MEGAFEST SDN BHD (DALAM LIKUIDASI) v CEMERLANG COKE INDUSTRIAL SDN BHD

j-02imncvc-775-05-2023 Court of Appeal (Mahkamah Rayuan) 26 February 2026 • J-02(IM)(NCvC)-775-05/2023 • 34 min read

12 cases cited (4 SG, 8 foreign)

Outcome

Accordingly, and for the reasons set out above, we are of the view that the learned High Court judge was wrong in allowing the Validation Application and we hereby allow the appeal in respect thereof and set aside the decision of the learned High Court Judge.

Quoted verbatim from the judgment of Court of Appeal (Mahkamah Rayuan) (j-02imncvc-775-05-2023). Read the full judgment on the official Malaysia Courts portal for the complete decision.

Catchwords

allegations of undue preference, premised on voluntary settlements said to have been made without valuable consideration and not in good faith - fraudulent preference - application for a validation order in respect of a payment rendered void as the payment was made after the presentation of the winding-up petition. - (i) the distinct statutory requirements governing undue preference as opposed to fraudulent preference; (ii) whether proof of a dominant intention to prefer remains a necessary element for fraudulent preference; (iii) the scope of the recognised exceptions where payments are made under genuine commercial pressure to avert the imminent collapse of the company; (iv) the scope of the directors’ duties and (iv) the circumstances in which the court may properly grant validation of payments otherwise void against the liquidator. - Companies Act 1965 (“CA 1965”) - Insolvency Act 1967 (“IA 1967”).

Practice Areas

Bankruptcy & Insolvency Company Law

Judges (3)

Ahmad Kamal bin Md. Shahid Coram Azhahari Kamal bin Ramli Coram Ong Chee Kwan Delivered

Counsel (7)

R. Jayabalan Firm Raj Shankar Firm Jayabalan a/l Raman Kutty Counsel Respondent Mohamed Shah Reza Counsel Respondent Raj Shankar a/l Rajahram Counsel Appellant Tan Legend Counsel Respondent Tina Francis Counsel Appellant

Parties (2)

CEMERLANG COKE INDUSTRIAL Sdn Bhd Respondent MEGAFEST Sdn Bhd (DALAM LIKUIDASI) Appellant

Case Significance

Addresses the validation of a payment made after presentation of a winding-up petition and otherwise void against the liquidator; the Court of Appeal allowed the appeal, situating the validation discretion within the wider insolvency policy of protecting the general body of creditors.

This Court of Appeal decision, delivered together with a group of related appeals arising out of the liquidation of Megafest Sdn Bhd (in liquidation), concerns the distinct appeal numbered J-02(IM)(NCvC)-775-05/2023, which was directed at an application for a validation order. Where the connected appeals attacked pre-liquidation transactions as voidable preferences, this appeal addressed the different statutory problem of a payment made after the presentation of the winding-up petition — a payment “rendered void as [it] was made after the presentation of the winding-up petition” unless the court validates it.

The liquidator of Megafest Sdn Bhd, acting for the company in liquidation, was the appellant. The central question on this branch of the litigation was “the circumstances in which the court may properly grant validation of payments otherwise void against the liquidator”. That inquiry required the court to weigh the statutory policy of preserving the insolvent estate for rateable distribution against the recognised exceptions that permit validation — in particular where payments are made under “genuine commercial pressure to avert the imminent collapse of the company”. The governing framework spanned the Companies Act 1965 (“CA 1965”) and the Insolvency Act 1967 (“IA 1967”), the statutes applicable to the relevant transactions.

The Court of Appeal disposed of this appeal in the appellant's favour. In its own words, “As regards Appeal 775, we allow the appeal with costs fixed at RM 20,000.00 here and below subject to payment of allocator.” The result is best read alongside the court's treatment of the sister appeals: while the substance of the various preference challenges produced mixed outcomes, the validation branch was resolved by allowing the appeal.

The judgment is significant for its structured articulation of Malaysian insolvency principles — separating the requirements for undue preference from those for fraudulent preference and mapping the exceptions to the avoidance and validation regimes — and for confirming that the court's validation discretion is exercised against the backdrop of protecting the general body of creditors.

Summary

Megafest Sdn Bhd (in liquidation) brought five related appeals involving allegations of undue preference, fraudulent preference, and a validation order for payments made after the winding-up petition. The key issues included the distinction between undue and fraudulent preference, whether a dominant intention to prefer was proven, and the scope of directors' duties. The Court of Appeal allowed Appeals 765, 761, and 764, dismissed Appeal 763 except for RM50,000 in post-petition payments, and allowed Appeal 775.

What did Appeal 775 concern?

It concerned an application for a validation order in respect of a payment made after the presentation of the winding-up petition — a payment otherwise void against the liquidator — raising the circumstances in which the court may properly validate such a payment.

How did the Court of Appeal dispose of Appeal 775?

The court allowed the appeal, recording that “As regards Appeal 775, we allow the appeal with costs fixed at RM 20,000.00 here and below subject to payment of allocator.”