[1] The meaning of "fair and equitable" under the former part of Article 243(1)2 of the former Debtor Rehabilitation and Bankruptcy Act as a requirement for authorization of the rehabilitation plan

[2] Where creditors have reached an agreement on the repayment order of claims but evidentiary materials have not been submitted to the court prior to the date of the first meeting of persons concerned pursuant to Article 193(3) of the former Debtor Rehabilitation and Bankruptcy Act, whether the court must consider the agreement when determining whether to grant authorization of the rehabilitation plan (negative in principle)

[1] In order for a court to grant authorization of a rehabilitation plan, the rehabilitation plan should be fair and equitable in accordance with the former Debtor Rehabilitation and Bankruptcy Act (amended by Act No. 12892, Dec. 30, 2014; hereinafter “Rehabilitation Act”). The term “fair and equitable” in this context means that the conditions of the rehabilitation plan should be fairly and equally differentiated between the right holders of the same type, taking into account the priority order of the rights under Article 217(1) of the Debtor Rehabilitation Act, and the conditions of the rehabilitation plan should be equally balanced between the right holders of the same type, as prescribed by Article 218(1) of the same Act.

[2] Article 193(3) of the former Debtor Rehabilitation and Bankruptcy Act (amended by Act No. 12892, Dec. 30, 2014) provides that “When an agreement is reached between all or some creditors on the repayment order of claims that they hold by the date preceding the date on which the first meeting of persons concerned is held, any provisions against claims for which repayment order is agreed shall not be prescribed to the extent that it does not prejudice other creditors under the rehabilitation plan.” The latter part of the same Article provides that “if an agreement is reached among creditors holding the same kind of claims on the repayment order, the rehabilitation plan shall be formulated to the court prior to the date on which the first meeting of persons concerned is held.”

Therefore, even if creditors have reached an agreement on the repayment order of claims but evidentiary materials have not been submitted to the court by the date prior to the date of the first meeting of persons concerned, barring any special circumstance, the court does not necessarily have to consider the agreement on the repayment order of claims among the creditors when making a decision on whether to grant authorization of the rehabilitation plan.

[1] Articles 217(1), 218(1), and 243(1)2 of the former Debtor Rehabilitation and Bankruptcy Act (Amended by Act No. 12892, Dec. 30, 2014) / [2] Article 193(3) of the former Debtor Rehabilitation and Bankruptcy Act (Amended by Act No. 12892, Dec. 30, 2014)

[1] Supreme Court Order 98Na11 dated August 28, 1998 (Gong1998Ha, 2493)

Korea Technology Finance Corporation (Law Firm Doel, Attorney Lee In-hee, Counsel for defendant-appellant)

Seoul High Court Order 2012Ra1506 dated July 1, 2014

The reappeal is dismissed.

The grounds of reappeal are examined.

1. In order for a court to grant authorization of a rehabilitation plan, the rehabilitation plan should be fair and equitable in accordance with the former Debtor Rehabilitation and Bankruptcy Act (amended by Act No. 12892, Dec. 30, 2014; hereinafter "the Debtor Rehabilitation Act") pursuant to the former part of Article 243(1)2 of the same Act. The term "fair and equitable" in this context means that the conditions of the rehabilitation plan should be equally and equitable between the right holders of the same type, taking into account the priority order of the rights under Article 217(1) of the Debtor Rehabilitation Act (see, e.g., Supreme Court Order 98Da11, Aug. 28, 1998).

Meanwhile, Article 193(3) of the Debtor Rehabilitation Act provides that “When an agreement is reached among all or some creditors on the repayment order of claims that they hold by the date preceding the date on which the first meeting of persons concerned is held, any provisions shall not be prescribed against claims for which repayment order is agreed within the scope that does not prejudice other creditors under the rehabilitation plan.” The proviso of Article 193(3) of the same Act provides that “if there is an agreement among creditors holding the same kind of claims on the repayment order, such agreement shall be reflected in the rehabilitation plan.” However, the latter part of the same Article provides that “In this case, the creditors shall submit materials attesting to their agreement to the court by the date preceding the date on which the first meeting

Therefore, even if creditors have reached an agreement on the repayment order of claims, if evidentiary materials have not been submitted to the court by the date prior to the date of the first meeting of persons concerned, barring any special circumstance, the court does not necessarily have to consider the agreement on the repayment order of claims among the creditors in making a decision on whether to grant authorization of the rehabilitation plan.

2. Reviewing the reasoning of the order of the court below and the record, the following facts are revealed: ① The rehabilitation plan of this case does not differentiate the terms and conditions of the rehabilitation plan by treating the re-appellant’s claim for indemnity as a rehabilitation claim of the same kind as the loan claim of the Industrial Bank of Korea, the National Bank of Korea, and the KDF Specialized Credit Guarantee Co., Ltd. (hereinafter referred to as “the Bank, etc.”) and ② the re-appellant, etc. did not submit materials attesting to the agreement on repayment order by the date prior to the date of the

Examining the above circumstances in light of the legal principles as seen earlier, even if the Re-Appellant’s claim for indemnity of this case, as alleged by the Re-Appellant and the Industrial Bank of Korea, etc., agreed to have preferential payment right compared to the loan claims of Industrial Bank of Korea, etc., the rehabilitation plan of this case cannot be deemed to be fair and equitable, on the ground that the Re-Appellant’s claim for indemnity of this case and the loan claims of the Industrial Bank of Korea, etc. are treated as the same kind of claims as the same without reflecting the contents of the guidelines, etc. of this case, as long as the documents proving the agreement on repayment order was not submitted within the time limit set by Article 193(3) of the Debtor Rehabilitation Act.

The judgment of the court below that maintained the decision of the court of first instance that approved the rehabilitation plan of this case is just and acceptable, and there is no violation of the Constitution, Act, order, or rule that affected the judgment.

3. Therefore, the reappeal is dismissed. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Chang-suk (Presiding Justice)