[1] Requirements for exercising the avoidance power under the Company Reorganization Act

[2] Whether the exercise of the right to set aside against some creditors under the Company Reorganization Act is against the good faith principle (negative)

[1] Where a company performs an act to extinguish an obligation after an application for suspension of payment, bankruptcy, commencement of composition or commencement of reorganization proceedings is made pursuant to Article 78 (1) 2 of the Company Reorganization Act, it may be denied only if a person who receives benefit therefrom knows that payment is suspended at the time of such act, or that such act would prejudice reorganization creditors, etc. In such a case, it is not required that the company was aware that it would prejudice reorganization creditors, etc. as in Article 78 (1) 1 of the Company Reorganization Act.

[2] The repayment of part of the debt is a company which filed an application for the commencement of reorganization proceedings, and the exercise of the avoidance power is a separate existence of both parties as a receiver of the reorganization company, and the exercise of the avoidance power is an inherent authority of the custodian to be subject to the repayment of the debt of the non-party company prior to the commencement of reorganization proceedings. Therefore, the exercise of avoidance power by the custodian is not in violation

[1] Article 78 (1) 2 of the Company Reorganization Act / [2] Article 2 of the Civil Act, Article 78 (1) 2 of the Company Reorganization Act

Korea Life Insurance Co., Ltd. (Attorneys Choi Jong-soo et al., Counsel for the defendant-appellant)

A receiver of Masethyl Co., Ltd. (Attorney Ma-tae, Counsel for the plaintiff-appellant-appellant)

Seoul High Court Decision 96Na27720 delivered on October 22, 1996

The appeal is dismissed. The costs of appeal are assessed against the plaintiff.

The grounds of appeal are examined.

Where a company performs an act to extinguish an obligation after an application for suspension of payment, bankruptcy, commencement of composition or commencement of reorganization proceedings has been made pursuant to Article 78 (1) 2 of the Company Reorganization Act, it may be denied only if the person who received profits therefrom knows the fact that the payment is suspended at the time of such act, or that the reorganization creditors damage the reorganization creditors, etc., and in such a case, it does not require an act to be done with the knowledge that the company would prejudice the reorganization creditors, etc. as in Article 78 (1) 1

According to the facts cited by the judgment of the court of first instance, which was duly affirmed by the court below, the non-party 1 corporation was unable to settle the payment bill on January 10, 1994 due to the aggravation of financial standing, and applied for a disposition of suspension of banking transactions and for a disposition of preservation of company property at the Seoul District Court, but the above applications were all dismissed on February 3 of the same year at the Seoul District Court. After filing an immediate appeal against the above dismissal decision, the non-party 1.6 billion won out of the loans owed to the plaintiff at the time of the same month. At that time, the plaintiff was paid 200 million won of the above loans to the Seoul District Court after being subject to a disposition of suspension of banking transactions as above and being notified of the fact that the above company was applied for the commencement of reorganization proceedings and the disposition of preservation of company property. Thus, the plaintiff's act of receiving 200 million won of the above repayment constitutes the subject of avoidance under Article 78 (1) 2 of the Company Reorganization Act.

In addition, the repayment of the debt in this case is the non-party company, and the exercise of the right to set aside is separate from each other, and the exercise of the right to set aside is the inherent authority of the administrator to comply with the act of repayment of the debt in the non-party company before the commencement of reorganization proceedings. Therefore, the exercise of the right to set aside by the administrator is not against the good faith principle

In the same purport, the decision of the court of first instance that rejected the plaintiff's claim of this case seeking the revocation of the decision of denial and the rejection of the plaintiff's claim of denial as of May 18, 1995 by Seoul District Court 95Da3569 is justified and the decision of the court of first instance is just and it is not erroneous in the misapprehension of legal principles as to the avoidance power system as pointed out in the ground of appeal. The ground of appeal cannot be accepted.

Therefore, the appeal is dismissed, and the costs of appeal are assessed against the plaintiff who is the appellant. It is so decided as per Disposition by the assent of all participating Justices.

Justices Park Jong-chul (Presiding Justice)