Introduction
In running a business, there is always a plausibility of the risk of the other party’s failure in performing their obligations, particularly, in relation to financial obligations. As an illustration, the failure of the debtor in making its installment debt payment obligation to its creditor.

Under the applicable laws and regulations in Indonesia, there is a legal instrument that may be undertaken by creditors in claiming the outstanding financial obligations of their debtor, either it has not been performed or been fully paid by the debtor, namely, Suspension of Debt Repayment (Penundaan Kewajiban Pembayaran Utang/PKPU). From the debtor’s perspectives, PKPU may be a solution to restructure its own debt against the other party, since the debtor, under Law No. 37 of 2004 on Bankruptcy and PKPU (“Bankruptcy and PKPU Law”), may file a request for PKPU over themselves.1

Further, in the event the commercial court grants the said request of PKPU and declare that the debtor is under temporary PKPU state as well as appoint a supervisory judge and administrative team, the debtor, under the Bankruptcy and PKPU Law, shall provide a settlement proposal to the creditors whose claims against the debtor have been verified by the administrative team under the list of permanent claims.

On 13 March 2024, the Legal and Judicial Research and Training Department (Badan Litbang Diklat Hukum dan Peradilan) of the Supreme Court of the Republic of Indonesia issued the 2023 Landmark Decisions, which is a compilation of judgments rendered in the previous period covering several legal aspects from cross-sector litigation in Indonesia, including bankruptcy and PKPU.2

Under the 2023 Landmark Decisions, a new legal norm on bankruptcy and PKPU is introduced which will be further explained and discussed by the author under this article.

Discussion

  1. PKPU in general under Bankruptcy and PKPU Law
    In general, PKPU is stipulated under Bankruptcy and PKPU Law, in particular, Chapter III, starting from Article 222 to Article 294.3

    Objective
    The objective of PKPU request is that to submit a settlement proposal covering a payment proposal (either partially or entirely) of debts to creditors, both unsecured and secured creditors.4

    PKPU Applicant
    The Bankruptcy and PKPU Law stipulates the ones who are entitled to file a request for PKPU, as follows:

    • Debtor itself; and
    • Creditor.

    In the event the debtor is:

    • a bank, the request for PKPU shall only be filed by Bank Indonesia;5
    • securities companies, stock exchanges, clearing and guarantee institutions, depository and settlement institutions, the request for PKPU shall only be filed by Capital Market Supervisory Agency (now, Financial Services Authority (OJK))6; and
    • insurance companies, reinsurance company, pension fund, or state-owned enterprise leading in public interest sector, the request for PKPU shall only be filed by the Minister of Finance.7

    Elements of PKPU
    When deciding on the request for PKPU, the panel of judges usually relies on whether the request submitted by either creditors or debtor has fulfilled the following elements:

    • 2 (two) creditors or more8;
    • due and payable debts9; and
    • can be summarily proven10.

    List of Permanent Claims and Settlement Proposal
    Upon the judgment of the commercial court declaring that the debtor is under temporary PKPU state and appointing a supervisory judge and an administrative team, the administrative team shall set out a deadline for creditors to submit their claims (including but not limited to interest and penalty (if any)) against the debtor (under PKPU state) through the administrative team.11

    Further, the claim shall be verified by the administrative team pursuant to the financial record and statements of the debtor (under PKPU) and lastly, the administrative team shall issue a list of permanent claims and the copy thereof shall be provided to the court clerks.12

    Afterwards, the debtor (under PKPU) shall draft settlement proposal to be provided to the creditors for further discussion and voting in a creditors’ meeting within 270 (two hundred and seventy) days pursuant to elucidation of Article 230 of the Bankruptcy and PKPU Law.13 Subsequently, the commercial court shall render the judgment on the approval of settlement proposal whether the said proposal is agreed or rejected along with the grounds thereof in a court hearing.

