Cassation practice in cases of rehabilitation procedure and bankruptcy procedure
The proper consideration of cases in this category by the courts directly affects the development of market relations in Kazakhstan.
The main reasons for the cancellation and amendment of judicial acts in cassation during the period under review were:
- incorrect definition and clarification of the range of circumstances relevant to the case;
- inconsistency of the conclusions set out in the decision (resolution) with the circumstances of the case;
- violation or improper application of substantive or procedural law norms.
In practice, courts do not always attach importance to the procedural aspect of the consideration of a case in this category.
When considering cases, the third and fourth parts of Article 15 of the CPC should be guided.
There is a formal attitude of judges to the drafting of judicial acts. Not all decisions on declaring a debtor bankrupt or applying rehabilitation procedures contain a detailed analysis of the debtor's financial and economic condition, as well as a reasonable assessment of his insolvency or temporary insolvency. The names of the normative legal acts applied by the court are not fully indicated.
According to Part 8 of Article 35 of the CPC, cases of disputes arising within the framework of rehabilitation and bankruptcy procedures are considered by the same judge who made the decision on the application of the rehabilitation procedure (declaring bankruptcy).
At the same time, the legislation does not provide for which court will resolve disputes arising during this procedure if such a decision is made by a higher instance after the decision of the court of first instance (appeal) is overturned.
It seems correct that in this case, the exercise of the powers established by articles 67, 86 of the Law is assigned to the specialized interdistrict economic court (the court of first instance, which was supposed to make the correct decision). There is cassation and appeal practice on this issue.
At the same time, an appropriate explanation is needed in the inventory item.
The conclusions of the court of appeal on the stable insolvency of the debtor do not correspond to the actual circumstances of the case
1) LA ESPERANZA LLP applied to the court for declaring bankruptcy, referring to overdue tax debts in the amount of 73,421,489 tenge, debts owed to the bank in the amount of 2,475,498,993 tenge.
By the decision of the Council of Economic and Social Council of the Almaty region dated July 10, 2019, the application was refused, citing the fact that the debtor's insolvency has not been proven in court; the applicant has not properly carried out work on collecting receivables; the creditor of Bank CenterCredit JSC is working within the framework of enforcement proceedings.
By the decision of the appeal dated September 26, 2019, the court's decision was overturned, a new decision was made to satisfy the application, since the applicant's insolvency and insolvency is confirmed by the conclusion of the interim administrator.
By a decision of the cassation instance dated March 3, 2020, the appeal ruling was overturned, and the court's decision was upheld.
Footing:
The applicant did not provide the court with evidence of his insolvency in terms of additional information about the financial and economic condition; the appeal decision lacks a detailed analysis of the financial and economic condition of the Partnership; it does not provide a reasonable assessment of its insolvency.
2) IP Mirzo applied to the court for declaring Bacchus Center LLP bankrupt.
The court found that the LLP has accounts payable in the amount of 579,117,193 tenge, including 3,432,278 tenge to IP Mirzo, and 121,017,105 tenge to the budget (accrued based on the results of a tax audit conducted in June 2019).
According to the conclusion of the interim manager, the LLP is insolvent.
By the decision of the Council of Ministers of the Pavlodar region of November 6, 2019, the application was refused due to the lack of reliable evidence of the debtor's insolvency and the presence of discrepancies in the financial documents submitted by the debtor.
By a decision of the appeals board dated January 14, 2020, the court's decision was overturned with a new decision on the satisfaction of the application, since the debtor is persistently insolvent; the amount of the debtor's outstanding accounts payable exceeds the value of existing assets by more than 2 times; there is no prospect of restoring solvency.
By a decision of the cassation instance dated October 13, 2020, the appeal ruling was overturned, and the court's decision was upheld.
Footing:
According to the tax statements, the debtor's total annual income for 2018 amounted to 7,213,837,293 tenge; according to the balance sheet, the company had assets in the amount of 4,093,239,895 tenge in 2018; the indications of cash registers indicated steady turnover in 2018-2019; information on existing movable and immovable property has not been fully verified.
The conclusions of the local courts are premature, based on the incorrect application of substantive and procedural law
1) JSC "Problem Loans Fund" applied to the court for declaring Alfarma LLP bankrupt, arguing that the debtor has not fulfilled its obligations to repay the bank loan since 2008; as of February 24, 2020, the debt amounted to 5,884,870 US dollars; there are no funds in the settlement accounts of the Partnership.
By the decision of the Council of Economic and Social Council of the Almaty region of December 31, 2020, upheld by the court of appeal, the application was denied, citing the fact that the tax authority had not applied all methods to ensure the tax obligation not fulfilled on time and enforcement measures (including the failure to conduct a thematic tax audit on debtors and on cash register); the debtor has not provided financial documents confirming the arguments of insolvency; A request for reimbursement of administrative expenses, which has not been submitted by the applicant, is attached to the tax creditor's application.
