Review of the court's ruling on recognition as an unfair procurement participant

On January 28, 2025, No. 6001-24-00-3GP/556, the Judicial Board for Civil Cases of the Supreme Court of the Republic of Kazakhstan, consisting of: the presiding judge E., judges B., having considered with the participation of a representative of the joint–stock company "K" (hereinafter referred to as the Company, the Customer) M., a representative of the limited liability company "V" (hereinafter referred to as the Partnership, Contractor) S. in open court via mobile videoconference, materials on the Company's claim to the Partnership for recognition as an unfair participant in procurement, received at the request of the Company for a review of the ruling of the specialized interdistrict Economic Court of the Aktobe region dated September 27, 2024, the ruling of the judicial board for civil cases of the Aktobe Regional Court dated October 31, 2024,

The Company filed a lawsuit against the Partnership with the above-mentioned requirement.

By the ruling of the specialized interdistrict Economic Court of the Aktobe region dated September 27, 2024, which remained unchanged by the ruling of the Judicial Board for Civil Cases of the Aktobe Regional Court dated October 31, 2024, the claim was refused.

In the petition, the Company, pointing to significant violations of the norms of substantive and procedural law committed by local courts, asks to cancel the contested judicial acts and send the materials of the claim for consideration on the merits to the court of first instance.

Having heard the explanations of the plaintiff's representative, who supported the arguments of the petition, the explanations of the defendant's representative, who agreed with the arguments of the petition, having examined the materials attached to the claim, having discussed the arguments of the petition, the judicial board comes to the following.

In accordance with part 5 of Article 438 of the Civil Procedure Code of the Republic of Kazakhstan (hereinafter referred to as the CPC), the grounds for cassation review of judicial acts that have entered into force are significant violations of substantive and procedural law that led to the issuance of an illegal judicial act.

Such violations have been committed by local courts.

It follows from the materials of the claim that a contract for the purchase of works dated April 16, 2024 No. 974449/2024/1 (hereinafter referred to as the Contract) was concluded between the Company and the Consortium within the Partnership, together with the Limited Liability Company "N"

Under the Contract, the Contractor assumed obligations to develop design and estimate documentation for the installation and connection of a diesel generator set in the administrative building of the branch of the Department of the Main Gas Pipelines "R" for a total amount of 1,064,000 tenge, including value-added tax. The Customer has undertaken to accept and pay for the work performed, provided that the Contractor fulfills its obligations under the Contract properly.

Clause 3.1 of the Agreement stipulates that the terms, conditions, scope and place of work are determined by Annexes No. 1,2 to this Agreement, according to which the Contractor has undertaken to perform the work from the date of signing the Agreement to August 31, 2024. However, the defendant's work was not completed within the time limit set by the Contract.

The plaintiff, pointing out that the Contractor's violation of obligations under the Contract entailed negative consequences for the Customer, appealed to the court to recognize the Partnership as an unfair participant in the procurement.

The Court of first instance, with the conclusions of which the appeals board agreed, refusing to accept the claim, proceeded from the fact that the claimed claim is not subject to consideration in civil proceedings, since the purchase of goods, works and services by the Company is regulated by the Procurement Procedure of Joint Stock Company "A" (hereinafter referred to as the Fund) and legal entities, fifty or more percent of the voting shares (participation interests) of which are directly or indirectly owned by the Fund by right of ownership or trust management, approved by the decision of the Board of Directors of the Fund dated March 3, 2022 No. 193 (hereinafter referred to as the Procedure), which does not actually provide for a judicial procedure for recognizing suppliers as unreliable.

In addition, according to clause 7.6 of the Agreement, in case of violation by the supplier of its obligations under the agreement, the customer sends information to the authorized procurement authority in accordance with the established procedure to include information about the supplier in the list of unreliable potential suppliers (suppliers) of the Fund.

However, such conclusions of the local courts cannot be accepted, as they are based on the incorrect application and interpretation of substantive and procedural law.

Refusal to accept a claim is one of the forms of ending the judicial process without making a decision due to the presence of circumstances that prevent the consideration of a legal dispute on its merits.

In turn, the grounds for refusal to accept the claim are defined in subitems 1)-3) of part 1 of Article 151 of the CPC. This list is exhaustive and is not subject to extensive interpretation.

It follows from the content of the contested judicial acts that the refusal to accept the claim is justified by the impossibility of considering the case in civil proceedings.

There is no such basis based on the materials of the claim.

According to subparagraph 1) of part 1 of Article 151 of the CPC, the judge refuses to accept the claim if the application is not subject to consideration and resolution in civil proceedings.

The application of this rule of the procedural law is possible only if the plaintiff does not have the right to appeal to the court, and the protection of the violated rights of the person who appealed to the court is carried out in a different manner from civil proceedings.

Meanwhile, the method chosen by the plaintiff to protect civil rights is directly provided for by law and can be implemented by him solely by filing a claim in the framework of civil proceedings.

This conclusion of the board is consistent with the relevant norms of substantive and procedural law.

Parts 2 of Articles 48, 225 of the CPC state that the court resolves the case within the limits of the plaintiff's claims and does not have the right to change the subject matter or the basis of the claim on its own initiative.

According to the explanations given in paragraph 16 of the normative resolution of the Supreme Court of the Republic of Kazakhstan dated July 11, 2003 No. 5 "On judicial decision in civil cases", the basis of the claim should be understood as the facts indicated by the interested person, entailing the emergence, modification or termination of the material legal relationship that is the subject of the claim.

