Introduction
The postponement of debt payment obligation (PKPU) is a means to restructure the debts or obligations by a debtor over their creditors. The PKPU provisions are stipulated under one law along with bankruptcy provisions – namely, the Bankruptcy and Postponement of Debt Payment Obligation Law 2004 (the 2004 Law). The provision of PKPU application was originally given to a debtor only (under the old law of 1998), but this was later changed to either a debtor or a creditor (under the 2004 Law).
On 1 December 2021, the Constitutional Court issued a ruling1 over the judicial review of three provisions under the 2004 Law – namely, article 235(1), article 293(1) and article 295(1). The Court partially admitted the claim and declared that both article 235(1) and article 293(1) of the 2004 Law violate the 1945 Constitution and have no binding power if they are not construed as a cassation remedy:
a cassation remedy is allowed over a decision of Postponement of Debt Payment Obligation submitted by the creditor and when the settlement proposal of debtor is declined.
The Court declined the review on article 295(1). This decision means that a PKPU decision by the first-instance court may be challenged through a cassation petition. This was not permissible before the ruling of December 2021.
Facts
The contents of article 235(1) stipulates: “Against the decision of postponement of debt payment obligation no legal remedy may be lodged.” Article 293(1) stipulates: “Against the court’s decision in accordance with this Chapter III no legal remedy is possible, unless stipulated otherwise in this Law.”
The claimant of the judicial review claimed that both provisions violate article(1) of the 1945 Constitution. Article 28D(1) discusses the principle of equality before the law. The claimant essentially claimed that both provisions fail to reflect the principle of justice and violate article 28D (1) of 1945 Constitution, thereby making it possible for other parties to use this opportunity (ie, a PKPU application by creditor) to cease and to topple its business competitor through a commercial court.
Decision
The Court explained there are several alternatives for a debtor to restructure its debts:
- by reaching a court or out-of-court settlement with its creditors;
- applying for PKPU including settlement under PKPU proceeding; and
- applying for voluntary bankruptcy, including settlement under bankruptcy proceeding.
These alternatives provide channels for the debtor to negotiate with its creditors. The Court considered the settlement proposal to be the essence of the PKPU proceeding. Even though PKPU may be applied by either a creditor or a debtor, only the debtor thoroughly understands its financial situation. Nevertheless, the Court considered that, even though the creditor is entitled to submit a PKPU application, its “good intention” must be supervised. The Court considered that such supervision is important to preserve economic stability and the debtor’s business activity, as well as the legal certainty that the business actor can use the PKPU proceeding so that it is not easily bankrupted.
The Court further argued that as part of the control mechanism, a court decision may be corrected by the higher court. This is to mitigate the possibility of wrong application of law and partiality by the first-instance court as well as the actual presence of contentious dispute between the debtor and creditor. The Court eventually argued that the appropriate legal remedy for a PKPU decision is a cassation petition, but without the opportunity to file a judicial review.
Comment
This recent decision is important to all business actors, especially for those who are still maintaining a positive outlook of their business, even though their financial condition may be suffering now or in the near future. It must be understood that this decision is only applicable for PKPU applications submitted by the creditor and when the settlement proposal by the debtor is declined. The same legal remedy is not available if the PKPU application is submitted by the debtor. Accordingly, both provisions in article 235(1) and 293(1) are still applicable, but must be construed wider than what has been currently stipulated. This would also mean, if the PKPU is voluntarily applied by the debtor, and then the debtor’s proposal is declined by the creditor in the meeting, that the debtor will immediately go bankrupt.
