1. Application for stay of bankruptcy proceedings pending setting aside of winding-up order against principal debtor. (Para 1 , 2 , 3 , 4 )
Back
Next 
2026 MarsdenLR 1731
HIGH COURT MALAYA JOHOR BAHRU
NORADURA HAMZAH, JC
IN THE MATTER OF: LING SING HOCK – Appellant
Versus
UNIPATI CONCRETE SDN BHD – Respondent
[Bankruptcy No: JA-29NCC-934-08/2025]
Petitioner Advocates:Jeyshini Naidu G Kali Das ,Respondent Advocate: Thirunaaukarasu Thoppasamy
The test for a stay of bankruptcy proceedings under Section 97 of the Insolvency Act 1967 is 'sufficient reason', not 'special circumstances', but an applicant must show expeditious disposal of the collateral proceedings, not just its mere existence.
Headnote:(A) Insolvency Act, 1967 [Act 360] - Section 97 - Stay of bankruptcy proceedings - Test of 'sufficient reason' distinguished from 'special circumstances' - Burden is lighter for stay of bankruptcy proceedings than stay of execution. (Paras 5-6, 8)
(B) Companies Act, 2016 [Act 777] - Section 410 - Judicial management - Effect on winding-up proceedings during period between application for judicial management order and its disposal - Prohibition on steps to enforce charges or commence other proceedings without leave - Question of substance to be determined by court seised of setting aside application. (Paras 12-14)
(C) Insolvency Rules, 2017 - Rules 17, 18, 19 - Rules of Court 2012 - Order 92 Rule 4 - Inherent jurisdiction of Court - Stay of bankruptcy proceedings pending disposal of setting aside application of winding-up order. (Paras 1, 4)
(D) Stay of bankruptcy proceedings - Pending collateral application - Requirement of expeditious disposal - Applicant must provide evidence of likely hearing or determination date - Stay of indefinite duration not justified by merely showing a bona fide collateral challenge. (Paras 10, 25-28) (E) Stay of bankruptcy proceedings - Balancing of interests - Judgment creditor's right to enforce judgment vs. judgment debtor's risk of losing capacity to prosecute collateral application - Decisive factor is applicant in control of collateral proceedings and delay is of applicant's own making. (Paras 35-38)
Facts of the case:
The judgment debtor (JD), a director of the principal debtor, guaranteed sums payable to the judgment creditor (JC) for supply of ready-mixed concrete. Judgment was entered against the principal debtor and guarantors in October 2023. A winding-up order was made against the principal debtor on 22 May 2025, after a winding-up petition was presented on 14 January 2025. However, a judicial management application had been filed on 10 June 2024, and a judicial management order was ultimately granted on 12 June 2025. The JD filed a setting aside application of the winding-up order on 12 January 2026. After the JC obtained leave to commence bankruptcy proceedings on 6 March 2026, the JD applied for a stay of the bankruptcy proceedings pending the disposal of the setting aside application.
Findings of Court:
The Court found that the setting aside application raises a serious question of law under Section 410 of the Companies Act 2016 and is brought bona fide. However, the JD failed to establish sufficient reason for the stay because there was no evidence of when the setting aside application would be determined, and the stay sought was of indefinite duration. The ad interim stay of the winding-up order granted on 3 August 2026 did not alter this analysis as it contained no finding on the validity of the winding-up order. The balance of justice favoured the JC as the suspension sought was of unknown duration, and the prejudice to the judgment creditor who held an unchallenged judgment since October 2023 was decisive.
Issues: The main issues were the correct test under Section 97 of the Insolvency Act 1967 for granting a stay of bankruptcy proceedings and whether the JD had established sufficient reason for such a stay pending the disposal of the setting aside application. The court also considered the effect of the judicial management order on the winding-up proceedings and the significance of the delay in the collateral proceedings.
Ratio Decidendi: The court ruled that the test for a stay under Section 97 is 'sufficient reason', which is set at a lower threshold than 'special circumstances'. However, a constituent element of sufficient reason is that the collateral application is capable of expeditious disposal and the hearing is fixed or determinable. An applicant seeking a stay of indefinite duration on account of an undetermined collateral challenge has not discharged the burden of showing sufficient reason. The court further held that where the applicant for the stay is also the moving party in the collateral proceedings, the risk of loss of capacity to prosecute that application due to bankruptcy is outweighed by the applicant's own control over and failure to prosecute that application with despatch. Result : Prayers (c) and (d) having been abandoned or requiring no determination, prayer (b) is dismissed with costs of RM9,000.00 to be paid by the judgment debtor to the judgment creditor, subject to allocatur. (Para 40)
Legal Category Hierarchy
Table of Contents
2. Dispute over applicable test for stay and whether setting aside application is bona fide and expeditious. (Para 7 , 8 , 9 , 12 , 25 , 31 , 33 )