When making a decision, by virtue of part 1 of Article 225 of the CPC, the court is obliged to establish what the legal relations of the parties are, which law should be applied in this case and whether the stated claim is subject to satisfaction.

The protection of civil rights can be implemented by the methods established both in paragraph 1 of Article 9 of the Civil Code of the Republic of Kazakhstan and in other ways provided for by legislative acts of the Republic of Kazakhstan.

The Company's claim is based on the failure of the Partnership to fulfill its obligations under the Agreement.

Paragraph 1 of Article 1 of the Law of the Republic of Kazakhstan "On Procurement of certain entities of the quasi-public sector" (hereinafter - The Law) defines that this Law regulates relations related to the acquisition of goods, works, and services necessary to ensure the functioning and performance of the statutory activities of national management holdings, national holdings, national companies and organizations, fifty percent or more of the voting shares (participation shares in the authorized capital) of which are directly or indirectly owned by national managing holdings, national holdings, national companies, as well as socio-entrepreneurial corporations, with the exception of legal entities, fifty or more percent of the voting shares (stakes in the authorized capital) of which are directly or indirectly owned by a national management holding company, a national holding company, or national companies transferred to trust management by individuals or non–governmental legal entities with the right to subsequent redemption (hereinafter referred to as individual quasi-public sector entities).

The company is a part of the joint stock company "Z", which owns 100% of the shares.

According to the Resolution of the Government of the Republic of Kazakhstan dated April 6, 2011 No. 376 "On approval of the list of national Management holdings, national holdings, national companies", Joint Stock Company "Z" is included in the list of national companies.

Thus, the provisions of the Law related to the acquisition by the Company of goods, works, and services necessary to ensure its functioning, as well as to carry out its statutory activities, are mandatory for the Customer.

Paragraph 1, subparagraph 3) Paragraph 2, paragraph 4 of Article 10 of the Law establishes that the register of unscrupulous procurement participants is formed in the electronic procurement information system.

The register of unscrupulous procurement participants is a list of suppliers who have failed to fulfill or improperly fulfilled their obligations under contracts concluded with them.

In the case specified in subparagraph 3) of part one of this paragraph, the customer is obliged, no later than thirty calendar days from the date on which he became aware of the supplier's violation of the contract, to file a lawsuit with the court for recognition of such supplier as an unscrupulous participant in the procurement, except in cases of payment by the supplier of a penalty (fine, fine) and full performance they have no contractual obligations.

The register of unfair procurement participants is formed on the basis of a court decision that has entered into force in the cases provided for in subparagraphs 2) and 3) of the first paragraph of paragraph 2 of this article.

The judicial procedure for recognizing unreliable potential suppliers is also provided for by the relevant provisions of the Procedure.

Paragraph 1 of the Procedure stipulates that the list of unreliable potential suppliers (suppliers) of the Fund is formed and maintained by the Fund's Procurement Operator on the Procurement web portal as information is received from the Customer(s) and from the procurement web portal.

Subparagraph 4) Paragraph 2 of the Procedure establishes that a potential supplier (supplier) is subject to inclusion in the List of Unreliable potential suppliers (suppliers) of the Fund for the following reasons:

-the existence of a court decision (resolution) that has entered into force, which established the fact of non-fulfillment or improper fulfillment of the procurement contract.

The conclusions of the local courts are not based on the norms of law that, under terms 7.6 of the Contract, the provision of information to the authorized body for listing the supplier in the list of unreliable suppliers of the Fund indicates that the Procedure does not contain requirements for the plaintiff to file a lawsuit.

Along with sending relevant information to the authorized body about an unreliable supplier, the Customer is obliged to provide the Fund operator with a copy of the court decision that entered into force, which established the fact of non-fulfillment or improper fulfillment by the supplier of the procurement contract.

Such requirements are contained in paragraph 3, subparagraph 4) of paragraph 5 of the Procedure.

In this regard, the conclusions of the local courts that the Law and Order do not provide for a judicial procedure for recognizing an unscrupulous procurement participant are untenable.

The contested judicial acts have created an obstacle to the legal resolution of the situation. In violation of the constitutional right to appeal to the court for protection of violated or disputed rights, freedoms or legitimate interests, local courts unlawfully refused to accept the claim, limiting Public access to justice.

In such circumstances, the board comes to the conclusion that the arguments of the petition are justified. The violations committed are significant, since they led to the issuance of illegal judicial acts by the courts, which entails their cancellation with the referral of the claim with the materials attached to it for a new consideration on the merits to the court of first instance.

In a new trial, the court must collectively and comprehensively examine and evaluate the evidence available in the case file and presented by the parties, give them an appropriate legal assessment, determine the circumstances relevant to the proper resolution of the case, apply the law applicable to the disputed legal relationship, and, as a result, make a legitimate and reasoned decision that meets the requirements of the civil procedure law..

Guided by subparagraph 5) of part 2 of Article 451 of the CPC, the judicial board DECIDED:

The ruling of the specialized interdistrict Economic Court of the specialized interdistrict Economic Court of the Aktobe region dated September 27, 2024, and the ruling of the Judicial Board for Civil Cases of the Aktobe Regional Court dated October 31, 2024 on this claim should be canceled.

To send the claim with the materials attached to it for new consideration to the specialized interdistrict economic court of Aktobe region.

To satisfy the petition of the joint-stock company "K".

 

 

 

 

 

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