    Should the said proposal is rejected, the commercial court shall declare that the debtor is bankrupt.14 Meanwhile, if the settlement is approved, it shall bind all creditors, except those who rejected the proposal in a voting.15

  2. A New Legal Norm on PKPU under the 2023 Landmark Decisions
    Under the 2023 Landmark Decisions, particularly, Civil Chamber Section, the Supreme Court introduced a new legal norm in relation to the bankruptcy and PKPU by incorporating the legal consideration of the Supreme Court under the Supreme Court Judgment No. 1262K/Pdt.Sus-Pailit/2022 in a case between Yayasan Rumah Sakit Sandi Karsa as the Cassation Applicant (previously, PKPU Respondent/Debtor) versus PT Mulya Husada Jaya as the Cassation Respondent (previously, PKPU Applicant/Creditor).16

    Case Position17
    The Cassation Respondent (previously, PKPU Applicant/Creditor) filed the request for PKPU against Yayasan Rumah Sakit Sandi Karsa at the Commercial Court at the District Court of Makassar (“Makassar Commercial Court”), where the Makassar Commercial Court rendered Judgment No. 1/Pdt.Sus-PKPU/2021/PN Niaga Mks dated 24 March 2022 declaring the temporary PKPU state of the Cassation Applicant (previously, PKPU Respondent/Debtor).

    Whereas up to the deadline of registration which was 12 April 2022 and according to the Claim Verification Meeting dated 19 April 2022, the List of Permanent Claim was issued consisting of only 2 (two) unsecured creditors, namely, PT Mulya Husada Jaya (the Cassation Respondent) and PT Internusa Dua Medika.

    Furthermore, at the said meeting, the creditors rejected the settlement proposal submitted by the Cassation Applicant (previously, PKPU Respondent/Debtor) since the creditors were of the view that the settlement proposal only covered the amount of principal debt, while the payment schedule for penalty was not included thereto.

    In response to such a rejection, the Cassation Applicant (previously PKPU Respondent/Debtor) provided that in addition to the payment of principal debt, a part of penalty with a maximum amount of Rp200,000,000 (two hundred million Rupiah) will be accommodated.

    However, the Makassar Commercial Court rendered Judgment No. 1/Pdt.Sus-PKPU/2022/PN Niaga Mks dated 23 May 2022 (“First Level Judgment”), with the rulings, among others, to declare PKPU Respondent (Yayasan Rumah Sakit Sandi Karsa) bankrupt with all legal consequences thereof.

    Against the First Level Judgment, the Cassation Applicant (previously, PKPU Respondent/Debtor) filed a request for cassation. In the end, the Supreme Court through its Judgment No. 1262 K/Pdt.Sus-Pailit/2022 ruled that the Cassation Applicant (Yayasan Rumah Sakit Sandi Karsa) is not bankrupt.

    The Legal Considerations of Supreme Court
    The Supreme Court under its legal consideration provided as follows (unofficial English translation):18

    “Whereas the Debtor conveyed that the delay of outstanding payment to the Creditors occurred due to the Covid-19 pandemic which jeopardized the operational Debtor’s business in providing hospital services. However, the Debtor provided that they are still solvent and not insolvent to make payment. In addition, the Debtor still has good faith to settle the principal claim and is able to settle all claims in April 2022;”

    “Whereas pursuant to the abovementioned ground, the Debtor shall be provided with the opportunity to continue their business (going concern), as philosophically, Law No. 37 of 2004 on Bankruptcy and Suspension of Debt Repayment, the submission of the Request for Suspension of Debt Repayment (PKPU) by the Creditor, is intended to provide opportunity to the Debtor to submit a settlement proposal; However, under the present case, after the Debtor submitted their settlement proposal, the said proposal was rejected by the Creditors. This depicted that the initial intention of the Creditor in submitting the Request for Suspension of Debt Repayment (PKPU) against the Debtor, is not to consider and agree on the proposal, but to make the Debtor bankrupt;”

    “…whereas the Debtor, Yayasan Rumah Sakit Sandi Karsa is a Foundation leading in or conducting hospital business, which under Law No. 44 of 2009 on Hospital, in Articles 2 and 29, it is stipulated that the Hospital providing medical services holds onto humanity values and has social functions, among others, providing patient services for those from lower economic class, emergency services without down payments, free ambulance services, disaster or act of god victims, and/or other charity activities; Hence, the business conduct of hospital is not solely for the purpose of obtaining profits, but more likely focusing on humanity. Therefore, the Debtor should have been provided with an opportunity to resume its business so that the Debtor can perform its obligations to the Creditors. Thus, the Debtor shall not be declared bankrupt.”19

    A New Legal Norms
    Departing from the said legal considerations above, new legal norms emerged which might be taken into consideration by judges in rendering a judgment on the approval of settlement proposal submitted by the debtor (under PKPU), as follows:

    • The opportunity for the debtor to continue its business activities (going concern);
    • The initial intentions and purposes of the creditors in submitting a request for PKPU; and
    • The debtor’s condition on whether the debtor is able to pay (solvent) or unable to pay (insolvent).