By the decision of the cassation board dated August 3, 2021, the judicial acts were canceled, the case was sent for a new hearing to the appellate instance.
Footing:
- as part of the execution of the decision, measures were taken to sell the collateral, however, the executive document was returned without execution;
- the applicant in the case (the Fund) is not a tax creditor, and therefore the requirements of Article 45 of the Law are not applicable and, moreover, this provision is excluded;
- the courts referred to the provisions of the Law governing the procedure for liquidation of the debtor without initiating bankruptcy proceedings, while the Fund applied to the court for declaring the Partnership bankrupt with the initiation of bankruptcy proceedings;
- Article 57 of the Law referred to by the courts has also been deleted;
- there is no legal assessment of the fact that the debtor has not fulfilled its obligations since 2008, it does not have a legal address, and it does not respond to notifications and letters sent.;
- the issue of the presence or absence of other creditors has not been clarified, an analysis of assets and opportunities (prerequisites) for improving and improving the state of solvency and solvency has not been carried out.
Upon a new review, the appeal was refused by the decision of October 7, 2021.
A proper assessment of the debtor's ability to satisfy creditors' claims has not been given, including due to the absence of documents of significant importance in the case file.
1) SD-Invest LLP applied to the court for declaring GeoGuide LLP bankrupt, arguing that it owed 112,792,710 tenge as a result of non-fulfillment of obligations to sell oil, which was confirmed by the reconciliation report.
By the decision of the Council of Economic and Social Council of Almaty dated December 30, 2020, the application was satisfied, since it was established from the documents submitted by the applicant and the temporary manager that the debtor could not fulfill its obligations to creditors.
By the decision of the appellate instance dated April 19, 2021, the decision was left unchanged.
The Supreme Court overturned the appeal ruling, and the case was sent for a new hearing.
Footing:
It was established that GeoGuide LLP carried out hydrocarbon exploration activities on the basis of a subsurface use contract. At the same time, the LLP has long-term assets (11.3 billion tenge), including accounts receivable; production activities were carried out until the end of July 2020; the amount of creditors' claims opposing bankruptcy is the predominant part of the total amount of creditors' claims; there is an estimate of the right of subsurface use under the contract in the amount of 48.6 billion tenge.
However, the courts did not take into account this assessment, the existing unfinished construction facility (2.7 billion tenge); the cost of inseparable improvements (3 billion tenge), as well as the debtor's ability to satisfy creditors' claims during the transition to the production stage.
In addition, the court found a violation of the norms of procedural legislation (including the absence of documents of significant importance in the case file).
According to the results of the new review, the decision of the Council of Europe was overturned by the decision of the appeal dated September 1, 2021, and the application was refused.
By the decision of the judge of the Supreme Court dated April 11, 2022, the transfer of the petition for the review of the judicial act in cassation was refused.
The court did not apply the applicable rules of substantive law, the conclusions are justified by the invalid rules of the Law "On Rehabilitation and Bankruptcy"
1) Konys Sports Palace Property Complex LLP applied to the court for a rehabilitation procedure due to temporary insolvency and inability to fulfill obligations to creditors.
By the decision of the Council of Ministers of the Aktobe region of September 27, 2021, which was left unchanged by the decision of the appeals board of January 18, 2022, the application was denied.
The court found that accounts payable amount to 212,687,397 tenge, including taxes - 3,804,413 tenge, to IC Konys LLP - 130,792,984 tenge, to IP Berezhnaya - 78,090,000 tenge.
The debt was incurred due to the inability to lease sports facilities due to restrictions caused by the COVID-19 pandemic.
The courts motivated the refusal to satisfy the application by the lack of a detailed analysis of the debtor's financial and economic condition and the possibility of restoring his solvency, as well as the focus of the Partnership's actions on obtaining a delay in the execution of the judicial act on foreclosure on property.
By the decision of the cassation instance dated April 12, 2022, the judicial acts were canceled, and a new decision was made to satisfy the application.
Footing:
The application submitted by the debtor complies with the requirements of article 41 of the Law. According to the temporary administrator, the debtor belongs to the II class of financial stability. There are no circumstances leading to a refusal to apply the rehabilitation procedure.
The local courts, having failed to apply the applicable rules of substantive law, referring to the provisions of the NP, justified their conclusions with the invalidated norms of the Law.
2) By the decision of the Council of Economic Cooperation of August 6, 2021, the application of Chilisai Chemicals LLP for the application of rehabilitation procedures against the debtor of Temir-Service LLP was denied. The appeal remains unchanged.
According to the conclusion of the interim administrator, the total amount of accounts payable to Temir-Service LLP amounted to 2,183,753,650 tenge, of which to the applicant - 1 332 080 767 tenge, the debtor's employees - 154,119,816 tenge, contractors - 697,553,067 tenge, tax arrears - 35,555,795.
