With reference to the bankruptcy process, it has been decided and it has been characterised that it has a quasi-criminal nature with the aim of protecting and securing the debtor's property so that it can be used as the law defines which is for the satisfaction of the creditors in whole or in part and equally (see London Clubs Ltd v. P. Papadopoulos (2002) 1(C) A.A.D. 1699). Further, in Rashid v. Papori Pol. Appeal No. 198/2012 dated 6/6/2018 the following was mentioned in relation to the bankruptcy procedure: " - The same here, by analogy, bearing in mind that the bankruptcy procedure is a sui generis procedure characterised as quasi-criminal in nature (Williams & Hunter on Bankruptcy, 12th ed. p. 1), where the applicant having no other choice, promoted the bankruptcy of the respondent legally to protect his own interests as well. The fact that a creditor takes the initiative for the bankruptcy of a debtor, which entails some advantage to him, is not considered as equivalent to the use of an unfair purpose or a parallel abusive procedure, (Petrakis v. Kimonos (2006) 1 A.A.D. 1311 ). Fraud or wrongful securing of money for the benefit of the particular creditor needs to be proven in order for a finding that the petition is brought forward on an abusive or unfair basis.
Of course, when examining a bankruptcy petition, the Court does not exercise control over or investigate the motives of the petitioner, but rather over the way the procedures are used (see Filippou v. Kyriakou Pol.Ef.No.348/2012 dated 13/9/2019). The purpose of bankruptcy proceedings is to protect and secure the debtor's property so that it can be used as the law prescribes for the satisfaction of all creditors in whole or in part and equally (London Clubs Ltd (above)).
A settlement proposal on its own despite pending bankruptcy proceedings will not be considered abusive, and would not be objectionable even if it ensured some advantage for the creditor, provided that there is no evidence of fraud and or unfair securing of money at the expense of the debtor and his other creditors (see Petrakis v Kimonos (2006) 1 A.A.D. 131).
If the Judge finds that what the creditor seeks through the bankruptcy proceedings is not the protection of the property for the benefit of all creditors, but the delivery of all the debtor's property to the persons of his choice and without actually taking into account any remaining creditors whose interests are affected, then the application shall be rejected. Additionally, if the Judge determines that the motives of the creditor, is for other purposes that are vindictive and or oppressive for the debtor or can be considered extortion in any way, then again, bankruptcy shall be denied.
For more information regarding bankruptcy proceedings and the law of Cyprus, please contact us at info@clerideslegal.com or con.clerides@clerideslegal.com.