31st July 2026

ISSUES

One of the recurring questions under the Construction Industry Payment and Adjudication Act 2012 (“CIPAA”) is whether an adjudication decision may be relied upon to present a winding-up petition against the unsuccessful party.

If the adjudication decision has not been registered under section 28 of CIPAA, can the debtor company nevertheless dispute the debt in the winding-up proceedings? Conversely, if the adjudication decision has been registered under section 28, does the debt become indisputable, or may it still be challenged and, if so, on what grounds?

These questions were revisited by the Court of Appeal in VKPT Sdn Bhd v LLC Infra Sdn Bhd (Civil Appeal No. W-02(NCC)(A)-171-02/2025), where the Court clarified the legal distinction between registered and unregistered adjudication decisions in the context of winding-up proceedings.

BRIEF FACTS

The brief facts of the case are as follows:-

(a)     The Respondent was engaged as the Appellant’s sub-subcontractor for the LRT3 Trackwork and Power Conductor Rail Installation Works.  Following disputes arising out of the performance of the subcontract and the Respondent’s subsequent termination of the subcontract, the Appellant commenced adjudication proceedings under CIPAA.

(b)     By an adjudication decision dated 11 January 2024, the adjudicator dismissed the Appellant’s payment claim in its entirety and awarded the Respondent RM98,300.00 as the costs of the adjudication proceedings (“Adjudication Costs”).

(c)     The Appellant did not apply to set aside the adjudication decision under section 15 of CIPAA, while the Respondent did not register the adjudication decision as a judgment of the High Court pursuant to section 28 of CIPAA.

(d)     Separately, the Appellant had earlier obtained a Judicial Management Order (“JMO”) through Kuala Lumpur High Court Originating Summons No. WA-28JM-7-03/2023 (“JM7”). Following the expiry of the JMO, the Respondent sought and obtained leave to intervene in the judicial management proceedings.

(e)     The High Court subsequently awarded the Respondent costs of RM2,080.00 in the JM7 proceedings (“JM7 Costs”). Together with the Adjudication Costs, the Respondent’s claim totalled RM100,380.00

(f)      On 9 August 2024, the Respondent served a statutory demand on the Appellant claiming RM100,380.00, comprising the Adjudication Costs and the JM7 Costs.

(g)     Following the Appellant’s failure to satisfy the statutory demand within the prescribed 21-day period, the Respondent presented a winding-up petition bearing reference WA-28NCC-878-09/2024 against the Appellant on 23 September 2024 (“Petition”).

(h)     The Appellant opposed the Petition. Whilst acknowledging both the Adjudication Costs and the JM7 Costs, the Appellant maintained that the underlying construction disputes remained to be finally determined by the Court and that the debt was therefore disputable

(i)      Pending the Petition, the Appellant requested the Respondent’s bank account details to settle the JM7 Costs. When no response was forthcoming, the Appellant deposited RM50,000.00 into its solicitors’ client account towards the disputed debt.

(j)      On 12 November 2024, the Appellant commenced Suit No. WA-22C-81-11/2024 (“Suit 81”) seeking a final determination of the parties’ underlying construction disputes

(k)     On 26 November 2024, the Appellant filed an application under section 16 of CIPAA to stay the adjudication decision (“Section 16 Application”). It also applied to stay the winding-up proceedings pending the disposal of the Section 16 Application (“WU Stay”). For completeness, the Section 16 Application was subsequently withdrawn before the appeal was heard.

(l)      On 21 January 2025, the High Court dismissed the WU Stay and allowed the winding-up petition, making a winding-up order against the Appellant (“WU Order”). The Appellant appealed against the WU Order to the Court of Appeal.

ISSUES BEFORE THE COURT OF APPEAL

The Court of Appeal recognised that the appeal lay at the intersection of two competing statutory regimes. On the one hand, CIPAA embodies the “pay now, argue later” philosophy by conferring temporary finality on adjudication decisions. On the other hand, the Companies Act 2016 recognises that winding-up proceedings are not intended to operate as a debt collection mechanism where the debt is genuinely disputed.

“1.     This appeal returns to a fault-line that has divided the Construction Court and the Winding Up Court, and on occasion, this Court itself: the uneasy meeting point between the “pay now, argue later” philosophy of statutory adjudication under the Construction Industry Payment and Adjudication Act 2012 (“CIPAA”) and the equally entrenched principle that winding up is not to be deployed as a debt-collection mechanism under the Companies Act 2016 (“CA 2016”).”

