In what cases bankruptcy auction should not be canceled?

A case on challenging the results of the bankruptcy auction was referred to the district court.  The Ministry of Defense insisted on the cancellation of the contract concluded with the winner and bilateral restitution.  The lower courts took different positions, but the district court put an end to the case.

The question concerned the insolvency case of a strategic enterprise. The applicant believed that the change of supplier under the contract was prohibited, and therefore the auction was invalid. The Ministry also stated that the winning company did not fully fulfil its contractual obligations.

In the court of first instance, the applicant's claims were dismissed. In the court of appeal, this decision was cancelled, as well as the auction, but the judge did not consider it necessary to apply the consequences of the invalidity of the concluded transactions.

The district court, in turn, sided with the court of first instance, having stated that the grounds provided by the applicant for invalidating the auction could not become a reason for satisfying the claim.

The board noted that the bankruptcy trustee notified the ministry of a series of obligations of the debtor to another person. The applicant accepted the execution by the new party without objection, which made it possible to consider the transaction valid. In addition, the district court noted that in such a situation, the cancellation of the auction would only lead to an increase in the cost of the procedure and damage to creditors, and therefore there was no expediency in taking the side of the applicant.

The result of the consideration of the case was the cancellation of the ruling of appeal and the upholding of the judicial act of the first instance (decision No. Ф09-7240/18 dated April 5, 2022 in case № А50-2470/2017).