THE SUPREME COURT INTERPRETED THE RULES ON BANKRUPTCY OF DEVELOPERS

In making the relevant decision, the courts were guided by the following.

The debtor, despite the construction of a real estate object by him, did not receive a construction permit, did not have any rights to the land plot where the object of unfinished construction is located.

Thus, according to the courts, the rules on the bankruptcy of the developer were not subject to application to the debtor due to the fact that he did not meet the criteria imposed on developers in the context of the GRC of the Russian Federation.

This approach, however, was not shared by the Armed Forces of the Russian Federation, which in its definition indicated the following.

Firstly, the court noted that the Bankruptcy Law provides for the application of the relevant bankruptcy procedure to a specific debtor both at the request of a participant in the case and at the initiative of the court itself, from which it concluded that the courts have an imperative obligation to verify the applicability of Section 7 of Chapter IX of the Bankruptcy Law.

Secondly, the supreme judicial instance, proceeding from the objectives of various branches of legislation, noted that the concept of "developer", enshrined in the Civil Code of the Russian Federation and the Bankruptcy Law, is different in its content, which is due to the public function of the state represented by the judicial system to ensure the protection of the rights of participants in shared-equity construction in the situation of insolvency of the developer.

The Supreme Court pointed out that the law does not contain any requirements for the debtor to have rights in relation to the object of unfinished construction and the land plot on which it is located, respectively, these facts do not affect the possibility of applying the rules on bankruptcy of the developer to the debtor.

Thus, the Supreme Court of the Russian Federation concluded that the courts incorrectly applied the norms of substantive and procedural law with an incorrect assessment of the evidence available in the case materials, which is why it canceled judicial acts, sending the case for a new hearing.