The judgment below is reversed, and the case is remanded to Busan High Court.

The grounds of appeal are examined.

1. Article 422 Subparag. 2 of the former Debtor Rehabilitation and Bankruptcy Act (amended by Act No. 12892, Dec. 30, 2014; hereinafter “Rehabilitation Act”) provides that a set-off may not be made when a bankruptcy creditor bears an obligation against the debtor, knowing that the bankruptcy creditor has been suspended from payment or a petition for bankruptcy.

Meanwhile, Article 6(1) and (4) of the Debtor Rehabilitation Act provides that in cases where a decision to discontinue rehabilitation procedures becomes final and conclusive after authorization is granted for the rehabilitation plan for the debtor who has not been declared bankrupt, the court shall, when it recognizes the fact that causes bankruptcy to the debtor, declare the bankruptcy ex officio. In such cases, in the application of the provisions of Part III (Bankruptcy Procedures), when no application is filed for the suspension of payment or bankruptcy prior to the declaration of bankruptcy, the "application for the commencement of rehabilitation procedures" or "act of the director (including managing members and other persons corresponding thereto) of the corporate debtor (including any person corresponding thereto) of the crime of fraud

Considering the purport of the provision that intends to smoothly link the rehabilitation procedures, including the “Rehabilitation” and “Bankruptcy”, along with the contents of each of the above provisions, when a decision to discontinue the rehabilitation procedures becomes final and conclusive after authorization was granted for the rehabilitation plan, and the debtor’s director, etc., who is a corporation subject to suspension of payment, bankruptcy petition, or fraud bankruptcy, has not been filed before the application for commencement of rehabilitation procedures is filed, the debtor’s “application for commencement of the rehabilitation procedures” is deemed to be deemed to be the “payment suspension” or “bankruptcy application,” which serves as the basis for setting the scope of prohibition

2. The reasoning of the first instance judgment as cited by the lower court and the evidence duly admitted are as follows.