Malaysia’s Court of Appeal on September 4, unanimously granted former Prime Minister Najib Razak and his son, Datuk Mohd Nazifuddin, a stay of bankruptcy proceedings stemming from an uncollected tax bill. The panel ruled that the tax assessments remain subject to ongoing challenge before tax commissioners.
Court of Appeal Grants Stay and Reverses High Court Decision
The three-judge panel, led by Justice Datuk Dr. Alwi Abdul Wahab alongside Datuk Dr. Shahnaz Sulaiman and Datuk Ong Chee Kwan, delivered a unanimous decision setting aside a Kuala Lumpur High Court ruling. That earlier decision, handed down on November 17, 2025, had refused to halt bankruptcy proceedings initiated against the father and son.
According to Utusan Malaysia, the court determined that the appellants raised specific, substantive issues that must be decided by the Special Commissioners of Income Tax (SCIT). This outstanding dispute over additional tax assessments issued by the Inland Revenue Board (LHDN) provided sufficient grounds to pause the bankruptcy action.
Legal representation for the two appellants includes lawyer Farhan Shafee, while LHDN appeared through senior revenue counsel Al-Hummidallah Idrus, as reported by Free Malaysia Today.
Origins of the Tax Dispute
The roots of the bankruptcy threat extend back to June 2019, when the government, acting through LHDN, filed a civil suit demanding unpaid income taxes for the assessment years spanning 2011 to 2017.
By July 2022, LHDN secured a summary judgment from the High Court to recover the funds without proceeding to a full trial with witness testimony. Subsequent appeals to the Court of Appeal and the Federal Court were dismissed in October 2023, leaving the taxpayers liable to settle the sums before bankruptcy notices were issued.
Avoiding Irreversible Consequences and Prejudice
Writing for the appellate bench, Justice Alwi emphasized that pushing forward with bankruptcy notices would create severe, lasting damage that subsequent tax adjustments could not fix. If bankruptcy orders were issued, they would paralyze the appellants’ capacity to pursue their challenges before the tax commissioners.
Furthermore, the court highlighted that granting a stay does not prejudice the government or compromise its statutory protections. LHDN retains full authority to collect any tax liabilities once the administrative and tribunal disputes reach a final conclusion.
Overlap With Criminal Proceedings and Public Administration
The appellate panel also factored in the broader landscape of legal actions surrounding the former prime minister. The judges took judicial notice of the numerous civil and criminal trials Najib faces, noting that an automatic bankruptcy status could disrupt the orderly administration of justice and stall proceedings of significant public interest.
Another critical dimension raised during the appeal involved potential overlaps between the funds targeted for tax assessments and the financial assets cited in separate criminal charges against Najib. This tension raises unresolved questions regarding whether funds alleged to have been unlawfully acquired can simultaneously be taxed as legitimate income.
Next Steps in the Tax Tribunal
With the bankruptcy proceedings formally paused, the legal focus shifts back to the administrative level. Najib and his son will pursue their ongoing challenges before the Special Commissioners of Income Tax to contest the quantum of the additional tax assessments. The court ordered each appeal to carry costs of RM30,000 as the parties prepare for hearings before the tax tribunal.
