. 63.

The court’s decision

The High Court found in favor of Affin Bank and dismissed both the application filed by Jamaludin. Upon appeal, the Court of Appeal found otherwise. When it went to the Federal Court, the Federal Court disagreed with the decision of the Court of Appeal and restored the decision that was meted out by the High Court.  

The court’s findings

The Federal Court pointed both parties to section 6(1) of the Enactment, which says:

“6.(1) Save as hereinafter provided in this Enactment, where any Reservation land is held under a document of title by a Malay, no right or interest therein shall vest, whether by transfer, sale in execution of a decree, sale at the instance of a chargee or otherwise, in any person who is not a Malay…”

Based on section 6(1) of the Enactment, the court held that the words “no right or interest therein shall vest” are governed by  the words “whether by transfer, sale in execution of a decree, sale at the instance of a chargee or otherwise.” 

The court also brought both parties attention to Schedule A of the Enactment, which states that:

“All documents of title except Permits, Banchi Sewa, and Surat Akaun may be charged to anyone; but if the chargor does not pay the money due the land if owned by a Malay may be sold only to a Malay, and if owned by Siamese may be sold only to a Malay or a Siamese.”

This means that, as the court puts it, the land can still be charged to a Non-Malay, provided that the rights of the land is not transferred to a Non-Malay. 

What about other States?

As mentioned above, a Malay reserve land  (other than Kedah) cannot be charged to a Non-Malay. In fact, each state (other than Kelantan) has its Enactment which expressly prohibits the charging of Malay reservation land to a non-Malay. They are:

1. Section 8 of the Malay Reservations Enactment, which applies to the States of Negeri Sembilan, Pahang, Perak, Selangor and the Federal Territory of Kuala Lumpur;
2. Section 9 of the Johor Malay Reservations Enactment;
3. Section 5A of the Perlis Malay Reservations Enactment;
4. Section 9 of the Terengganu Malay Reservations Enactment; and
5. Section 108 of the National Land Code (Penang and Malacca) Titles Act.

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