Once the statutory conditions are met, the principal’s obligation to pay is mandatory, not discretionary. Sections 30(2) and 30(3) impose a duty on the principal to issue the requisite notice to the non-paying party and, failing proof of payment, to make direct payment to the successful claimant.
 
This position is reflected in Construction Adjudication in Malaysia (2nd edition, 2018) by Lam Wai Loon and Ivan Y.F. Loo, where the learned authors made the following observation with respect to section 30(3) of the CIPAA:
  In essence, section 30(3) of CIPAA creates an independent statutory obligation on the part of the principal in its own right to make direct payment to the subcontractor, and this is a separate payment obligation imposed by statute which exists in parallel with the duty of the unsuccessful party (i.e. the main contractor) to pay all or part of the adjudicated amount. In CT Indah Construction Sdn Bhd v BHL Gemilang Sdn Bhd [2020] 1 CLJ 75, the Court of Appeal clarified that the principal’s obligation to pay the unpaid party exists even in a situation where the non-paying party is in liquidation, dismissing the argument that such payment would circumvent the rule prohibiting preferential payments.

• sums already due; or
• sums contractually payable, even if not yet due. 

The term “adjudicated amount,” is not defined in section 4 of the CIPAA but had been the subject of considerable debate in our courts.
 
In Cabnet System, the High Court held that the expression “adjudicated amount” in sections 12(5), 30(1), and 30(3) of the CIPAA refers to the adjudicated sum claimed by the unpaid party and pre- and post-adjudication interest, but excludes adjudication costs under section 18(1) CIPAA.  
 
Subsequently, in Bond M&E Sdn Bhd v Pali PTP Sdn Bhd [2022] 11 MLJ 58, the High Court was of the view that the words “adjudicated amount” in sections 30(1) and (3) of the CIPAA do not include interest and costs, on the basis that if Parliament had intended for such inclusion, express words to that effect would have been inserted in the subsections as the terms ‘interest’ and ‘costs’ are used in other parts of the CIPAA.
 
However, the abovementioned position was overruled by the Court of Appeal in Pali PTP Sdn Bhd v Bond M&E Sdn Bhd and another appeal [2023] 6 MLJ 176. In taking a purposive approach by considering CIPAA’s objective to protect small contractors and subcontractors, Lim Chong Fong JCA reversed the High Court’s decision and held that the “adjudicated amount” includes not only the principal sum but also interest and costs as awarded in the adjudication decision. According to the learned judge, a narrower interpretation would require claimants to pursue separate proceedings, which would be contrary to the purpose of CIPAA.​

In HSL Ground Engineering, the High Court held that the unexplained failure to issue a notice to the non-paying party calling for proof of payment was fatal to the principal’s defence and justified a presumption of non-payment, resulting in a direct payment order. A similar position was taken in a slew of other authorities as follows:PCom Pacific Sdn Bhd v Apex Communications Sdn Bhd & Anor [2020] MLJU 118; Bond M&E Sdn Bhd v Pali PTP Sdn Bhd [2022] 11 MLJ 58 (per Aliza Sulaiman J at paras. [19] and [20]); Peck Chew Piling (M) Sdn Bhd v Panzana Enterprise Sdn Bhd [2022] MLJU 390 (per Aliza Sulaiman J at paras. [44] to [47]).
 
However, this principle was subsequently clarified in JDI Builtech wherein the Court of Appeal found that non-compliance with section 30(2) does not override the foundational requirement in section 30(5). Where the evidence clearly establishes that no money was due or payable at the material time such as in cases involving termination and bona fide disputes under the main contract, the absence of a section 30(2) notice alone will not justify direct payment.

Where the main contract is awarded to an incorporated joint venture company, identifying the “principal” for the purposes of section 30 requires careful attention to the actual contractual chain.
 
In Chop Lee Huat Cermin & Aluminium Sdn Bhd v Government of Malaysia [2025] MLJU 3871, the Government contracted with an incorporated JV company as main contractor. A subcontractor was appointed not by the JV company itself, but by one of its member companies, against whom the adjudication decision was obtained. The subcontractor sought to invoke section 30 against the Government on the basis that the JV company and its member operated as a “unified entity”.
 
The High Court rejected this approach. It held that an incorporated JV is a separate legal entity from its members, and the mere fact that a JV member appointed subcontractors, shared directors, or acted as an “executing arm” was insufficient to establish that the employer was the principal of that member. Absent clear evidence of an agency relationship, acknowledgment by the employer, or conduct treating the JV and its member as interchangeable, the court will not collapse the corporate structure or bypass the JV entity. The practical implication is that, in JV arrangements, a section 30 claim will fail at the threshold unless the claimant can show a direct payment nexus between the alleged principal and the party against whom the adjudication decision was obtained.

A principal cannot defeat a section 30 claim merely by asserting that it did not approve the appointment of the unpaid subcontractor. In Kinu Sdn Bhd, the Court of Appeal rejected the argument that section 30 liability depends on the principal’s prior written consent to the subcontractor’s appointment, even where the main contract expressly required such consent. The Court held that the statutory definition of “principal” under section 4 of CIPAA contains no requirement that the subcontractor be an approved or nominated subcontractor.
 
Contractual restrictions only operate between the contracting parties (i.e. principal and non-paying party) and cannot override a statutory payment mechanism enacted by Parliament. To hold otherwise would permit principals to contract out of CIPAA through standard consent clauses, undermining the Act’s core objective of cashflow protection for ‘all construction contracts’.​