Objection against the judicial liquidator’s report. Annulment of the report and of the partial distribution plan. Obliging the judicial liquidator to redo the report and the partial distribution plan.
RELEVANCE OF THE CASE
Recovering amounts from an insolvent debtor is a priority for any creditor. The peculiarity of this case lies in the fact that the amounts the creditor sought to recover were unduly paid to the insolvent debtor.
To protect their interests, it is important for creditors to know their legal possibility to contest the report on funds obtained from liquidation and the plan for distribution of those sums. Every three months, counted from the start of liquidation, the judicial liquidator must present to the creditors’ committee a report on the funds obtained from liquidation and from the collection of receivables, as well as a distribution plan among creditors, if applicable.
The report and the plan are filed with the court registry and published in the Insolvency Procedures Bulletin. Any creditor may file an objection to the report and to the distribution plan within 15 days from their publication in the Insolvency Procedures Bulletin.
SUMMARY OF FACTS
By a sale-purchase contract, the claimant company, as buyer, obtained from the company under judicial reorganization, represented by its judicial administrator, a construction land parcel for the price of 751,857.28 lei (equivalent to 167,511.20 euro), plus 150,371.46 lei VAT.
Subsequently, an Addendum to the Sale-Purchase Contract was executed in which the selling company via its judicial administrator committed to distribute/return to the claimant company the amount of 150,371.46 lei with priority, but no later than a date agreed in that addendum, the two contracting parties recognizing that, in error, the selling company (through the judicial administrator) had collected and received 150,371.46 lei VAT connected to the sale price, while this transaction was subject to the reverse charge provisions of the Fiscal Code, so no VAT should have been collected.
Following the judicial administrator’s refusal to fulfill the obligations assumed through the Addendum—to restitute to the claimant the sum of 150,371.46 lei—the claimant company filed an objection to the judicial administrator’s measures, and in another judgment, the court ordered acceptance of the objection brought by the claimant in opposition to the debtor company represented by the judicial liquidator, and ordered the judicial liquidator to pay 150,371.46 lei to the claimant under the conditions laid down in the Addendum.
PRESENTATION AND SUPPORT OF THE CASE
SUPPORT OF THE CASE BEFORE SIBIU TRIBUNAL
The team of Brisc Legal attorneys specialized in commercial law and insolvency litigation represented the claimant company lodging the objection in this case, seeking partial annulment of the Report and of the Partial Distribution Plan, and obliging the judicial liquidator to remake them in such a way that the sums obtained from liquidation are distributed to the claimant company in the sense of distributing the amount of 150,371.46 lei to the claimant, based on the court decision pronounced due to the judicial administrator’s refusal to fulfill the obligations assumed by the Addendum to the Sale-Purchase Contract.
In the alternative, they requested distribution of the 150,371.46 lei to the claimant company, as a result of undue payment made to guaranteed creditors of the debtor company.
In support of the claimant’s claim, the insolvency litigation attorneys from Brisc Legal argued to the court that applying the dispositive part of the judgment pronounced due to the administrator’s refusal imposes obliging the judicial liquidator to pay 150,371.46 lei to the claimant company under priority conditions, before any other distribution.
Further, they argued that this interpretation reflects the parties’ real intention at the time the Addendum was entered into: the debtor, represented by its judicial administrator, expressly undertook in the Addendum to distribute/return the 150,371.46 lei with priority to the claimant.
They also demonstrated to the court that this clarification of the dispositive part of the judgment is the only way to enforce the judgment in order to restore the claimant company to the situation prior to the undue VAT payment, and to cover the prejudice caused by the collection and distribution of the sum by the judicial liquidator without legal right and in violation of law.
In supporting the claim concerning distribution of the amount to the claimant as a result of unjust enrichment of the guaranteed creditors of the debtor company, they showed that the guaranteed creditor, and subsequently the creditor who acquired the claim, as the mortgage creditors of the property acquired under the Sale-Purchase Contract, benefited from early distributions that were unjustified and undeserved, based on sums paid by the claimant company unduly, namely the VAT amount, in violation of law.
Given applicable legal provisions, they pointed out that the sums paid by the claimant company (the sale price of 751,857.28 lei + the undue VAT of 150,371.46 lei) were used to settle the debt owed to the guaranteed creditor, then to the assignee creditor, under the payment program implemented according to the debtor’s reorganization plan.
In these circumstances, given that the amount of 150,371.46 lei paid unduly could not really be transmitted to the state budget, it was used by the judicial administrator to discharge the claim of the guaranteed creditor, and later the creditor who took over the claim, under the reorganization plan.
This hypothesis corresponds to the provisions of Article 122 paragraph 3 of Law no. 85/2006. Thus, the guaranteed creditor assignee, successor in private title of the bank that granted the debtor a mortgaged loan, participated in the distribution of the VAT amount unduly paid by the claimant before the sale of the liquidated assets referred to in the contested Report.
They argued to the court that this amount must be paid to the claimant company with priority, pursuant to the court judgment pronounced due to the administrator’s refusal to fulfill the Addendum to the Sale-Purchase Contract. In this way, in compliance with the provisions of Law no. 85/2006, the guaranteed creditor will be prevented from receiving more than what it was entitled to, through benefitting from unjustified and undeserved distributions out of the sum unduly paid by the claimant as VAT.
SOLUTION OF SIBIU TRIBUNAL
In accord with the arguments developed by the team of commercial law attorneys from Cluj, the Sibiu Tribunal, adopting the reasoning in favor of the objection and annulment of the Report and of the distribution plan, found that in this case the claim in amount 150,371.46 lei invoked by the claimant company is a current creditor’s claim (creanță curentă), such that payment of this claim was required per the court decision, and that it was not necessary to register it among the claims in the estate, with the consequence that the payment should follow the order of distribution of claims recorded in the estate, as established by Law no. 85/2006. It held that incorrectly had been acted through the liquidation report and partial distribution plan drawn up in the bankruptcy procedure by the judicial liquidator.
Considering the arguments developed by our lawyers, the objection was admitted, the bankruptcy judge ruling to annul the report on funds obtained in the insolvency procedure and the distribution plan and to oblige the judicial liquidator to redo them, in the sense of distributing the amounts obtained from asset sales so that the 150,371.46 lei is paid to the claimant-objector as a current claim, in execution of the judicial decision pronounced as a result of the refusal by the judicial administrator to fulfill obligations assumed via the Addendum to the Sale-Purchase Contract.
Regarding the solution of the trial court, the guaranteed creditor filed an appeal, requesting that the objection be rejected and that the report and the partial distribution plan be maintained, in terms of distributing the sum to it, in its capacity as guaranteed creditor.
In supporting its appeal, the guaranteed creditor argued that the first instance court had misapplied the law, arguing that the 150,371.46 lei is not a current claim but a claim born during the debtor’s reorganization period, and that preferential payment is not justified from the court decision resulting from the judicial administrator’s refusal to fulfill the Addendum.
The appeal by the guaranteed creditor was rejected, taking into account the arguments developed by the commercial law attorneys of Brisc Legal.