Kuwait Court of Cassation principle number 99

Summary: - Bankruptcy rules are matters of public policy. - A challenge lies only against what is issued pursuant to judicial authority, not against decisions lacking the character of judgments. - Decisions of the bankruptcy judge. Challenging them. Its condition. That the law so provides or that they are issued in a matter outside his jurisdiction. - A customer subject to Law No. 41 of 1993 and its amendments. A special circuit of the Court of First Instance has jurisdiction to declare his bankruptcy upon an application by the Public Prosecution. The court's appointment of the Kuwait Investment Authority as bankruptcy administrator. Its implication. Its right to sell the bankruptcy assets in the manner it considers appropriate, depositing the proceeds of sale in the treasury of the managing bank, by way of exception to Article 724 of the Commercial Code. - Issuance by the bankruptcy judge of a decision authorizing the Kuwait Investment Authority to sell the bankrupt's shares when jurisdiction over that matter lies with the bankruptcy court. Its implication. The invalidity of that decision because it falls outside the jurisdictional authority of the bankruptcy judge. Its effect. It may be challenged. The challenged judgment's departure therefrom and its ruling that the appeal was inadmissible. This renders it defective and requires its cassation. Rule: Whereas the plea raised by the Prosecution that the bankruptcy judge lacks jurisdiction to authorize the Kuwait Investment Authority to sell the bankruptcy assets, and that the Public Debts Bankruptcy Court has jurisdiction to grant that authorization, is well-founded. It is established in the jurisprudence of this Court that the import of paragraph 2 of Article 153 of the Code of Civil Procedure is that, in a cassation appeal, the parties, as well as the Public Prosecution and the Court itself, may raise grounds relating to public policy even if they were not previously invoked before the trial court or in the notice of appeal, provided that the factual and documentary elements necessary to decide them are available. Bankruptcy rules are matters of public policy. Although the import of Article 127 of the Code of Civil Procedure is that a challenge lies only against what the court issues pursuant to its judicial authority, and not against decisions it issues that lack the character of judgments, Article 639/1 of the Commercial Code provides that "Decisions issued by the bankruptcy judge may not be challenged 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 challenged unless issued in a matter outside his jurisdiction or the law provides for permissibility. Under item Eighth of Part Eight of the Executive Regulations of Law No. 41 of 1993 concerning the rules and procedures relating to the role of the Kuwait 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 is competent to authorize the Kuwait Investment Authority, in its capacity as administrator of the body of creditors, to sell the bankruptcy assets in the manner it considers appropriate. The proceeds of sale are to be deposited in the treasury of the managing bank for distribution to creditors pursuant to Article 21 of Law No. 41 of 1993 and its amendments, after deduction of the sums allocated by the court for expenses. Article 14 of Law No. 41 of 1993 concerning the State's purchase of certain debts provides that "The Public Prosecution may request that a customer who ceases payment be declared bankrupt in accordance with this Law ........ A special circuit or more shall be designated at the Court of First Instance to declare the bankruptcy of customers subject to this Law, composed of 3 judges. In the bankruptcy declaration judgment, the court shall appoint the Kuwait Investment Authority as bankruptcy administrator. In bankruptcy declaration proceedings before the court, the provisions of Part Four of the Commercial Code shall be followed in matters for which no special provision is made in this Law. This indicates that the legislature designated a special court competent to hear applications to declare the bankruptcy of a customer subject to this Law who has ceased payment, upon an application by the Public Prosecution. In the bankruptcy declaration judgment, the court appoints the Kuwait Investment Authority as bankruptcy administrator. Accordingly, actions seeking a declaration of bankruptcy of a customer subject to Law No. 41 of 1993 have become subject to the exclusive jurisdiction of that circuit. Item Eighth of Part Eight of the Executive Regulations of Law No. 41 of 1993 concerning the rules and procedures relating to the role of the Kuwait Investment Authority in implementing Law No. 41 of 1993 concerning the State's purchase of certain debts and the manner of their collection, issued by Council of Ministers Resolution No. 804 of 1995, provides that "By way of exception to Article 724 of the Commercial Code, the Kuwait Investment Authority, in its capacity as administrator of the body of creditors and after approval of the bankruptcy court, may sell the bankruptcy assets in the manner it considers appropriate. The proceeds of sale shall be deposited in the treasury of the managing bank for distribution to creditors pursuant to Article 21 of Law No. 41 of 1993 and its amendments, after deduction of the sums allocated by the court for expenses." The bankruptcy court has jurisdiction to approve authorization for the Kuwait Investment Authority to sell the bankruptcy assets in the manner it considers appropriate, as provided in item Eighth of Part Eight of the Executive Regulations of Law No. 41 of 1993, by way of exception to Article 724 of the Commercial Code, which vested the bankruptcy judge with jurisdiction to sell the bankrupt's movable property in accordance with the procedures specified. Since approval authorizing the Kuwait Investment Authority to sell the shares that are the subject of the challenged decision was issued by the bankruptcy judge, although jurisdiction lay with the bankruptcy court, that decision was issued outside the scope of the bankruptcy judge's jurisdictional authority, is invalid, and may be challenged before the competent court. Since the challenged judgment departed from this view and ruled that the appeal was inadmissible, it is defective and must be quashed on this ground, without any need to examine the grounds of appeal.