FORMER prime minister Datuk Seri Najib Razak and his son, Datuk Mohd Nazifuddin, will not face bankruptcy proceedings for now after the Court of Appeal unanimously ordered the proceedings to be stayed pending the outcome of their tax appeals.
A three-member panel chaired by Datuk Dr Alwi Abdul Wahab ruled that the issues raised by the father and son before the Special Commissioners of Income Tax (SCIT) were sufficiently serious to justify halting the bankruptcy proceedings.
The decision effectively puts on hold Inland Revenue Board (LHDN) efforts to enforce bankruptcy proceedings over tax claims of RM1,692,872,924.83 against Najib and RM37.6 million against Mohd Nazifuddin.
The panel, comprising Alwi, Datuk Dr Shahnaz Sulaiman and Datuk Ong Chee Kwan, also set aside the Kuala Lumpur High Court’s Nov 17, 2025 decision which rejected their applications for a stay.
In delivering the unanimous ruling, Alwi said the stay would not prejudice the government and rejected the view that the two men could simply recover any money paid if their tax appeals eventually succeeded.
"Section 111 provides for a refund of excess tax already paid if Najib’s and Mohd Nazifuddin’s appeals before the Special Commissioners of Income Tax (SCIT) concerning their tax liabilities succeed.
"We agree with the appellants’ submission that the judicial commissioner’s reasoning was confined to the question of recovering the money. It does not and cannot address the distinct and irreversible consequences of a bankruptcy declaration, as previously stated," he said.
Alwi said the "pay first, argue later" mechanism under the Income Tax Act 1967 was not an absolute barrier to the courts exercising their discretion in exceptional circumstances.
"It is a procedural framework designed to ensure revenue collection, but it does not extinguish the existing jurisdiction of the courts to intervene when the balance of justice requires it," he said.
Alwi said the appeals were among cases in which a stay was warranted and that the government would not be prejudiced by the decision.
"In conclusion, for all the reasons stated, the appeals are allowed and the bankruptcy proceedings are stayed until the appeals before the SCIT are determined.
"The decision and order of the judicial commissioner dated Nov 17, 2025 are set aside," he said.
The court also identified a new issue concerning an overlap between funds subjected to additional tax assessments and funds that are the subject of criminal charges against Najib.
Alwi said this raised a question over whether proceeds allegedly obtained unlawfully could simultaneously be treated as legitimate income for tax purposes.
The court also took into account the various criminal and civil proceedings that Najib, 73, the former Pekan MP, is facing or has faced.
LHDN was ordered to pay RM30,000 in costs to the two appellants.
The government launched its action against Najib on June 25, 2020, seeking RM1,692,872,924.83 in outstanding income tax, while Mohd Nazifuddin faced a claim of RM37.6 million.
LHDN said the claims concerned unpaid income tax for the 2011 to 2017 assessment years.
On July 22, 2020, the High Court ordered Najib to pay the outstanding tax after allowing LHDN’s application for summary judgment.
Najib and Mohd Nazifuddin subsequently challenged the summary judgments, but their appeals were dismissed by the Court of Appeal and later the Federal Court.
On Oct 16, 2023, the Federal Court ruled that the father and son were liable for the outstanding amounts after dismissing their appeals to overturn the High Court decisions.
Bankruptcy notices were subsequently issued against both men.
They then sought to stay the bankruptcy proceedings while pursuing their challenges before the SCIT, but their application was rejected by High Court deputy registrar Kamarul Aris Kamalluddin on July 29, 2024.
Their subsequent appeal to the High Court was unsuccessful, leading them to bring the matter before the Court of Appeal.
Najib and Mohd Nazifuddin are now challenging the tax assessments in separate proceedings before the SCIT, scheduled for September and October respectively.
The Court of Appeal’s decision does not cancel or overturn the tax liabilities. It only prevents the bankruptcy proceedings from continuing until the SCIT appeals are determined. - September 4, 2026
