Article 35 of the former Subsidy Act is a valid provision and is null and void for an act of disposal in violation of such provision. Article 35 of the former Subsidy Act also applies to an indirect subsidy program operator, the other party who traded with an indirect subsidy program operator is at a disadvantage that may be invalidated due to the circumstances not explicitly provided for in the Act. This has a significant impact on the safety and legal stability of the transaction. Therefore, Article 35 of the former Subsidy Act shall be strictly interpreted in accordance with its language and text, and it is difficult to view that it is of a nature that can be easily interpreted or analogically interpreted

Article 2 of the former Subsidy Act clearly distinguishess the terms of “subsidies, subsidies, and indirect subsidies” and “indirect subsidies, indirect subsidies, and indirect subsidies”. Accordingly, the former Subsidy Act explicitly distinguishess and regulates subsidy program operators and indirect subsidy program operators from individual provisions. As a result, Article 23 of the former Subsidy Act on the approval of the head of a central government agency for the change, etc. of the contents of subsidy program provides for only the application of subsidy program operators and indirect subsidy program operators, and Article 22 of the former Subsidy Act on the prohibition of use of subsidy for other purposes provides for both subsidy program operators and indirect subsidy program operators, and Article 30 of the former Subsidy Act on the revocation of the decision to grant due to the violation of Acts and subordinate statutes provides for all of them in terms of procedures.

In particular, Article 34(2) of the former Subsidy Act stipulates that, in relation to Article 15 of the former Enforcement Decree of the Act on the Budgeting and Management of Subsidies (amended by Presidential Decree No. 23264, Oct. 26, 2011), an increase or decrease of important property (hereinafter “important property”) and the present value thereof are subject to application of “indirect subsidy, indirect subsidy,” other than “indirect subsidy,” but Article 35 of the former Subsidy Act does not specify “indirect subsidy” and “indirect subsidy” as subject to application.

Article 35 of the former Subsidy Act prevents the use of, or disposal of, property acquired from a subsidy granted by the State budget for any purpose other than the intended purpose of granting the subsidy, thereby ensuring the proper management of the State and the effectiveness of the subsidy for a subsidy program. Therefore, it is consistent with the legislative intent of Article 35 of the former Subsidy Act to treat indirect subsidies that are financed by the State budget and the local government’s own budget only from the subsidies created by the State budget, which are subject to only regulation on the “subsidized project operator and subsidy.”

1. As to the assertion of misapprehension of legal principles as to the scope of application of Article 35 of the former Subsidy Budget and Management Act (amended by Act No. 10898, Jul. 25, 2011; hereinafter “former Subsidy Act”) by the Defendant and the Intervenor joining the Defendant (hereinafter “ Intervenor”)

(a) Article 35 of the former Subsidy Act provides, “The owner of a subsidized project shall not use, transfer, exchange, or lend, or provide as security, important property acquired with a subsidy or the utility of which increased, for any purpose that violates the purpose of the grant of the subsidy, even after the completion of the subsidy program in question, without the approval of the head of the central government agency.”

Meanwhile, Article 35 of the former Subsidy Management Act (amended by Act No. 10898, Jul. 25, 2011; amended by Act No. 13931, Jan. 28, 2016; hereinafter “Subsidy Act”) provides that “A subsidy program operator or indirect subsidy program operator shall clarify the present value and increase in material property prescribed by Presidential Decree (hereinafter “material property”) acquired with a subsidy or indirect subsidy or the utility thereof increased, as prescribed by Presidential Decree, and shall report the present status thereof to the head of a central government agency or the head of the relevant local government,” and Paragraph (3) of the same Article provides that “A subsidy program operator or indirect subsidy program operator shall not, without approval from the head of the relevant central government agency, engage in any of the following activities with respect to material property without approval even after the completion of the relevant subsidy program:

B. In full view of the nature of Article 35 of the former Subsidy Act, the regulatory structure and method of the former Subsidy Act and the legislative intent of Article 35 of the former Subsidy Act with respect to “indirect subsidy and indirect subsidy program operators” and “indirect subsidy and indirect subsidy program operators, etc., it shall be deemed that Article 35 of the former Subsidy Act does not apply to indirect subsidy program operators and indirect subsidy program operators. The reasons are as follows.