Against that backdrop, the Court identified two principal questions for determination. First, whether the temporary finality conferred by Section 13 of CIPAA renders an adjudicated debt indisputable for the purposes of a winding-up petition, or whether such transformation occurs only upon registration of the adjudication decision under Section 28 of CIPAA.

Secondly, once the status of the adjudicated debt has been established, on what grounds may a respondent company nevertheless resist the winding-up petition, whether by demonstrating a genuine dispute on substantial grounds or by relying on a bona fide cross-claim or set-off.

“4.     When an unpaid party armed with a CIPAA adjudication decision presents a winding up petition against the paying party, these two regimes collide. The question that lies at the heart of this appeal — and which has generated a body of conflicting first-instance authority — is this: does the temporary finality conferred by section 13 of CIPAA translate into the kind of indisputability that forecloses a debtor company’s right to raise a genuine dispute on substantial grounds under section 466 of the CA 2016? And if the adjudicated sum is to be treated as indisputable for winding up purposes, by what process and at what point does that transformation occur — is it upon the delivery of the adjudication decision, section 28 registration, a curial intervention, or something else?

5.          A second, equally consequential question arises: can the respondent company nonetheless resist the petition by asserting that it has a genuine dispute based on substantial grounds and or a cross-claim or set-off equal to or exceeding the adjudicated debt. What is needed to satisfy the genuine disputes based on substantial grounds test?”

REGISTRATION UNDER SECTION 28 IS NOT REQUIRED BEFORE PRESENTING A WINDING-UP PETITION

The Court of Appeal began by clarifying what it considered to be a common misunderstanding arising from its earlier decision in Likas Bay Precinct Sdn Bhd v Bina Puri Sdn Bhd [2019] 3 MLJ 244 (“Likas Bay”). The Court observed that Likas Bay has often been interpreted as meaning that an adjudication decision, once made, is automatically indisputable for winding-up purposes.

The Court of Appeal considered this to be “an overstatement of the ratio decidendi” of Likas Bay, explaining that the earlier decision decided only that registration under Section 28 of CIPAA is not a procedural precondition to the presentation of a winding-up petition. Whether the absence of registration affects the debtor’s ability to dispute the debt in the winding-up proceedings is a separate question altogether.

“29.   Likas Bay has been interpreted by many to mean that an adjudication decision once made is indisputable. This, we hold, is an overstatement of the ratio decidendi of the judgment. We consider that decision requires clarification. While we do not depart from the proposition that registration under s. 28 is not a procedural precondition to commencing winding-up proceedings, we hold that registration under s. 28 has critical substantive consequences for the question of whether the debt may be disputed in those proceedings. The two questions, namely, whether registration is required to present a petition, and whether the absence of registration affects the disputability of the debt, are distinct, and Likas Bay addressed only the former.”

Having drawn that distinction, the Court of Appeal held that where an adjudication decision has not been registered under Section 28 of CIPAA, the adjudicated debt remains susceptible to challenge. Although the adjudication decision is persuasive evidence that the debt is due, it does not possess the conclusive status of a judgment debt. Accordingly, the debtor company remains entitled to resist a winding-up petition by demonstrating that the debt is genuinely disputed on substantial grounds.

“32.   Where, however, the adjudication decision has not been registered under s. 28, the debt retains its character as an adjudicated, but not judicially determined (albeit statutorily created), debt. It has persuasive weight as evidence that the sum is owed, but it does not carry the conclusive force of a judgment. In these circumstances, we hold that the debtor company is entitled to challenge the winding-up petition by demonstrating that the debt is disputed on genuine and substantial grounds.”

Having clarified the scope of its earlier decision in Likas Bay, the Court of Appeal ultimately reaffirmed that registration under Section 28 of CIPAA is not a procedural precondition to the presentation of a winding-up petition.

“36.   We therefore hold, on the first issue, that:

 (a)     Registration under s. 28 of CIPAA is not a procedural precondition to the presentation of a winding-up petition, in accordance with Likas Bay.”