3. Stay application dismissed with costs to judgment creditor. (Para 40 )
4. What is the applicable test for a stay of bankruptcy proceedings under section 97 of the Insolvency Act 1967?
The test is 'sufficient reason', a lower burden than 'special circumstances', as held in Chen Ying v. Export-Import Bank of Malaysia Berhad and Re Rosli Abdul Kadir. (Para 5 , 6 , 7 , 10 , 11 , 35 , 37 , 38 )
5. What factors are considered in assessing whether a collateral challenge is bona fide and on merit for a stay?
The court considers whether the challenge raises a serious question of law, is brought in good faith, is not frivolous, and whether it has a real chance of success. (Para 12 , 13 , 14 , 15 , 16 , 17 )
6. What is the requirement regarding the duration and progress of the collateral proceedings for a stay?
The court must be able to form a view of the period of suspension; expeditious disposal is a constituent element of sufficient reason, and indefinite stays are not granted. (Para 25 , 26 , 27 , 28 , 29 , 30 , 36 )
7. How does the identity of the moving party in the collateral challenge affect the nugatory limb analysis?
If the judgment debtor is the moving party as contributory, adjudication may stultify the challenge, engaging the nugatory limb; if the principal debtor is the moving party, the limb does not arise. (Para 18 , 19 , 20 , 21 , 22 , 23 , 24 )
8. What role does delay play in an application for stay under section 97?
Delay is a factor in the discretion but not determinative; the court considers whether the applicant has come promptly and whether there is satisfactory explanation for any delay. (Para 31 , 32 , 33 , 34 )
JUDGMENT
[Summons In Chambers Dated 14 July 2026 — Stay Of The Bankruptcy Proceedings]
Introduction
[1] This is the judgment debtor's application by Summons in Chambers dated 14 July 2026, brought under ss 10, 11 and/or 97 of the Insolvency Act 1967 [Act 360], rr 17, 18 and/or 19 of the Insolvency Rules 2017, O 92 r 4 of the Rules of Court 2012 ("ROC 2012") and the inherent jurisdiction of this Court. The substantive relief sought, at prayer (b), is a stay of the whole of the bankruptcy proceedings pending the hearing and full disposal of a notice of motion dated 12 January 2026 filed in the High Court at Kuala Lumpur, Post Winding Up No: WA-28PW-45-01/2026, to set aside a winding-up order dated 22 May 2025 made against the principal debtor in Companies (Winding-Up) No: WA-28NCC-66-01/2025 and any appeal therefrom ("the setting aside application").
[2] In the written submission, learned counsel for the judgment debtor informed the Court that prayer (c), an alternative stay pending his appeal against the decision of the learned Senior Assistant Registrar, had become academic, that appeal having been dismissed by this Court on 17 July 2026. Prayer (d) sought an interim stay only until the disposal of this application and therefore requires no determination. The application proceeded on prayer (b) alone.
Background
[3] The judgment creditor ("JC") supplied ready-mixed concrete to Suasana Utama Sdn Bhd ("principal debtor"). By a Guarantee and Indemnity dated 26 October 2022 the judgment debtor ("JD"), who is a director of the principal debtor, guaranteed the sums payable. On 27 October 2023 the Sessions Court at Petaling Jaya entered judgment against the principal debtor, the JD and three other guarantors for RM505,638.00, a late payment charge at 1.5% per month and costs. As at 29 August 2025 the JC put the indebtedness at RM736,002.76.
[4] The material chronology is as follows:
(a) 10 June 2024:
the principal debtor applied for a judicial management order in Originating Summons No: WA-28JM-19-06/2024 ("the jm application"), amended on 25 November 2024;
(b) 9 December 2024:
on the JC's own winding-up petition in Companies (Winding-Up) No: BA-28NCC-223-04/2024 at Shah Alam, a winding-up order was made against the principal debtor;
(c) 10 December 2024:
the JD, as contributory, moved to set aside that order in Post Winding-Up No: BA-28PW-378-12/2024, relying upon ss 492(1), 410 and 410(c) of the Companies Act 2016, and also upon his own non-attendance on 9 December 2024, for which he apologised;
(d) 10 January 2025:
that order was set aside pursuant to O 92 r 4 of the Rules of Court 2012, no order as to costs. The order records no reasons;
(e) 14 January 2025:
Euphoplex Sdn Bhd presented a winding-up petition against the principal debtor in Companies (Winding-Up) No: WA-28NCC-66-01/2025;
(f) 22 May 2025:
a winding-up order was made on that petition ("the winding-up order"), the order reciting service, advertisement and the absence of the respondent;
(g) 12 June 2025:
the JM application was allowed and the principal debtor placed under judicial management for six months;
(h) 24 September 2025:
the JC filed its application under s 5(3)(b) of Act 360 for leave to commence bankruptcy proceedings against the JD as a guarantor other than a social guarantor;
(i) 7 January 2026:
a winding-up search by the JC disclosed the winding-up order, it was produced at the hearing of that application on 9 January 2026. The JD's evidence, which is unanswered, is that this was when he and the principal debtor first learnt of it;
(j) 12 January 2026:
the setting aside application was filed;
(k) 6 March 2026 - the learned Senior Assistant Registrar allowed that application and granted leave. His Grounds of judgment are dated 21 May 2026;
(l) 19 March 2026:
The JD appealed, 14 July 2026 - the present application was filed, 17 July 2026 — the appeal was dismissed;
(m) 3 August 2026:
on the JD's evidence, the High Court at Kuala Lumpur allowed an amendment of the notice
