2026 MarsdenLR 1788

HIGH COURT MALAYA JOHOR BAHRU
BUDIMAN LUTFI MOHAMED, JC
PRAKASH MANIAM (SOLE PROPRIETOR OF U OCEAN TANK) – Appellant
Versus
XH UNIVERSAL FORWARDING SDN BHD – Respondent
[Companies (Winding-Up) No: JA-28NCC-227-12/2025]

A winding-up petition will be dismissed where the alleged debt is bona fide disputed on substantial grounds, and the debtor has rebutted the statutory presumption of insolvency by paying the undisputed portion and preserving the disputed sum.

Headnote:

(A) Companies Act 2016 (Act 777) - Sections 465(1)(e) and 466(1)(a) - Winding up - Inability to pay debts - Bona fide dispute - Statutory threshold - Abuse of process - Held: Petition dismissed as debt was bona fide disputed on substantial grounds, statutory presumption of insolvency was rebutted, and remaining disputed sum fell below the prescribed threshold.

(B) Winding-up proceedings - Bona fide dispute - The governing threshold is not satisfied by a bare denial; the debtor company must produce evidence showing the dispute is honestly maintained and rests on substantial grounds (paras 28-33). The winding-up court must conduct a “sieving” exercise to see if the asserted defence has weight and raises a serious issue, without finally adjudicating the dispute (paras 29, 33).

(C) Winding-up proceedings - Statutory notice - The failure to comply with a valid statutory notice gives rise to a rebuttable presumption of inability to pay (paras 26-27). The notice is not, by itself, proof that the amount demanded is a debt due and owing (para 27).

(D) Winding-up proceedings - Commercial solvency - The statutory presumption of insolvency can be rebutted by evidence of payment of the undisputed portion and preservation of the disputed sum (paras 61-63). Evidence of bank balances and ongoing business activities may also be considered (para 63). (E) Winding-up proceedings - Abuse of process - Presenting a winding-up petition merely to enforce payment of a disputed debt constitutes an abuse of process. This does not necessarily import bad faith but reflects the unsuitability of using the collective insolvency jurisdiction to decide a bilateral contractual dispute (paras 75-76).

Facts of the case:
The petitioner sought to wind up the respondent based on an alleged debt of RM322,530.00 for the rental of ISO tanks and tank-cleaning services. The respondent did not deny the services but disputed the contractual rate for tank-cleaning services. The respondent accepted liability for RM276,720.00 (comprising undisputed tank rental and cleaning charges at RM460.00 per tank) and paid this amount through an associated company. The remaining disputed sum of RM45,810.00 was placed with its solicitors as stakeholder. The petitioner claimed a higher cleaning rate, relying on a backdated rental agreement and invoices. The respondent declined to sign the agreement and sought a reduction in the cleaning charges.

Findings of Court:
The court found a genuine and substantial dispute over the applicable cleaning rate. The dispute was not a bare denial; the respondent identified the agreed rate, the quotation relied upon, and the precise difference. The documentary chronology raised genuine questions about when higher rates were communicated and agreed. The respondent’s refusal to sign the backdated agreement, its request for a reduction, and subsequent negotiations supported its position. The payment of the undisputed portion did not amount to an admission of the disputed balance. The respondent sufficiently rebutted the statutory presumption of insolvency by paying the undisputed sum and preserving the disputed amount. The remaining unpaid balance of RM45,810.00 was below the statutory threshold and was itself disputed. The court held that the underlying contractual issues should be determined through ordinary civil proceedings, not winding-up proceedings.

Issues: The main issues were (a) whether the petitioner established a debt presently due and owing; (b) whether the disputed sum was bona fide disputed on substantial grounds; (c) whether the respondent had rebutted the statutory presumption of insolvency; (d) the effect of the payment and stakeholder arrangement; (e) the effect of the remaining disputed sum falling below RM50,000.00; and (f) whether the petition should be allowed or dismissed in the court's discretion.

Ratio Decidendi: The court ruled that a winding-up petition will be dismissed where the alleged debt is bona fide disputed on substantial grounds, such that the petitioner does not stand in the position of a creditor entitled to present the petition. A genuine contractual dispute over the rate charged for services, supported by contemporaneous documents and conduct, cannot be determined through conflicting affidavits in winding-up proceedings. The payment of the undisputed portion and preservation of the disputed sum rebuts the statutory presumption of insolvency. The court's task is to examine whether the dispute is genuine and substantial, not to finally adjudicate the contractual claim.

Result: Petition dismissed. The dismissal was without prejudice to the petitioner's right to pursue the disputed sum by ordinary civil proceedings. The respondent shall retain the disputed sum placed with its solicitors as stakeholder. Costs of RM5,000.00 to the respondent.