The existence of an arbitral decision does not hinder courts from considering the justification of creditor claims in a bankruptcy

January 23, 2019

The Parties: 

LLC Paritet is the creditor under the arbitral award;

LLC CFR Capital is the appellant in the cassation appeal in the state court.

LLC VIS-SERVICE is the arbitral award debtor, and the defendant.

The Parties' representatives at the arbitration court:

No information


No information

The Parties' representatives at the state court:

LLC Paritet – E.S. Popryadikhina.

LLC CRF Capital – A.A. Fomin, A.M. Yagubova.

The bankruptcy administrator of LLC VIS-SERVICE – D.A. Prudetskyi.

The judges issuing the judgment at the state court: 

I.V. Razumov (Presiding Judge), E.S. Korneluk, S.V. Samuilov.

On July 19, 2017 the Supreme Court of the Russian Federation adopted a decision in the case regarding the inclusion of the creditor claims of LLC Paritet, amounting to 315 million rubles, in the register of creditors' claims against LLC Vis-Service, which is undergoing bankruptcy proceedings.[1]The company’s claims are based upon the award of the Arbitration Court at the Non-Commercial Institution Moscow Arbitration Chamber in the suit arising from the agreement on the novation of an obligation for bills of exchange and its substitution by a surety for the supply of goods. Having studied the case materials during the review of the cassation appeal filed by LLC CFR Capital (a creditor in the Vis-Service bankruptcy), the Supreme Court refused to include the company’s claims in the register of creditor claims. The court found Vis-Service's indebtedness to be unsubstantiated and that the arbitration court proceedings regarding the novation agreement which had been concluded by the parties merely served to create the appearance of a private-law dispute .

In March 2015, LLC Vis-Service and LLC BRIS concluded an agreement for the swap of bills of exchange. As a result, LLC Paritet became the holder of the 32 bills of exchange issued by LLC Vis-Service, and in August 2015 it presented them to Vis-Service for payment. Three days after the claim was presented, LLC Paritet, LLC Vis-Service and ProfEngineering-M entered into a novation agreement under which the obligation under the bills of exchange was replaced by an obligation to supply diesel fuel oil. If the supplier (ProfEngineering-M) delayed its performance by more then 7 days, then Paritet was entitled to refuse performance, to require that the money be returned and to recover damages from the supplier and the surety-provider (LLC Vis-Service). The novation agreement further stipulated that all disputes arising out of the novation agreement be settled by the Arbitration Court at the Non-Commercial Institution Moscow Arbitration Chamber.

Due to the supplier's delay, Paritet presented a claim to it and to the surety-provider for payment. The failure to satisfy the claim served as the grounds for LLC Paritet filing a suit with the Arbitration Court to recover the funds from ProfEngineering-M and Vis-Service jointly and severally. The Arbitration Court award granted the plaintiff's claims. In September 2015, LLC Paritet succeeded in obtaining an enforcement order from the state commercial court against the legal successor of ProfEngineering-M. However, the court did not consider the claims against Vis-Service, since bankruptcy proceedings had been commenced in respect of this legal entity. Paritet filed a claim in the state court to include its claims in the registry of creditors’ claims in the Vis-Service bankruptcy. After consideration by the court of first instance and the court of appeal, the court of cassation remitted the case for a new trial. The newly adopted judgment of the court of first instance was appealed to the court of appeal and the cassation court, and in July 2018 it was reviewed by the panel for economic disputes of the Supreme Court under the cassation appeal of CFR Capital. The appellant requested that the transactions serving as the grounds for the claims of LLC Paritet be invalidated.

Refusing to include the claims of LLC Paritet in the register, the Supreme Court stated that on the threshold of LLC Vis-Service's bankruptcy, the companies created the appearance of a private-law dispute to be considered in an arbitration court, and they also created the appearance that there were no doubts regarding Vis-Service’s obligation for the bills of exchange and that it was indisputable so that the claims arising out of the groundless debt would be included in the register of creditors using a simplified procedure. The court found that the arbitration dispute was settled in an unusually short period (within 7 days), and furthermore LLC Vis-Service immediately recognized the statement of claims made against it.

The Supreme Court further noted that the commercial (arbitrazh) courts should have made a comprehensive examination of the circumstances related to the obligation under the bills of exchange, as if no arbitration court award had been made regarding it. This is explained by the fact that the including groundless claims in the register of creditor claims contradicts the public order of the RF, more precisely the fundamental principle of the equal legal protection of the interests of all creditors, which prohibits satisfying the claims of some creditors to the detriment of others without properly examination. The Supreme Court found the claims arising out of the novation agreement to be groundless due to fact that the existence of a novated obligation for the bills of exchange among the parties had not been proven.

The claim of LLC CFR Capital to invalidate the transactions of Vis-Service was dismissed, because in the court's opinion, the company is not an interested part in regard to the transactions, because due to the court judgment , they had no impact on the bankruptcy estate of the debtor during bankruptcy.

Valeria Pchelintseva

[1]Ruling of the Supreme Court of the Russian Federation of July 19, 2018 No. 306-ЭС16-19550 (7) in case No. A55-25483 / 2015.