PUTRAJAYA: Datuk Seri Najib Razak and his son Datuk Mohd Nazifuddin have succeeded in their appeal to stay bankruptcy proceedings against them over failure to settle tax arrears amounting to billions of ringgit.
A three-judge panel chaired by Justice Dr Alwipa Abdul Wahab unanimously allowed the stay application by Najib and Mohd Nazifuddin in the decision here on Friday (Sept 4).
Other judges on the panel were Justices Dr Shahnaz Sulaiman and Ong Chee Kwan.
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Justice Alwi, who read the decision, said the learned Judicial Commissioner (JC) who dismissed Najib and Mohd Nazifuddin's stay application had erred when he held that the appellants suffer no irreparable harm on the basis of Section 111 of the Income Tax Act (ITA) 1967.
Section 111 guarantees a refund of any tax overpaid, should the appeal by Najib and Mohd Nazifuddin before the Special Commissioner of Income Tax (SCIT) on their tax arrears succeed.
"We concede with the appellants' submission that the JC's reasoning is only confined to the recoverability of money. It does not and cannot address the distinct and irreversible consequences of an adjudication of bankruptcy as alluded to above.
"The learned JC's equation of irreparable harm with mere monetary loss was a misdirection," Justice Alwi said.
He also said that the "Pay First, Dispute Later" mechanism under the ITA must not be construed as an absolute statutory bar that overrides the court's discretion in granting appropriate reliefs under special circumstances.
"It (the mechanism) is a procedural framework designed to secure revenue collection but it does not extinguish the court's inherent jurisdiction to intervene where the balance of justice so requires," Justice Alwi said.
He added that the present appeal before the court was precisely such a case where a stay was warranted and that a stay would not prejudice the government, as the respondent.
"In conclusion, for all the above reasons, the appeal is allowed and bankruptcy proceedings are stayed pending disposal of the appeal before the SCIT.
"The decision and the order of the learned JC dated Nov 17, 2025, is set aside," Justice Alwi said.
The Court of Appeal also granted RM30,000 in costs to Najib and Mohd Nazifuddin each.
Najib and Nazifuddin were appealing the Nov 17, 2025, High Court decision that dismissed their application to stay bankruptcy proceedings against them.
The bankruptcy proceedings were initiated by the Inland Revenue Board (LHDN) following Najib and Nazifuddin's failure to settle tax arrears amounting to RM1.69bil and RM37.6mil respectively.
In 2020, two separate High Courts allowed LHDN’s applications to enter a summary judgment to recover tax arrears of RM1.69bil from Najib and RM37.6mil from Nazifuddin for the period between 2011 and 2017.
On Oct 16, 2023, the Federal Court ruled that father and son must pay the arrears after dismissing their appeal to set aside the High Court decision.
Najib and Nazifuddin are disputing the tax assessment in two SCIT proceedings scheduled for September and October, respectively.
