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Publication date: 23.05.2024
lawyer, 23 years of experience in enforcement.
Recognizing electronic auctions as invalid
The procedure for the sale of seized property is regulated by the Order approved by the Order of the Ministry of Justice of Ukraine dated September 29, 2016 No. 2831/5.
Clauses 7-9 of Section X of Order No. 2831/5 establish that no later than the next working day from the date of issuing/sending the certificate of electronic auctions to the winner, all arrests and bans imposed by state enforcement agencies (private executors) shall be removed from such property by the executor (except for the arrest imposed for the execution of the court decision on taking measures to secure the claim). Copies of the decision of the executor on the removal of the attachment from the sold property are sent no later than the next working day after its issuance to the winner and the relevant authority (institution) for the removal of the attachment.
The act of conducted electronic auctions is a document that confirms the emergence of the right of ownership of the purchased property, in cases provided for by law.
In the case of the purchase of movable property, the certificate of electronic auctions is the basis for obtaining the property. The specified act confirms the emergence of the right of ownership of the person who purchased the movable property.
Analyzing the legal nature of the procedure for the sale of property at public auctions, which consists in the sale of property, i.e. in ensuring the transfer of ownership of the debtor’s property subject to foreclosure to the buyer, a participant in public auctions, and taking into account the peculiarities provided by the legislation on conducting public auctions, the Supreme The court concluded that this procedure is the formalization of contractual relations of purchase and sale of property at public auctions, that is, it is a deed. (Decision in case No. 910/13670/18 of September 12, 2019, Decision in case No. 372/3161/18 of September 24, 2020).
The above is consistent with the norms of Part 4 of Art. 656 of the Civil Code of Ukraine, according to which the general provisions on purchase and sale are applied to the purchase and sale contract at exchanges, auctions (public bidding), unless otherwise established by the law on these types of purchase and sale contracts or does not follow from their essence.
The Supreme Court emphasized that the legal nature of the sale of property through public auctions provides grounds for the possibility of declaring the auctions invalid according to the rules for invalidating transactions, in particular on the basis of civil legislation (Articles 203, 215 of the Civil Code of Ukraine) on the invalidity of a transaction as such, which does not meets the requirements of the law, in case of non-fulfillment of the requirements regarding the procedure, order of bidding, provided for by Order No. 2831/5.
Plaintiffs usually justify that public (electronic) auctions were conducted in violation of the requirements of the law and, on these grounds, their results are subject to recognition as invalid, and as a consequence, title-establishing documents drawn up based on the results of the auctions are also subject to recognition as invalid, namely, the act of a private executor on the conducted electronic auctions and a certificate of purchase of real estate from public auctions.
In the absence of grounds for leaving the statement of claim without movement, returning the statement (Article 185 of the Code of Civil Procedure of Ukraine) and refusing to open proceedings in the case (Article 186 of the Code of Civil Procedure of Ukraine), the court opens proceedings in the case.
In the decision of the Supreme Court of Ukraine dated April 6, 2016 in case No. 3-242gs16, it was concluded that when resolving a dispute about the recognition of electronic auctions as invalid, the courts must establish whether there was a violation of the requirements of the Temporary Order (acts before the entry into force of Order No. 2831/5 - ed.) and other legal norms when conducting electronic auctions; whether these violations affected the results of electronic auctions; whether there was a violation of the rights and legitimate interests of the plaintiffs who dispute the results of electronic auctions.
The decision of the Supreme Court of Ukraine dated November 29, 2017 in case No. 668/5633/14-ts also states the legal conclusion that the main condition to be established by the courts is the presence of violations that could affect the outcome of the auctions, and therefore, in addition to if there is a violation of the law during public auctions, violations of the rights and legitimate interests of the person contesting them must also be established, the method of protection of which is to declare public auctions invalid.
Thus, the basis for filing a lawsuit to declare public auctions invalid is the presence of a violation of the law when conducting auctions at the same time as a violation of the rights and legitimate interests of the person contesting them.
Usually, such reasons arise due to errors by executors during the preparation of applications for the sale of seized property, because the bidding organizer does not check the content of the application for compliance with the requirements of the law.
In order for the court to recognize public auctions as invalid, the following are necessary: the existence of grounds for declaring public auctions invalid (violation of the rules of conducting electronic auctions); establishing whether the subjective civil right or interest of the person who appealed to the court is violated (not recognized or contested).
Considering cases regarding the invalidation of the results of public auctions, the Supreme Court formulated conclusions on the Consequences of invalidating electronic auctions, came to the conclusion that Violation of the rules of public auctions established by law is the basis for their invalidation, Failure to conclude an act of electronic auctions does not mean the auctions themselves are invalid and their results, and many others that can be found in the Lex system.
If the plaintiff does not prove that the violations mentioned by him affected the result of electronic auctions, and there are no circumstances proving the violation of the rights and legitimate interests of the plaintiff in conducting electronic auctions, the court makes a decision to refuse to satisfy the claim (the decision of the Supreme Court in case No. 372/3161/18 of September 24, 2020).
According to Art. 272 of the Civil Procedure Code of Ukraine, copies of the full court decision are handed to the participants of the case who were present at the court session, immediately after the announcement of such a decision. If a summary decision is announced at a court session, the court shall send a copy of the full court decision to the parties within 2 days from the date of its drafting.
The court's decision is executed in general order. According to Art. 354 of the Civil Code of Ukraine, the decision of the court of first instance can be appealed within 30 days from the day of its announcement.
The procedure for declaring electronic auctions invalid is long-term and quite complicated, the borzhnik can hardly appeal them. Please note that pre-trial dispute regulation is not possible in this matter. Recognizing electronic trades as invalid is only possible through judicial dispute regulation.
Legal service "Consultant" will select a lawyer or an attorney who will conduct a legal analysis of the situation, file a claim declaring electronic auctions invalid, and also help in gathering the evidence base for the most effective resolution of the issue. Service specialists will accompany the process of declaring bids invalid from the beginning to the execution of the court decision. They will also provide consultation and help in solving such issues as: preparation of amicable settlement with the creditor, amicable settlement,bankruptcy of an individual, change of the debtor and also.
