The car in discussion here is civic 2006 VTI Oriel. The purpose of this thread is to share the findings and resolution and help others stuck in such situation.
Issue:
The brake pedal sank on brake application. It was happening whether the car is stationary or moving. It did sink little when the car was shut off (no booster assist). This was dangerous as the car was not stopping properly, and lunged forward even on full brake application even on lower speeds. The abs kicked in randomly on braking, everytime on hard braking (even on slower speeds with medium braking force while the wheels werent even close to locking).
Checked brake oil level, it was full. Cheked for leaks, none found in lines, calipers, master cylinder.
Flushed and bled the system to no avail. The most obvious cause in this case is Master cylinder itself (having an internal leak and bypassing fluid via cup seals). Without giving it much thought, replaced it with new Honda genuine part.
New parts was bench bled and then bled the system again and lo and behold, the pedal is still sinking. Bled again and again, actuating ABS aswell, wasting couple litres of brake fluid (must have cleaned the lines good lol).
Doubted that the new master cylinder is faulty aswell. Tested it by blocking the two outlet ports with cutup line ends with ends shut (desi blockers). The pedal was rock solid. Well, put it all back together and back to sinking.
Disassembled all 4 calipers and verified for working, found nothing wrong. The brake pads were nearly new from the last brake job.
Searched around on internet and people were having similar issues, a video pointed that it could be the ABS.
Will be updating the proceedings in below posts.