INTRODUCTION
The Court of Appeal in VKPT Sdn Bhd v LLC Infra Sdn Bhd [2026] 6 MLRA 22; [2026] MLJU 2847 held that registration under Section 28 of the Construction Industry Payment and Adjudication Act 2012 (“CIPAA”) is the “legal watershed” between a disputable adjudicated debt and an indisputable judgment debt.
A creditor may present a winding-up petition based on the unregistered adjudication decision, but the debtor company may resist that petition by showing that the debt is genuinely disputed on substantial grounds.
BACKGROUND FACTS
VKPT Sdn Bhd (“VKPT”) engaged LLC Infra Sdn Bhd (“LLC Infra”) as its sub-subcontractor for trackwork and power conductor rail installation works under the LRT3 project by a Letter of Award dated 26.7.2021.
LLC Infra terminated the sub-subcontract on 20.9.2022. VKPT disputed the termination and commenced adjudication under CIPAA by a payment claim dated 19.4.2023.
On 11.1.2024, the adjudicator dismissed VKPT’s claims in their entirety and awarded LLC Infra RM98,300.00 in adjudication costs. VKPT did not apply to set aside the decision under Section 15 of CIPAA and did not pay the costs.
On 20.5.2024, LLC Infra also obtained a separate costs order in VKPT’s judicial management proceedings for RM2,000.00 plus RM80.00 in allocatur fees. Its total demand was therefore RM100,380.00.
LLC Infra did not register the adjudication decision under Section 28 of CIPAA.
On 9.8.2024, LLC Infra issued a statutory demand under Section 466(1)(a) of the Companies Act 2016 (“CA 2016”).
VKPT failed to satisfy the demand within 21 days. On 23.9.2024, LLC Infra presented its winding-up petition.
On 12.11.2024, VKPT filed High Court Suit No. WA-22C-81-11/2024 (“Suit 81”) for final determination of the underlying construction disputes.
On 26.11.2024, VKPT also applied for a stay of the adjudication decision under Section 16 of CIPAA. It also sought to stay the winding-up petition pending that application.
The Section 16 application was later withdrawn before the appeal was heard.
On 21.1.2025, the High Court refused to stay the petition and ordered VKPT to be wound up.
VKPT appealed to the Court of Appeal.
ISSUES BEFORE THE COURT OF APPEAL
The Court considered the following issues:
- 1. whether an unregistered adjudication decision constituted an indisputable debt for winding-up purposes;
- 2. whether the adjudication costs formed part of that decision;
- 3. whether VKPT had established a genuine dispute on substantial grounds; and
- 4. the effect of the Section 16 application and LLC Infra’s contention that Suit 81 had been filed merely to stifle the petition.
FINDINGS OF THE COURT OF APPEAL
Registration Not a Precondition to Presenting a Petition
The Court maintained the position in Likas Bay Precinct Sdn Bhd v Bina Puri Sdn Bhd [2019] 3 MLJ 244 that a creditor need not register an adjudication decision under Section 28 before presenting a winding-up petition.
However, Likas Bay did not decide that every adjudication decision becomes indisputable upon delivery.
Whether a creditor may present a petition and whether the company may dispute the petition debt are separate questions.
Before registration, the debt remains adjudicated but not judicially determined. It carries “persuasive weight” as evidence of indebtedness, but not “the conclusive force of a judgment”. The absence of a formal challenge does not give it judgment status.
Cross-Claim or Set-Off After Registration
Registration under Section 28 gives the adjudicated debt judgment status. Subject to any appeal or stay, while that judgment subsists, the company cannot reopen the underlying dispute in winding-up proceedings.
A competing cross-claim or set-off must be bona fide, supported by substantial grounds and equal to or exceed the judgment sum.
Registration does not remove temporary finality. Under Section 13, the decision ceases to bind if it is set aside under Section 15, if its subject matter is settled in writing, or if the dispute is finally determined in court or arbitration.
Registration gives it judgment status for enforcement, but it does not finally determine the underlying dispute.
Genuine Dispute on Substantial Grounds
For an unregistered decision, the debt must be genuinely disputed on substantial grounds. The Court held that mere non-admission or an arbitration clause is insufficient.
CIPAA’s “pay now, argue later” policy does not permit insubstantial challenges to delay enforcement. It does not give an unregistered decision judgment status.
The Court held that, in the ordinary case involving an unregistered decision, commencing proceedings for final determination of the underlying dispute will ordinarily suffice to establish a genuine and substantial challenge.
The proceedings must be genuine. Relevant factors include timing, earlier steps towards litigation or arbitration, repetition of rejected claims without a new basis or evidence, and the intention to pursue them to a conclusion.
Suit 81 concerned the disputes dismissed by the adjudicator. LLC Infra failed to establish bad faith.
The fact that VKPT filed the suit shortly before the petition hearing was insufficient, particularly as VKPT had already stated its intention to pursue the dispute in its affidavit opposing the petition.
The Court found a prima facie genuine and substantial dispute over the adjudication costs.
Costs Following a Decision on the Merits Form Part of That Decision
LLC Infra argued that Suit 81 would determine the construction claims, leaving the adjudication costs unaffected. The Court disagreed.
Costs following determination of the merits form part of the adjudication decision and are subject to CIPAA’s provisions on temporary finality, setting aside, stay and enforcement.
Final determination extinguishes the whole adjudication decision under Section 13(c), including its costs, without a separate order reversing them. Filing Suit 81 did not itself have that effect, but it supported the dispute over the unregistered debt.
Final determination replaces the adjudication decision. If it confirms the sum, the parties’ substantive positions remain unchanged. If it reverses or reduces the sum, any overpayment may be recovered by counterclaim, restitution or set-off.
A winding-up order does not fall automatically if final determination reverses the adjudicated liability.
The company or liquidator must apply for a stay, termination or annulment. The Court referred to Sections 492 and 493 of the CA 2016 and its inherent jurisdiction.
The Court also held that a pending Section 16 application does not, by itself, change the debt’s character for winding-up purposes. That issue became moot when VKPT withdrew its application.
An actual stay would suspend the decision’s binding force as an enforcement instrument, without itself establishing a genuine dispute over the debt.
The Court allowed VKPT’s appeal, set aside the High Court’s orders and awarded RM30,000.00 in costs, subject to allocatur.
CONCLUSION AND KEY TAKEAWAYS
A creditor considering winding-up should first establish whether its adjudication decision has been registered under Section 28.
Registration is not required to present the petition, but it narrows the company’s ability to contest liability in those proceedings.
A company facing a petition based on an unregistered adjudication decision should identify the substantial grounds of dispute and genuinely pursue final determination.
Once the adjudication decision is registered, repeating the underlying defence will not suffice, and any cross-claim or set-off must meet the required threshold and be supported by evidence.
Disclaimer: This article is for general information only and does not constitute legal advice or legal opinion. It should not be relied upon as a substitute for specific legal advice. No person should act (or refrain from acting) based on this article without obtaining advice on the specific facts and circumstances. Halim Hong & Quek does not accept responsibility or liability for any loss or damage arising from reliance on this article. Halim Hong & Quek reserves the right to update, amend or withdraw this article at any time. All rights reserved.
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About the authors
Chew Jin Heng
Principal Associate
Dispute Resolution
Halim Hong & Quek
jhchew@hhq.com.my