    In light of the above-mentioned legal norms, the Supreme Court conclude that the PKPU judgment on the approval of the settlement proposal which does not rely on the opportunity of the debtor to continue their business (going concern) and the intentions and purposes of the creditors in filing a request for PKPU, but only the inability of the debtor to pay (insolvent), cannot be justified.20

    If it is linked to the case position above, it is clearly displayed that the panel of judges under case No. 1262 K/Pdt.Sus-Pailit/2022 finds that the Cassation Applicant (previously, PKPU Respondent/Debtor) which is a foundation leading in hospital business service, is still solvent and has good faith by willing to make a settlement towards their outstanding to the creditors. Conversely, the creditors depict their bad faith by rejecting the settlement proposal, since their initial intention is to make the Cassation Applicant (previously, the PKPU Respondent/Debtor) bankrupt. Further, the Cassation Applicant (previously, the PKPU Respondent/Debtor) which is a foundation whose establishment is based on humanity value and having social function, should have been provided with the opportunity to keep running their business to settle all of their obligations to the creditors.

  3. Conclusion
    PKPU might be a legal instrument for creditors to claim their receivables against their debtor. From the debtor’s side, PKPU might be an instrument for debt restructure. In the event the commercial court grants the said request of PKPU and declare that the debtor is under temporary PKPU state as well as appoint a supervisory judge and administrative team, the debtor, under the Bankruptcy and PKPU Law, shall provide a settlement proposal to the creditors whose claims against the debtor have been verified by the administrative team under the list of permanent claims.

    Under Judgment No. 1262 K/Pdt.Sus-Pailit/2022, the Supreme Court introduced a new legal norm on the 3 (three) elements that might be taken into account in rendering the PKPU judgment on the approval of settlement proposal, namely, (i) the debtor’s opportunity of going concern, (ii) the creditors’ intention and purposes of a request for PKPU submission, and (iii) the condition on whether the debtor is able or unable to pay.

    The author is of the view that the Judgment No. 1262 K/Pdt.Sus-Pailit/2022 might be a reference for the panel of judges in ruling the approval of settlement proposal, particularly, if a debtor is a foundation and has social functions to the society.

Dodi Roikardi

Sources

  1. Article 222 paragraph (2) of the Bankruptcy and PKPU Law governs that the Debtor who cannot or already predict that they cannot pay their debts which are already due and payable, may file a request for suspension of debt repayment, with the purpose of submitting a settlement proposal covering a payment proposal (either partially or entirely) of their debts to the Creditor.
  2. Legal and Judicial Research and Training Department of the Supreme Court of the Republic of Indonesia, “2023 Landmark Decisions” issued on 13 March 2024, available at https://bldk.mahkamahagung.go.id/id/puslitbang-id/landmark-decision.html, accessed on 28 March 2024.
  3. Prof. Dr. Sutan Remy Sjahdeini, S.H., “History, Principles, and Theory of Bankruptcy Law”, Second Edition (Jakarta: Prenadamedia Group: 2016), page 411.
  4. Article 222 paragraph (2) of the Bankruptcy and PKPU Law.
  5. Article 223 in conjunction with Article 2 paragraph (3) of the Bankruptcy and PKPU Law.
  6. Article 223 in conjunction with Article 2 paragraph (4) of the Bankruptcy and PKPU Law.
  7. Article 223 in conjunction with Article 2 paragraph (5) of the Bankruptcy and PKPU Law.
  8. Article 222 paragraph (1) of the Bankruptcy and PKPU Law.
  9. Article 222 paragraphs (2) and (3) of the Bankruptcy and PKPU Law.
  10. Article 8 paragraph (4) of the Bankruptcy and PKPU Law.
  11. Articles 269 and 270 of the Bankruptcy and PKPU Law.
  12. Articles 271 to 276 of the Bankruptcy and PKPU Law.
  13. Articles 278 to 284 of the Bankruptcy and PKPU Law.
  14. Article 285 of the Bankruptcy and PKPU Law.
  15. Article 286 of the Bankruptcy and PKPU Law.
  16. Op.cit, page 34.
  17. Op.cit, pages 35 – 36.
  18. Judgment No. No. 1262 K/Pdt.Sus-Pailit/2022, page 8.
  19. emphasis by the writer
  20. Op.cit, page 35.
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