Court undecided over IFC bankruptcy plea

Court undecided over IFC bankruptcy plea

JAKARTA (JP): The Supreme Court has yet to decide over the
International Finance Corporation's (IFC) bankruptcy appeal
against financing company PT Panca Overseas Finance (POF), after
IFC lost a bankruptcy case at the Jakarta Commercial Court.

IFC legal representative Luhut Pangaribuan on Thursday denied
a few media reports saying the Supreme Court had rejected IFC's
bankruptcy appeal against POF.

"That is not correct, we went to the Supreme Court to verify
the news but a ruling on this matter has not been issued," Luhut
told The Jakarta Post.

The IFC, the World Bank's commercial financing arm, filed a
bankruptcy petition against POF last year for unresolved debts
amounting to US$13 million.

It said it took POF to court after two years of negotiations
had failed to produce a debt restructuring deal.

Luhut, however, did confirm that the Supreme Court rejected
IFC's appeal, but on a different issue in the case against POF.

He said the Supreme Court had only rejected IFC's first appeal
against a decision by the supervisory judge at the Jakarta
Commercial Court to verify POF's debts and creditors.

The IFC issued its first appeal shortly after the supervisory
judge approved the verification of POF's creditors and the amount
of their loans.

The appeal was issued on suspicion that POF had falsified
several creditors in an attempt to manipulate the court ruling.

Yet the main case, which is the bankruptcy appeal, remains
undecided, Luhut said.

Although he questioned the reasons behind the Supreme Court
rejecting the appeal according to him the IFC's arguments were
strong.

"We have a police report stating they found strong indications
of criminal action in POF's case," he complained.

To expose false creditors, IFC hired the service of an
internationally-renowned private investigating firm.

Luhut said the firm's reports revealed some irregularities in
the presence of suspected fictitious creditors.

He added that the Supreme Court rejected IFC's first appeal,
because appealing a supervisory judge's ruling was not regulated
under bankruptcy law.

"But our appeal was not against the law, and there was an
earlier case where the same appeal was made," Luhut said,
although he fell short of naming the case.

Asked how the chances were of winning the main appeal after
the first one had been rejected, he said he remained confident.

"We haven't lost the case yet, there is still a possibility
that the Supreme Court will accept our appeal," he said.

Luhut said that the bankruptcy law required the Supreme Court
to respond to IFC's appeal within 30 days of receiving it.

The IFC appealed early last month, after losing its bankruptcy
petition against POF in January.

It suspects that POF escaped the bankruptcy case by
fabricating 14 out of its 31 creditors to vote in favor of POF.

Under bankruptcy law, creditors vote to decide whether to
accept or reject a debtor's debt restructuring proposal.

If the majority of creditors representing at least two thirds
of a company's outstanding debt, approve the proposal, the debtor
will survive the bankruptcy petition.

But since the enactment of the 1998 bankruptcy law, only a few
firms have been declared bankrupt by the Jakarta Commercial
Court.

Foreign investors eye with suspicion the recurring failures of
the Indonesian Bank Restructuring Agency (IBRA) in bringing
uncooperative debtors bankrupt.

The case of IFC against POF is widely seen as a showcase of
how Indonesia's bankruptcy court lacks legal certainty. (bkm)