Creditors challenge bankruptcy ruling

Dadan Wijaksana, The Jakarta Post, Jakarta

In another test of the credibility of the country's legal system, Exim SB Leasing and Bank Sumitomo Mitsui Indonesia filed an appeal with the Surabaya High Court to challenge a lower court's controversial decision which suspends a bankruptcy ruling against gold producer PT Itamaraya Gold Industry (IGI).

While citing the ruling as bizarre, lawyer Ricardo Simanjuntak, who represents Exim and Sumitomo -- whose majority stakes are owned by the Japanese investors -- said his clients intended to fight the ruling, not only to seek justice but also to help clean up the country's messy legal system.

"What's been happening to this case is by and large confusing. It's much worse than the Manulife case. Therefore we'll keep on fighting," Ricardo told The Jakarta Post on Thursday.

He was referring to the July 11 ruling by the Surabaya District Court ordering a suspension on the bankruptcy ruling made by the Supreme Court.

He questioned the legal basis of a lower court overturning a ruling made by a higher court.

Ricardo said that Itamaraya owed the creditors some US$870,000 in debt.

The legal dispute began late last year when Exim and Sumitomo accused the Surabaya-based gold producer of failing to fulfill its debt payment obligation and filed a bankruptcy petition against the company with the Surabaya Commercial Court.

The conflicting parties then engaged in a fierce and protracted legal battle all the way to the Supreme Court.

On April 29 however, the Supreme Court ruled in favor of Exim and Sumitomo, declaring Itamaraya bankrupt.

Itamaraya then filed a lawsuit with the Surabaya District Court against the two banks to overturn the decision, arguing that the decision had no legal basis as the company did not owe anything to Sumitomo.

Foreign creditors have been facing difficulties in sending delinquent debtors into bankruptcy, which some say is due to the country's weak and corrupt legal system. This has been seen as a factor discouraging investors to return to the country.