(1) Article 35 of the former Subsidy Act is an effective provision and is null and void for an act of disposal in violation of such provision (see Supreme Court Decision 2004Da5556, Oct. 28, 2004). Article 35 of the former Subsidy Act applies to an indirect subsidy program operator, the other party to the transaction with the indirect subsidy program operator is at a disadvantage that may be invalidated due to the circumstance that the other party to the transaction with the indirect subsidy program operator is not explicitly provided for in the Act. This may affect the safety and legal stability of the transaction. Therefore, Article 35 of the former Subsidy Act shall be strictly construed in accordance with its language and text, and it is difficult to view that the act of disposal in violation of such provision may be

(2) Article 2 of the former Subsidy Act clearly differentiates the term “subsidies, subsidized projects, and subsidized projects” and “indirect subsidy projects, indirect subsidy projects, and indirect subsidy projects” (see Supreme Court Decision 2016Do1103, Sept. 7, 2017). Accordingly, the former Subsidy Act explicitly separates and regulates subsidy project operators and indirect subsidy project operators from each individual provision. As such, Article 23 of the former Subsidy Act explicitly specifies only the subject of application of subsidy project operators and Article 22 of the former Subsidy Act on the approval of the head of a central government agency on the change, etc. in the contents of subsidy projects. For example, the former Subsidy Act explicitly prescribes both subsidy project operators and indirect subsidy project operators as the subject of application of all subsidy projects, and Article 30 of the former Subsidy Act on the revocation of a decision to grant a decision to use a subsidy due to a violation of a law prescribes both of them as the subject of application and regulates them differently in terms

In particular, Article 34(2) of the former Subsidy Act stipulates that, in relation to Article 15 of the former Enforcement Decree of the Act on the Budgeting and Management of Subsidies (amended by Presidential Decree No. 23264, Oct. 26, 2011), an increase or decrease of important property (hereinafter “important property”) and the present value thereof are subject to application of “indirect subsidy, indirect subsidy,” other than “indirect subsidy,” but Article 35 of the former Subsidy Act does not specify “indirect subsidy” and “indirect subsidy” as subject to application.

(3) The legislative purpose of Article 35 of the former Subsidy Act is to continuously secure the appropriate management and the effectiveness of subsidies for subsidized projects by preventing the property acquired with subsidies granted by the State budget from being used or disposed of for any purpose other than the intended purpose of its grant (see Supreme Court Decision 2004Da5556, Oct. 28, 2004). Therefore, it accords with the legislative intent of Article 35 of the former Subsidy Act to treat indirect subsidies, which are used only as financial resources of the State budget and local government’s own budget, separately from subsidies created by the State’s budget and local government’s own budget, by regulating only the scope of “subsidized project operators and subsidies.”

C. Nevertheless, even if Article 35(3) of the former Subsidy Act does not expressly stipulate indirect subsidy program operators, the lower court presumed that the instant land acquired by the Nonparty, an indirect subsidy program operator, constitutes an indirect subsidy program operator, and thus, the disposal thereof is limited as it constitutes an important property under Article 35 of the former Subsidy Act. In so determining, the lower court determined that each registration of establishment of a mortgage on the instant land, which was created by the Nonparty, was null and void. In so determining, the lower court erred by misapprehending the legal doctrine on the scope of application of Article 35 of the former Subsidy Act, contrary to what is alleged in the grounds of appeal by the Defendant and the Intervenor, thereby adversely affecting the conclusion of the judgment. The allegation contained in

2. As to the ground of incidental appeal by the Plaintiff

The Plaintiff’s ground of incidental appeal is that, on the premise that Article 35(a) and (b) of the former Subsidy Act are also applied to indirect subsidy program operators and indirect subsidy, the lower court determined that the Do expenses and Si expenses among indirect subsidies granted to acquire the instant land were not subject to the said provision, and that the Plaintiff’s ground of incidental appeal is erroneous to have determined that the instant building and the instant land and the machinery, instruments,

However, as seen earlier, insofar as deeming that Article 35 of the former Subsidy Act does not apply to indirect subsidy program operators or indirect subsidy program operators, the grounds of incidental appeal by the prior Plaintiff on a different premise are without merit without further need to determine the grounds of incidental appeal.

3. Conclusion

Therefore, without further proceeding to decide on the remaining grounds of appeal by the Defendant and Intervenor, the part against the Defendant among the judgment below is reversed, and that part of the case is remanded to the court below for further proceedings consistent with this Opinion. The Plaintiff’s supplementary appeal is dismissed. It is so decided as per Disposition by the assent of all participating Justices

Justices Jo Hee-de (Presiding Justice)