Court accepts Danamon bankruptcy case
JAKARTA (JP): The Central Jakarta Commercial Court on Thursday decided to proceed with a bankruptcy petition filed by Bank IFI against publicly listed Bank Danamon, despite the objection from the central bank, Bank Indonesia.
Speaking to reporters after the first hearing of the case, chief judge Subari said that by law a court could not turn down a petition it had received.
"The validity (of the petition) comes later, that's part of the case's substance," Subari explained.
"If I reject it (petition) now, it's the same as issuing a verdict," he added.
Subari responded to Bank Indonesia's objections to the case, which according to the central bank violated the bankruptcy law.
Under the 1998 bankruptcy law, only Bank Indonesia can file a petition against a bank.
Last week, Bank IFI filed a bankruptcy petition against Bank Danamon. It charges the latter neglected payment of debts, interest rates, and penalties amounting to $12 million.
Bank IFI legal representative Hotman Paris Hutapea has said his client appealed to Bank Indonesia for a bankruptcy petition against Bank Danamon several times, but to no avail.
"Creditors have the right to seek protection under the law," he said.
But Bank Indonesia governor Sjahril Sabirin earlier explained that liquidating Bank Danamon would damage the overall banking environment.
"Since when does the commercial court needs Bank Indonesia's approval?" Subari snapped at reporters.
The loan dispute centers around Bank Danamon's rejection to pay Bank IFI the interest rates and penalties of its principle debts of $4.6 million, which were due in 1998.
Bank Danamon took over the $4.6 million debts from Bank Nusa Nasional, after the latter was merged with Bank Danamon along with seven other banks last year.
In 1996, Bank Nusa agreed to commit some $16.78 million in a loan syndication with other banks for PT Riau Prima Energi. As the bank lacked funds, it borrowed $5 million from Bank IFI, which joined the banking syndicate under a sub-participation deal.
Later, the loans to Riau Prima turned out to be non- performing, prompting Bank IFI to withdraw from the banks' syndicate in 1998, according to Bank Danamon's legal representative Amir Syamsuddin.
He said Bank IFI's decision to exit the syndicate should have denied it the rights to receive interest and penalty payments on the loans.
"It's only fair that Bank IFI receive only the principle amount, as the other banks in the syndicate, continue to carry the burden of Riau Energi's non-performing loans," he said.
He said that if Bank IFI wanted to get more, it should seek a settlement through an arbitration panel.
The law protected banks from bankruptcy petitions other than from Bank Indonesia, because banks liquidations carry heavy social consequences, Amir went on saying.
Bank Danamon, which was one of the country's largest private banks, is 99 percent owned by the government, following the injection of Rp 28.9 trillion (about US$2.6 billion) worth of recapitalization bonds. The remainder belongs to the investing public.
Hotman argued that a court may overrule a law if the reasons presented before it could justify such a decision.
"In the past, there have been many examples of courts achieving a breakthrough, the bankruptcy law is just another one," he said.
The court will proceed with its hearing on Wednesday next week.(bkm)