Disputes about the invalidity of a contract, a transaction made only for appearance, without the intention to create the corresponding legal consequences (an imaginary transaction), is declared invalid by a court at the request of an interested person, a proper government agency or a prosecutor.

The State Revenue Administration for the Almaly district of the Department of State Revenue for the City of Almaty (hereinafter referred to as the Institutions) filed a lawsuit against T LLP (hereinafter referred to as the Partnership), ABK LLP (hereinafter referred to as the LLP) for recognition of the contract dated September 2, 2013 b/n (hereinafter referred to as the The contract) is invalid. The claim was denied by the decision of the specialized interdistrict Economic Court of Almaty dated April 13, 2017. The Judicial Board for Civil Cases of the Supreme Court overturned the decision of the court of first instance and issued a new decision invalidating the contract dated September 2, 2013 b/n, concluded between LLP "T" and LLP "A" on the following grounds. Paragraph 4 of the normative Resolution of the Supreme Court of the Republic of Kazakhstan dated January 15, 2016 No. 1 "On the right of access to Justice and the powers of the Supreme Court of the Republic of Kazakhstan to review judicial acts" establishes that by exercising these constitutional powers, the Supreme Court ensures a uniform interpretation and application of the law in the conduct of legal proceedings. The uniformity of judicial practice, characterized by uniform approaches to the interpretation and application of legal norms by courts, is achieved not only through the adoption by the Supreme Court of regulatory rulings clarifying issues of judicial practice, but also as a result of the cassation review of judicial acts that have entered into force. At the same time, the activity of the Supreme Court in reviewing judicial acts aimed at ensuring their legality, validity and fairness is crucial for the formation of judicial practice.

Disputes about the invalidity of a contract, a transaction made only for appearance, without the intention to create the corresponding legal consequences (an imaginary transaction), is declared invalid by a court at the request of an interested person, a proper government agency or a prosecutor.

The achievement of uniformity of judicial practice is conditioned by the tasks of ensuring legality, protecting the constitutional rights and freedoms of man and citizen, therefore, the revision of judicial acts that have entered into force is associated with their high social significance, as well as importance for the development of law, its uniform interpretation and application. Based on these tasks, the procedural legislation defines as the grounds for cassation review of judicial acts: - violation of uniformity in the interpretation and application of legal norms by courts (subparagraph 3) of part 6 of Article 438 of the Civil Procedure Code of the Republic of Kazakhstan (hereinafter – CPC) and subparagraph 3) of part 2 of Article 485 of the Criminal Procedure Code of the Republic of Kazakhstan. Thus, in order to ensure the rule of law and uniformity of judicial practice, overcoming the legal force of a judicial act in cassation is exceptional, that is, limited by special grounds. The Board considers that there are exceptional grounds for reviewing the contested judicial acts in cassation. They are expressed in violation of uniformity in the interpretation and application by the court of the norms of substantive and procedural law. The Court found that the Partnership was registered with the judicial authorities on September 28, 2005. Type of activity – landscaping, landscape planning. In the tax statements f.300.00 "VAT Declaration" for the 4th quarter of 2013, the Partnership reflected mutual settlements with LLP for the amount of turnover – KZT 28,902,155, including value added tax of KZT 3,096,660. By the verdict of the Ili District Court of the Almaty region dated May 23, 2016, on the establishment of an LLP under part 3 of Article 215 of the Criminal Code of the Republic of Kazakhstan (false entrepreneurship), S., L. were convicted. Within the framework of this criminal case, these persons confirmed that they had created an LLP with no intention of carrying out business activities. The institution, considering these mutual settlements imaginary, appealed to the court with a claim for invalidation of the Contract. By the decision of the specialized interdistrict Economic Court of Almaty (hereinafter referred to as the SMEC) dated November 16, 2016, which was left unchanged by the decision of the Judicial Board for Civil Cases of the Almaty City Court dated February 15, 2017, the claim of the Institution was satisfied. By a decision of the Judicial Board for Criminal Cases of the Supreme Court dated November 29, 2016, the verdict of the Ili District Court of the Almaty region dated May 23, 2016 against S., L. was overturned. The criminal case was sent for a new review, during which it was returned for additional investigation. By a decision of the pre-trial investigation body dated March 26, 2018, the criminal case was terminated due to the enactment of a law abolishing criminal liability for the committed act. Referring to the cancellation of the verdict in the criminal case,

The Partnership applied to the Council of Economic and Social Council for a review of judicial acts in a civil case due to newly discovered circumstances. By the decision of the Council of Economic and Social Council of March 9, 2017, the Partnership's application was satisfied, the decision of November 16, 2016 was canceled due to newly discovered circumstances. The court of first instance, rejecting the claim, proceeded from the fact that the guilty verdict against the LLP on recognizing it as a false enterprise had been overturned. However, it is impossible to agree with such conclusions of the court. The decriminalization of Article 215 of the Criminal Code of the Republic of Kazakhstan (false entrepreneurship) entails only the cancellation of the criminal consequences - the punishability of the act. The cancellation of the verdict does not deprive the Tax Authority of the right to file a claim for invalidation of the transaction in civil proceedings, substantiating it, including with reliable evidence collected in a criminal case, which must be evaluated in the civil process in conjunction with other evidence. By virtue of paragraph 3 of Article 148 of the Civil Code, in order to conclude a contract, it is necessary to express the agreed will of two parties (a bilateral transaction) or three or more parties (a multilateral transaction). Article 160 of the Civil Code stipulates that a transaction made only for the sake of appearance, without the intention to create the appropriate legal consequences (an imaginary transaction), is declared invalid by a court at the request of an interested person, an appropriate government agency or a prosecutor. In order for the court to properly resolve the claim, based on part 2 of Article 73 of the CPC, it was necessary to establish the actual execution of financial transactions, the availability of genuine primary documents, labor and material resources. The existence of contracts and other accounting documents does not indicate the actual commission of a financial and business transaction. During the pre-trial investigation, S., who created the LLP, confirmed that the company had not actually performed any work or provided any services. According to the terms of the contested contract, the LLP provided services for landscaping, whitewashing trees, and planting seedlings. However, the type of activity of the LLP - the development of construction projects - has nothing to do with the improvement of the streets of the city.  In addition, the LLP did not have the necessary resources: - staffing; - transportation; - the LLP did not submit declarations and calculations on taxes on vehicles, property, as well as on individual income and social taxes to the tax authorities in 2013. This reliably proves that the LLP does not have the opportunity to provide services and, of course, indicates the imaginary nature of the disputed transaction. The fulfillment by the Partnership of obligations under the public procurement agreement does not indicate the provision of services specifically to the LLP. In accordance with paragraph 7 of Article 8 of the Law of the Republic of Kazakhstan "On Public Procurement" (as amended before January 1, 2016), contractors are required to reflect in their tender documentation information about the subcontractors involved. Meanwhile, the Partnership has not provided evidence of the fulfillment of this condition – the indication in the tender application as a subcontractor of the LLP when participating in public procurement. On the contrary, by a letter dated February 9, 2013, the Partnership notified the customer, the akimat of the Medeu district of Almaty, of the work on planting seedlings and landscaping squares on its own without the involvement of subcontractors. 

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