Adriatic Fair to pay 1,69 million: Court of Appeal ruling in favor of Lipovo water factory in bankruptcy

The Court of Appeal rejected the appeal of the Adriatic Fair as unfounded and upheld the Commercial Court's verdict according to which the company must pay the bankrupt Lipovo Water Factory 1,69 million euros.

This was confirmed to "Vijesti" by the bankruptcy trustee. Dragan Milić from Nikšić. In addition to 1,69 million, the court ordered "Adriatic Fair" to pay statutory default interest from January 2021, as well as 10.799 euros in procedural costs.

According to the judgment of the Court of Appeal, the Commercial Court correctly determined that, based on the 2017 agreement and the contract on the transfer of ownership of the equipment, “Lipovo” had in fact settled part of the debt of “Adriatic Fair” to Atlas Bank. Therefore, according to the court, “Lipovo” had the right to claim the same amount from “Adriatic Fair”. The Court of Appeal accepted the conclusion that legal subrogation had occurred here, i.e. that the plaintiff, by fulfilling someone else’s obligation, acquired the right to collect the claim from the debtor.

“Adriatic Fair” claimed in its appeal that the first-instance court had incorrectly calculated the statute of limitations, misinterpreted the 2017 agreement, and ignored the contract on the transfer of property rights. They also argued that there was no basis for the statute of limitations to be calculated only after the expiration of six months from the contract, and that the claim, if such a separate contract had not been concluded, would be premature or time-barred. They requested that the judgment be reversed or quashed and the case be remanded for a new decision.

The Court of Appeal did not accept these allegations. It concluded that the parties had agreed to a six-month period for subsequent regulation of the manner and deadlines for settling the obligation, so the plaintiff could not forcefully demand payment before the expiration of that period. Therefore, the court found that the statute of limitations did not begin immediately in 2017, as “Adriatic Fair” claimed, but after the expiration of that period. Additionally, due to the bankruptcy of “Lipovo”, the statute of limitations was suspended, so the lawsuit filed in April 2021 was not out of time.

The appeal of the "Adriatic Fair", the verdict explains, is unfounded because the first instance court correctly interpreted the presented evidence and, with regard to the main debt, correctly determined that there was an obligation to the bankrupt "Lipovo" water factory, in an amount that was not disputed between the parties.

The bankruptcy of the Lipovo water factory, which produced water under the Akva Monte brand, was initiated in 2018, and in the proceedings that were initiated, around 2,3 million euros of claims were reported, of which 1,5 million euros were to Atlas Invest, Atlas Grupa and Zeta Invest. The plan envisages that these companies will convert their claims into share capital.

The most valuable asset of this factory, which was owned by a businessman Duško Knežević, a year before the bankruptcy, was transferred to "Atlas Bank" to settle part of the loan of another Knežević company - "Adriatic Fair". Thus, the "Lipovo" factory was left without equipment for water production, which is why the Tax Administration then initiated a court case, demanding that the contract on the transfer of ownership of the equipment worth 1,7 million euros be annulled.

The bankruptcy of the water factory was initiated by the Tax Administration due to a debt of 431,8 thousand euros, and a total of 2,3 million euros of claims were reported. According to media reports, employees were owed around 202 thousand euros in 2020, while 1,5 million are claimed by related companies.

The attempt to reorganize the factory failed because the plan of the founder of "Atlas Invest" to deposit 100 thousand euros in "Atlas Bank" to restart production, which would have given "Lipovo" the former equipment free of charge, but for use, was not accepted.

Milić explained to "Vijesti" that previously, by a decision of the Commercial Court, the civil proceedings based on the lawsuit filed by the state, namely the Tax Administration, against the bankrupt "Lipovo" water factory and "Atlas Banka" were suspended. The proceedings, he states, were suspended in accordance with Article 35 of the Law on Bankruptcy and Liquidation of Banks, which stipulates that on the day of the opening of bankruptcy proceedings, ongoing court proceedings against the bank are suspended, and creditors are obliged to notify the bankruptcy administrator of these proceedings and file claims in accordance with the provisions of this law.

"In particular, with such legal provisions according to which the procedure had to be explicitly suspended, there is now no longer a legal possibility to challenge actions regarding the transfer of ownership rights before the aforementioned court. The lawsuit was filed to challenge the legal action of the bankruptcy debtor, the transfer of ownership rights to movable property (equipment) from the 'transferor', the 'Lipovo' Water Plant, to the 'acquirer', Atlas Bank, in order to settle the debt of the Adriatic Fair Budva, based on a loan approved by Atlas Bank," explained Milić.

He said that the first defendant (the Lipovo Water Plant in bankruptcy), through the aforementioned civil proceedings by force of law in accordance with the Law on Obligations, should be transferred the claim in the amount of 1,69 million euros that the second defendant (Atlas banka AD, Podgorica) has against the Adriatic Fair based on the loan agreement. Milić explained that after the suspension of the civil proceedings, the Adriatic Fair was issued an invoice in the amount of around 1,69 million at the end of December 2020, which they did not settle, after which a lawsuit was filed with the Commercial Court.

"Adriatic Fair" claimed in its appeal that the first-instance court incorrectly calculated the statute of limitations, misinterpreted the 2017 agreement, and ignored the contract on the transfer of property rights...

10.799 euros are the costs of the proceedings and are payable by the "Adriatic Fair"