PT Suryamas loses derivative suit
JAKARTA (JP): PT Suryamas Dutamakmur lost its legal battle with Bank Niaga when the Supreme Court upheld the bank's appeal and annulled an earlier verdict favoring the property developer, a source at the Supreme Court said.
The source said the verdict, dated Dec. 17, annulled the Jakarta State Administrative High Court's decision ordering the bank to compensate Suryamas Dutamakmur in the amount of Rp 290 billion (US$41.5 million) for a derivative transaction.
The Supreme Court ruled the transaction between Bank Niaga and Suryamas Dutamakmur was valid under existing laws and must be honored by both parties.
The verdict was reached by a three-member panel of justices led by Chief Justice Sarwata. The panel also included Paulus Lotulong and Syafeudin.
Bank Niaga president Ruddy Capelle said he had heard about the Supreme Court's decision but had not yet received a copy of the verdict. "The party that is right has finally won victory," Ruddy said commenting on the verdict.
He also said justice in the Niaga-Suryamas case was finally reached through the Supreme Court.
Lawyers familiar with the case said the Supreme Court's verdict would be a "landmark decision" for other derivative cases. There are currently eight derivative cases working their way through the South Jakarta District Court.
The dispute between Niaga and Suryamas began in 1997 when the property developer applied for a derivative transaction from Bank Niaga to develop the Rancamaya housing complex in Bogor, West Java, and the Bumi Manggala housing complex in Cibubur, East Jakarta.
The derivative transaction was a cross-currency interest rate agreement in which the two parties swapped their obligations, one in rupiah and the other in U.S. dollars.
Under the agreement, Suryamas was to deliver to Bank Niaga a principal amount of $50 million while Bank Niaga, in return, was to deliver an amount of rupiah equivalent to $50 million at the predetermined exchange rate of around Rp 2,500 per dollar.
When the rupiah plunged against the greenback following the economic crisis, Suryamas claimed Bank Niaga had entrapped it an "exotic" banking transaction without providing it adequate counsel.
Suryamas filed suit against Bank Niaga with the South Jakarta District Court in July 1998. The court ruled in favor of Suryamas and ordered Bank Niaga to compensate the property developer.
Bank Niaga filed an appeal with the Jakarta State Administrative High Court. The bank argued that the derivative transaction was a normal banking transaction and that Suryamas itself had admitted to the $50 million obligation to Bank Niaga in its audited financial statements on Dec. 31, 1997, and Dec. 31, 1998.
However, the high court in April last year sustained the lower court's decision. Bank Niaga continued its legal battle by filing an appeal to the Supreme Court.
Then the case took a sudden turn. According to Ruddy, Suryamas in October asked Bank Niaga to drop its appeal to the Supreme Court and discuss an out-of-court settlement.
Bank Niaga rejected the offer, expecting to win the legal battle and also assuming that Suryamas' offer was an "empty" one, Ruddy said.
"There was not enough explanation about the reasons, compromises and consequences of the offer," he said.
Another source said the Indonesian Bank Restructuring Agency (IBRA) intervened in the Suryamas-Niaga case, attempting to persuade Bank Niaga to accept Suryamas' offer.
IBRA took over the private commercial bank when Niaga's shareholders could not save the bank from insolvency following a run by depositors.
Ruddy however declined to comment when asked about any intervention by IBRA in the case. "I have no comment on that," he said, adding only that his bank rejected Suryamas' offer on a very sound basis.
Ruddy said Bank Niaga had a similar derivative case with property firm Jakarta International Hotel Development.
"They offered us an out-of-court-settlement with complete and fair terms and conditions, what may be called a peace accord," he said.
Ruddy said based on this so-called peace accord, Bank Niaga agreed to the out-of-court settlement after receiving ownership of a 1.5-hectare piece of property located in Jakarta's Central Business District. (udi)