MEGAFEST SDN BHD (DALAM LIKUIDASI) v 1. ) CEMERLANG COKE INDUSTRIAL SDN BHD 2. ) SIVANANTHAM A/L MUTHU KARPAN 3. ) LIM KWEE GEE

j-02ncvcw-763-05-2023 Court of Appeal (Mahkamah Rayuan) 26 February 2026 • J-02(NCvC)(W)-763-05/2023 • 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-02ncvcw-763-05-2023). 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 (6)

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

Parties (4)

CEMERLANG COKE INDUSTRIAL Sdn Bhd Respondent MEGAFEST Sdn Bhd (DALAM LIKUIDASI) Appellant Lim Kwee Gee Respondent Sivanantham a/l Muthu Karpan Respondent

Case Significance

The fraudulent-preference branch of the Megafest cluster: focusing on a dominant intention to prefer and the commercial-pressure defence, the Court of Appeal dismissed the appeal save for an identified RM50,000 post-petition payment, producing a different outcome from the undue-preference appeals in the same judgment.

This Court of Appeal decision belongs to the group of related appeals arising from the liquidation of Megafest Sdn Bhd (in liquidation) and concerns Civil Appeal No. J-02(NCvC)(W)-763-05/2023. It is distinguished from the other appeals in the cluster both by its respondents — which included the corporate respondent Cemerlang Coke Industrial Sdn Bhd — and by the impugned transactions, which the liquidator challenged as “fraudulent preference, involving payments within 6 months prior to the presentation of the petition”. Individual respondents are referred to here by their procedural role only.

The court set out to give “a clear articulation of the applicable principles” distinguishing undue preference from fraudulent preference under the Companies Act 1965 (“CA 1965”) and the Insolvency Act 1967 (“IA 1967”). The issues included “whether proof of a dominant intention to prefer remains a necessary element for fraudulent preference” and “the scope of the recognised exceptions where payments are made under genuine commercial pressure to avert the imminent collapse of the company”. This appeal is notable because it was the one branch of the litigation the Court of Appeal did not allow outright.

The court's disposition was that “in respect of Appeal 763, we dismiss the same save and except for the sum of RM50,000.00 being the payment made post the winding up petition with interest at 5% p.a from 19.4.2023 to full realisation with costs fixed at RM 30,000.00 here and below subject to payment of allocator.” The appeal was therefore substantially dismissed, with a carve-out limited to the identified post-petition payment.

The decision is significant for showing how the fraudulent-preference analysis — with its focus on a dominant intention to prefer and the availability of a genuine commercial-pressure defence — can lead to a different result from the undue-preference appeals decided in the same judgment, and for isolating a post-petition payment that fell to be dealt with separately from the preference challenge.

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.

How did Appeal 763 differ from the other Megafest appeals?

It was framed around fraudulent preference — payments within six months before the petition — and its respondents included the corporate respondent Cemerlang Coke Industrial Sdn Bhd. It was the branch of the litigation the court did not allow outright.

What was the disposition of Appeal 763?

The court dismissed Appeal 763 save and except for the sum of RM50,000 (the payment made after the winding-up petition), with interest at 5% per annum from 19 April 2023 and costs fixed at RM30,000.