An overwiew of the Russian bankruptcy case law, published in the third quarter of 2015

During bankruptcy litigation, a debtor’s receiver applied to the state commercial court to contest a transaction to purchase and sell a transport vehicle under the grounds set in article 61.2(1) of the Bankruptcy Law, as a transaction made for an inadequate consideration.

By a ruling of the state commercial court of the first instance, which was upheld by the courts of appeal and of cassation, the claim was dismissed.

The courts of all three levels pointed out that the receiver failed to provide valid evidence to confirm the actual market price of the vehicle and to file a motion seeking that a court expert review be arranged to determine the market price at the court of first instance.

It followed from the actual circumstances of the case that the price of the contested transaction was many times lower than the price of the vehicle sold, at which the debtor bought it shortly before the transaction was consummated.

The Chamber for Commercial Disputes of the Russian Supreme Court (the “CCD of the RSC”) set aside the judgments of the lower courts and sent the case for a new trial and pointed out as follows.

When the courts referred to the receiver failing to confirm with valid evidence the actual market price of the vehicle, they did not give any legal assessment of the argument that the vehicle purchased at RUB 1,100,000 was sold at RUB 100,000 two months after it was purchased with no evidence being provided that it was damaged and had lost most of its value during the two months mentioned.

During the new trial, the courts was recommended that a legal assessment be given of the arguments of the receiver that the price of the vehicle was reduced tenfold two months after the debtor made a transaction to purchase the vehicle, with no evidence being provided that the vehicle lost most of its value.

To avoid the risks of transactions being subsequently contested as transactions with inadequate consideration, we recommend that you, when consummating transactions, compare the conditions and time limits when the debtor has purchased property and take account of the factors that may materially influence the value of property over the period when it was in the debtor’s possession.