I am reading Fatwa 11796, regarding the sleeves and searched for this hadith but couldnt find the relevant hadith. But as a contradiction, I found this hadith:
Volume 7, Book 72, Number 677: Translation of Sahih Bukhari, Book 72: Narrated Abu Juhaifa:
I saw Bilal bringing an Anza (a small spear) and fixing it in the ground, and then he proclaimed the Iqarna of the prayer, and I saw Allahs Apostle coming out, wearing a cloak with its sleeves rolled up. He then offered a two-Rakat prayer while facing the 'Anza, and I saw the people and animals passing in front of him beyond the 'Anza.
Please explain whether it is permissable to pray with your sleeves folded with evidence.
Rolling or tucking up a garment - whether that means rolling up the sleeves and baring the arms or rolling or tucking up the hem and baring the lower legs -- is all makrooh according to the majority of scholars.
Al-Nawawi (may Allah have mercy on him) said:
The scholars are unanimously agreed that it is not permissible to pray with one's sleeves or garment rolled up and the like, or with one's hair braided or with one's hair wrapped up beneath the turban and so on. All of that is not permissible according to the consensus of the scholars, and it is makrooh in the sense of being discouraged and not proper. If a person prays like that, he has done something wrong but his prayer is valid. End quote. Sharh Muslim, 209.
In Fath al-Qadeer (1/418), which is a Hanafi book, it says:
It is also makrooh to pray with the sleeves rolled up, baring the forearms. End quote.
In Tuhfat al-Muhtaaj (2/162), which is a Shaafa‘i book, it says:
It is makrooh to wrap or tie his hair or roll or tuck up his garment, such as rolling up his sleeves or tucking up his hem, even if he only did that in order to work, or he is offering the funeral prayer, because of the hadeeth the soundness of which is agreed upon, “I have been commanded to prostrate on seven bones, and not to roll or tuck up my garment or hair.” The reason why that is not allowed when prostrating is that it is contrary to proper focus and humility. End quote.
In Kashshaaf al-Qinaa‘ (1/373), which is a Hanbali book, it says:
It is makrooh to roll or tuck up one’s garment. Some of the scholars mentioned the reason for this prohibition as being that the hair and so on prostrate with a person and it is makrooh to roll up the sleeves. This was stated in al-Ri‘aayah, for the mentioned reason above. If he does that - i.e., tucks up the hair and rolls up his garment and so on, because of some work that he was doing before the prayer, it is makrooh for him to leave them like that, because of what is stated above, and because of the hadeeth of Ibn ‘Abbaas, according to which he saw ‘Abd-Allah ibn al-Haarith praying with his hair braided at the back. He stood up and undid his braid. When ‘Abd-Allah had finished praying, he came to Ibn ‘Abbaas and said: What have you to do with my head? He said: I heard the Prophet (blessings and peace of Allah be upon him) say: “The likeness of such a one is that of a person who prays when he is tied up. Narrated by Muslim. End quote.
But the Maalikis only regard that as makrooh in the case of one who does that for the prayer. But if that is how he was before he prayed, or he did that for the purpose of work, then it is not makrooh for him. The majority of scholars -- as stated above -- are of the view that it is makrooh in all cases.
In Sharh Mukhtasar Khaleel by al-Kharashi (1/250), which is a Maaliki book, it says:
It is makrooh for one who is praying to roll up his sleeves or wrap them around his arm (if they are wide), because that is a kind of distraction from proper focus (khushoo ‘). That applies if he did that in order to pray. But if that is how he dresses or it was for the purpose of work, then the time for prayer came and he prayed like that, then it is not makrooh for him, as was stated by Ibn Yoonus, because the Prophet (blessings and peace of Allah be upon him) said: “I have been commanded to prostrate on seven parts and not to tuck up my hair or garment.” And he said that the prohibition on that only applies if one does that deliberately before praying. End quote. See al-Mawsoo‘ah al-Fiqhiyyah, 12/34
With regard to the hadeeth mentioned in the question, which is the hadeeth of Abu Juhayfah (may Allah be pleased with him) who said:
I saw Bilaal bring out an iron-tipped spear and set it up, and the Messenger of Allaah (blessings and peace of Allah be upon him) came out wearing a suit that was rolled or tucked up. He prayed two rak‘ahs, facing the spear, and I saw people and animals passing in front of the spear.
Narrated by al-Bukhaari (5768) in a chapter entitled: Rolling or tucking up one’s garment. He also narrated a longer version (no. 376) and it was also narrated by Muslim (no. 503).
Imam al-Nawawi (may Allah have mercy on him) said: Rolled or tucked up means that it came to mid-calf or thereabouts, as he said in the previous report: It is as if I can see the whiteness of his shins. End quote.
Sharh Muslim, 4/220-221
This hadeeth does not contradict what is mentioned above, and we can answer that in many ways, such as the following:
It may be understood that the Prophet (blessings and peace of Allah be upon him) tucked up his garment to show that it is permissible, and that does not contradict its being makrooh, because it is possible that the Prophet (blessings and peace of Allah be upon him) did some things that are makrooh in order to show that they do not reach the level of being haraam; rather they are makrooh only; therefore that action is not makrooh in his case (blessings and peace of Allah be upon him).
It may be that the Prophet (blessings and peace of Allah be upon him) came out to his companions with his garment tucked up as it says in the hadeeth, then when he wanted to pray, he let it down and got ready to pray, but the narrator did not mention that and did not mention anything to indicate that this was not so either.
The rolling or tucking up mentioned here does not refer to the sleeves, and it does not refer to rolling up the sleeves, as is the view of the author, because tashmeer (rolling or tucking up) does not apply only to the sleeves; rather it may also refer to tucking up the hem of the garment and so on. It says in al-Mawsoo‘ah al-Fiqhiyyah (12/32): Tashmeer (rolling or tucking up) may mean rolling or tucking up the izaar (lower garment or waist wrapper) or thawb (garment). End quote. And this is what is referred to here, i.e., tucking up the garment so that the calf or shin is uncovered. This is what is mentioned in the hadeeths, as in the report narrated by al-Bukhaari (3566): The Messenger of Allah (blessings and peace of Allah be upon him) came out and it is as if I [the narrator] can see the whiteness of his shins - i.e., because he tucked up his garment and they became visible. Hence when al-Bukhaari narrated the hadeeth in a chapter entitled Rolling or tucking up the garment, al-Haafiz Ibn Hajar (may Allah have mercy on him) said, commenting on the chapter heading: This means lifting up the lower part of the garment. Then he said: From this it may be understood that the prohibition on tucking up the garment when praying applies to something other than the hem of the garment. It is possible that this happened coincidently or that it was during a journey, which is the situation in which the garment may be rolled up. End quote. Fath al-Baari, 10/256
There are other scholarly views, but perhaps what we have mentioned here is the strongest and most correct of these views.
And Allah knows best.