Kuwait Court of Cassation principle number 481

Summary: - Bankruptcy rules are matters of public policy. - An appeal lies only against what is issued pursuant to judicial authority, and not against decisions which do not have the character of judgments. - Decisions of the bankruptcy judge. Appealing against them. Condition. The law must provide for this, or they must have been issued in a matter not falling within his jurisdiction. - A client subject to the provisions of Law No. 41 of 1993 and its amendments. A special circuit of the Court of First Instance has jurisdiction to adjudicate his declaration of bankruptcy, upon an application by the Public Prosecution. The court’s appointment of the Public Investment Authority as administrator of the bankruptcy estate. Implication. Its right to sell the assets of the bankruptcy estate in the manner it considers appropriate, with the proceeds of sale deposited in the treasury of the managing bank, by way of exception to Article 724 of the Commercial Code. - Issuance of a decision by the bankruptcy judge granting the Public Investment Authority permission to sell the bankrupt’s shares when jurisdiction over this lies with the bankruptcy court. Implication. This decision is void because it falls outside the scope of the bankruptcy judge’s jurisdictional authority. Effect. It may be appealed. The challenged judgment’s departure from this and its ruling that the appeal is impermissible. This vitiates it in a manner necessitating its cassation. Rule: Whereas, regarding the plea raised by the Public Prosecution that the bankruptcy judge lacks jurisdiction to grant the Public Investment Authority permission to sell the assets of the bankruptcy estate, and that the Public Debts Bankruptcy Court has jurisdiction to grant this permission, it is well founded. It is established in the jurisprudence of this Court that the import of the second paragraph of Article 153 of the Law of Procedure is that, in an appeal by way of cassation, the parties may—as may the Public Prosecution and the Court itself—raise grounds relating to public policy even if they were not previously invoked before the trial court or in the notice of appeal, whenever the elements necessary to determine them are available from the facts and papers. Bankruptcy rules are matters of public policy. Although the import of Article 127 of the Law of Procedure is that an appeal lies only against what the court issues pursuant to its judicial authority, and not against decisions it issues which do not have the character of judgments, Article 639/1 of the Commercial Code provides that “Decisions issued by the bankruptcy judge may not be appealed unless the law provides that this is permissible or the decision exceeds the bankruptcy judge’s jurisdiction.” This means that decisions of the bankruptcy judge may not be appealed unless issued in a matter not falling within his jurisdiction or the law provides for permissibility. Pursuant to item Eight of Part Eight of the Implementing Regulations of Law No. 41 of 1993 concerning the rules and procedures relating to the role of the Public Investment Authority in implementing the provisions of the aforementioned Law concerning the State’s Purchase of Certain Debts and the Manner of Their Collection, the bankruptcy court has jurisdiction to grant permission to the Public Investment Authority, in its capacity as administrator of the body of creditors, to sell the assets of the bankruptcy estate in the manner it considers appropriate. The proceeds of sale shall be deposited in the treasury of the managing bank, which shall distribute them to the creditors pursuant to Article 21 of Law No. 41 of 1993 and its amendments, after deducting the amounts allocated by the court for expenses. The provision in Article 14 of Law No. 41 of 1993 concerning the State’s Purchase of Certain Debts that “The Public Prosecution to request a declaration of bankruptcy of a client who ceases payment pursuant to the provisions of this Law ........ A special circuit or more shall be designated at the Court of First Instance for declaring the bankruptcy of clients subject to the provisions of this Law, composed of three judges. In the judgment declaring bankruptcy, the court shall appoint the Public Investment Authority as administrator of the bankruptcy estate. The provisions of Part Four of the Commercial Code shall be followed before the court in declaring bankruptcy, insofar as no special provision thereon appears in this Law” indicates that the legislature designated a special court with jurisdiction to consider applications to declare the bankruptcy of a client subject to the provisions of this Law who has ceased payment, upon an application by the Public Prosecution. In the judgment declaring bankruptcy, the court appoints the Public Investment Authority as administrator of the bankruptcy estate. Accordingly, actions brought seeking a declaration of bankruptcy of a client subject to the provisions of Law No. 41 of 1993 have become a matter within the exclusive jurisdiction of that circuit. Item Eight of Part Eight of the Implementing Regulations of Law No. 41 of 1993 concerning the rules and procedures relating to the role of the Public Investment Authority in implementing the provisions of Law No. 41 of 1993 concerning the State’s Purchase of Certain Debts and the Manner of Their Collection, issued by Council of Ministers Decision No. 804 of 1995, provides that “By way of exception to the provisions of Article 724 of the Commercial Code, the Public Investment Authority, in its capacity as administrator of the body of creditors and after obtaining the bankruptcy court’s approval, may sell the assets of the bankruptcy estate in the manner it considers appropriate. The proceeds of sale shall be deposited in the treasury of the managing bank, which shall distribute them to the creditors pursuant to Article 21 of Law No. 41 of 1993 and its amendments, after deducting the amounts allocated by the court for expenses.” Whereas the bankruptcy court has jurisdiction to approve the granting of permission to the Public Investment Authority to sell the assets of the bankruptcy estate in the manner it considers appropriate, as provided in item Eight of Part Eight of the Implementing Regulations of Law No. 41 of 1993, by way of exception to the provisions of Article 724 of the Commercial Code, which conferred jurisdiction on the bankruptcy judge to sell the bankrupt’s movables in accordance with the procedures specified. Since approval granting the Public Investment Authority permission to sell the shares that are the subject of the challenged decision was issued by the bankruptcy judge, whereas jurisdiction over this lies with the bankruptcy court, that decision was issued outside the scope of the bankruptcy judge’s jurisdictional authority. It is therefore void and may be appealed before the competent court. Since the challenged judgment departed from this view and ruled that the appeal was impermissible, it is defective, necessitating its cassation on this ground without any need to examine the grounds of appeal.