The debt to Chilisai Chemicals LLP was incurred in 2013 and 2016.
The reason for the refusal: the applicant did not provide reliable evidence confirming the actual transactions, substantiating the amount of the debtor's debt; the applicant did not file a lawsuit to recover the debt from the debtor.
The possibility of restoring solvency through the execution of the supply contract was rejected, since, according to the demands of the employees, bailiffs seized railway dead ends and specialized equipment, suspended licenses, permits and special rights of the debtor.
By a decree of the Supreme Court dated March 1, 2022, the judicial acts that took place in the case were canceled, the case was sent for a new hearing to the court of appeal.
Footing:
The conclusions of the courts are based on invalid, invalid provisions of the Law. The list of grounds for the court's decision to refuse to apply the rehabilitation procedure is exhaustive.
The court's conclusions about the prematurity of the stated claims should be based on a full and objective study of the circumstances of the case and an analysis of the evidence presented in their entirety.
1) Kazak Bidayy LLP filed for bankruptcy, indicating persistent insolvency and debt owed to creditors totaling 5,836,899,303 tenge.
By the decision of the Council of Economic and Social Council of Almaty dated November 30, 2021, left unchanged by the decision of the appeal dated March 17, 2022, the application was denied.
The court proceeded from the fact that the claims were filed prematurely, since the bankruptcy procedure of a large debtor of Agrotechnmash LLP for the repayment of receivables has not been completed. The existence of accounts payable to an LLP is not an unconditional basis for declaring the debtor bankrupt.
By the decision of the cassation Court of June 28, 2022, the judicial acts were canceled, and a new decision was made to satisfy the application.
Footing:
It has been reliably established that the insolvency of the Partnership is stable, the insolvency is confirmed by the conclusion of the interim manager, the possibility of collecting accounts receivable is excluded.
2) JSC "Problem Loans Fund" applied to the court for declaring TRAMONTANA LLP bankrupt.
The court found that in 2014-2015, Tsesnabank JSC provided loans totaling 82 million US dollars to three companies: Ayyrtau Oil Depot LLP, Agrotechnika-2030 LLP, Gilmore LLP.
TRAMONTANA LLP was registered as a legal entity on January 17, 2017, and subsequently re-registered several times due to changes in the membership, head, and location.
On February 22, 2017, the obligations under the bank loan agreements from the above-mentioned companies were transferred to the Partnership, with the provision of money (stored in a savings account and coming in the future) as collateral for the pledge agreements.
On September 25, 2018, the Fund purchased the right of claim against the debtor from the bank and by a court decision dated August 23, 2019, debts totaling 35,933,238,681 tenge were recovered from TRAMONTANA LLP in favor of the applicant. The court's decision has not been executed.
Referring to the fact that the debtor is insolvent and does not carry out financial and economic activities, the Fund appealed to the court to declare him bankrupt.
By the decision of the Council of Ministers of the City of Nur-Sultan dated January 11, 2022, which remained unchanged by the decision of the appeal dated April 6, 2022, the application was denied.
By a private ruling of the same court, the information of the Economic Investigation Service of the Financial Monitoring Committee of the Ministry of Finance of the Republic of Kazakhstan was brought to the attention of the revealed facts regarding the Partnership.
The local courts motivated their conclusions by the fact that there was no information about the debtor's financial and economic activities and primary accounting documentation; work on checking the cash flow on settlement accounts had not been properly carried out; the cause of the insolvency had not been established; the opinion of the debtor and other existing or possible creditors (including second-tier banks) had not been clarified. what influences the resolution of the issue of its insolvency.
By the decision of the cassation instance dated July 5, 2022, these judicial acts were upheld.
Footing:
Agreeing that the evidence presented to the court of first instance formally confirms the debtor's insolvency and insolvency, the judicial board pointed out that in this case the circumstances of the debt deserve attention.
It has been reliably established that the debtor's debt to the Fund was formed only as a result of the transfer of the debt of the original borrowers to it.
At the same time, there is no proper information about the validity of the transfer of debt in the amount of about 36 billion tenge to a Partnership established one month before the transfer of debt; its financial viability at that time, the availability of guarantees for debt repayment; the Bank's actions to authorize the transfer of debt, as well as the legality of the Fund's actions to repurchase assets (rights debt claims against the Debtor).
Thus, the issue of deliberate bankruptcy or fraudulent actions in obtaining loans and transferring them is not resolved. Clarifying the above issues is essential for resolving the issue of declaring the Partnership bankrupt.
Summary of judicial practice in the application of legislation on rehabilitation and bankruptcy in cases considered by the courts for the period 2020-2021 and the 1st half of 2022.
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