AN UNREGISTERED ADJUDICATION DECISION DOES NOT AUTOMATICALLY BECOME AN UNDIPUSTABLE DEBT

Having clarified that registration under section 28 of CIPAA is not a procedural precondition to presenting a winding-up petition, the Court turned to the consequences of an unregistered adjudication decision. It held that an unregistered adjudication decision does not automatically render the underlying debt indisputable for the purposes of winding-up proceedings.

Instead, the debtor company remains entitled to resist the winding-up petition by demonstrating that the debt is genuinely disputed on substantial grounds. In particular, the commencement of proceedings for a final determination of the underlying dispute, or the filing of a substantive application under section 15 of CIPAA to set aside the adjudication decision, may constitute evidence of such a genuine dispute.

The Court further clarified that its earlier decision in Bludream City Development Sdn Bhd v Pembinaan Bina Bumi Sdn Bhd [2024] 4 MLJ 67 (“Bludream”) was confined to its facts, which involved an adjudication decision that had been registered and enforced as a court order under Section 28 of CIPAA. Accordingly, Bludream has no application to unregistered adjudication decisions.

“79.   Fourth, a winding-up petition on an unregistered adjudication decision may be challenged on genuine disputes based on substantial grounds. Since an unregistered adjudication decision is a disputable debt, a winding-up petition premised upon it may be resisted by demonstrating that the debt is genuinely disputed on substantial grounds [See: Sian; V Medical Services]. The filing of proceedings for final determination, or the making of a substantive set-aside application under s. 15, may constitute such a genuine disputes on substantial dispute. The decision in Bludream, which held that the debt was indisputable, is confined to its facts, which involved an adjudication decision that had been registered and enforced as a court order under s. 28. Bludream has no application to an unregistered adjudication decision.”

REGISTRATION UNDER SECTION 28 IS THE LEGAL WATERSHED

The Court of Appeal then explained the legal significance of registration under Section 28 of CIPAA. The Court of Appeal held that once an adjudication decision is registered as a judgment of the High Court, it assumes the status of a judgment debt and becomes indisputable for enforcement purposes.

Accordingly, the debtor company may no longer re-open the underlying construction dispute to resist the winding-up petition. Instead, the only remaining avenue of challenge is to demonstrate a bona fide cross-claim or set-off, founded on substantial grounds, that equals or exceeds the judgment debt.

“46.   We record, for completeness, the position when an adjudication decision has been registered as a judgment under s. 28. In that event, the debt takes on the conclusive character of a court judgment and the debtor company cannot simply re-open the underlying dispute to resist the winding-up petition. The avenue of challenge that remains available is the demonstration of a cross-claim or set-off that is bona fide, on substantial grounds, and that equals or exceeds the judgment debt: see Maju Holdings Sdn Bhd v Spring Energy Sdn Bhd [2021] MLJU 374 (“Maju Holdings”); Bludream [2024] 4 MLJ 67.”

 The Court concluded by identifying Section 28 registration as the critical point at which the legal character of the adjudicated debt changes. It described Section 28 registration as “the legal watershed” between a disputable adjudicated debt and an indisputable judgment debt.

 “80.   Fifth, registration under s. 28 confers indisputability. Once registered under s. 28 as if it were a judgment, the adjudication decision acquires the status of a judgment debt. A judgment debt is indisputable for enforcement purposes. The statutory “as if” formulation treats the adjudicated debt as a court judgment, thereby conferring upon it the indisputability that attaches to all court judgments. The s. 28 registration is the legal watershed between a disputable adjudicated debt and an indisputable judgment debt.”

KEY TAKE AWAY

Following the Court of Appeal’s decision, it is important to note that:-

(a)        Registration under Section 28 is not a procedural precondition to presenting a winding-up petition. An adjudication decision may support a winding-up petition without first being registered as a judgment of the High Court. However, whether the absence of registration affects the disputability of the debt is a separate question altogether.

(b)        An unregistered adjudication decision does not automatically become an indisputable debt. Where an adjudication decision has not been registered under section 28 of CIPAA, the adjudicated debt remains susceptible to challenge. The debtor company may therefore resist a winding-up petition by demonstrating that the debt is genuinely disputed on substantial grounds.

(c)        Registration under section 28 is the legal watershed. Once an adjudication decision has been registered under section 28 of CIPAA, the debtor company may no longer re-open the underlying construction dispute to resist a winding-up petition. Instead, the remaining avenue of challenge is to establish a bona fide cross-claim or set-off, founded on substantial grounds, that equals or exceeds the judgment debt.

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