Malaysia Court of Appeal finds insolvency trumps arbitration where there is no bona fide dispute of debt

27 September 2024

Swissray Asia Healthcare Co Ltd v V Medical Services (M) Sdn. Bhd. 
[2024] CLJU 1358

The Malaysia Court of Appeal in Swissray Asia Healthcare Co Ltd v V Medical Services (M) Sdn. Bhd. recently held that a petitioner is not obligated to refer a debt claim to arbitration and may instead proceed with a winding up petition if the debt claimed is not genuinely disputed under a contract which is subject to an arbitration agreement.

This is the first Malaysian appellate court decision that deals with an interplay of insolvency and arbitration. Historically, Malaysian High Court decisions have been divided between a pro-insolvency approach and a pro-arbitration approach. This decision clarifies that the appropriate test for granting an injunction to restrain a winding-up petition in the context of a debt claimed under a contract which provides for arbitration in the event of a dispute is the bona fide dispute test.

This article by our associate firm in Malaysia, Rahmat Lim & Partners, provides an overview of the Court of Appeal’s decision and is available on their website.