In a credit agreement or other similar agreement, it is common to have a guarantee agreement that is additional (accessory) to the principal agreement. Such a guarantee agreement occurs when third party as the Guarantor (Personal/Corporate Debtor) commits to implement the performance that is not carried out by the Debtor in the principal agreement. Based on this explanation, it is quite clear that the Guarantor binds himself into a certain principal agreement to protect the interests of the Creditor for possible defaults committed by the Debtor. The regulation of the guarantee agreement in the Civil Code (hereinafter referred to as the “Civil Code”) starts from Article 1820 to Article 1850. The guarantee agreement is normed in Article 1820 of the Civil Code as follows:
“Guarantee is an agreement in which a third party, for the benefit of the creditor, binds himself to fulfill the debtor’s obligations, if the debtor does not fulfill his obligations.”
Based on these provisions, it is clear that in principle, the obligation of the Guarantor to fulfill the Debtor’s performances arises when the Debtor has not fulfilled his performance in the principal agreement. The issues are when does the Guarantor’s obligation to fulfill the Debtor’s performance(s) begin? And then, Can the Guarantor immediately be held legally responsible for fulfilling the performance(s) that is not carried out by the Main Debtor? Article 1831 of the Civil Code has tried to answer this problem by providing legal protection to the Guarantor so that his interests are not harmed by the potential arbitrariness carried out by the Debtor against the implementation of performances in the principal agreement. The following are the norms contained in Article 1831 of the Civil Code:
“The guarantor is not obliged to pay to creditors unless the debtor neglects to pay the debt, in which case the properties belonging to the debtor must be confiscated and sold first to pay off the debt.”
The norm in Article 1831 of the Civil Code is a clear indication that basically the Guarantor’s obligation to fulfill performance(s) that is not carried out by the Debtor in the principal agreement begins since the following 2 (two) conditions happened:
- The Debtor has failed to carry out his peformance(s); and
- Properties belonging to the Debtor must be confiscated and sold first to pay off the debtor.
The application of the two conditions mentioned above is cumulative and imperative, meaning that the Guarantor’s obligations will only arise conditionally if the two conditions mentioned above have occurred. According to the author, such an arrangement is indeed a proper arrangement, because if it is not regulated as such, it will be very open to the potential for arbitrary actions carried out by the Debtor so that it can be detrimental to the interests of the Guarantor who has a good faith obligation to bind himself to ensure the implementation of the Debtor’s obligations in the principal agreement. However, the arrangement of the basic principles in the norms of Article 1831 of the Civil Code also has the potential to harm the interests of the Creditor if the Guarantor who binds himself to the guarantee agreement does not have good faith in any form, including if it turns out that the Guarantor is also an affiliate of the Debtor who has deliberately cooperated so as not to carry out his obligations in the principal agreement and has been engineered from the beginning in any way so that the Guarantor factually does not have the ability to fulfill obligations that are not carried out by the Debtor in the principal agreement, which of course is detrimental to the interests of the Creditor.
Based on the description above, the law should also accommodate provisions that can anticipate the occurrence of things that can be detrimental to the interests of the creditor as explained above, because the guarantee agreement that is actually made to protect the interests of the creditor in the principal agreement is not made in good faith by the guarantor and the debtor. Therefore, the law has determined that the norm as referred to in Article 1831 of the Civil Code is not coercive (aandvullen recht), so that the norm does not have to be followed and can be deviated from the agreement of the parties entering into the agreement. The possibility of exceptions from the validity of the Guarantor’s liability for negligence committed by the Debtor in the principal agreement has been regulated in Article 1832 of the Civil Code. The following are the provisions in Article 1832 of the Civil Code:
“The guarantor cannot demand that the debtor’s property be confiscated and sold first to pay off his debt:
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If he has waived his privilege to demand that the debtor’s properies be confiscated and sold first;…”
The norm in Article 1832 of the Civil Code expressly stipulates that the basic principle in Article 1831 of the Civil Code, which requires that all the debtor’s property be confiscated first so that the guarantor can be held accountable, can be waived based on the agreement of the guarantor to waive his privileges. In such a case, the obligation of the Guarantor to fulfill the performance(s) that is not carried out by the Debtor in the principal agreement can be held legally responsible since the time that the Debtor failed to carry out the performance(s) in the principal agreement.
Based on the description above, the legal position of the Guarantor and the Debtor is different in the perspective of law. Even if the Guarantor who, by virtue of his obligations, has to take over the obligations that the Debtor has defaulted on in the principal agreement, the Guarantor who has fulfilled his obligations has the right to demand from the Debtor the amount of the obligations that have been performed by the Guarantor under the guarantee agreement. This is as stipulated in Article 1839 Paragraph (1) of the Civil Code which states as follows:
“The guarantor who has paid can demand what he has paid from the principal debtor, regardless of whether the guarantee is held with or without the knowledge of the principal debtor. This re-prosecution can be carried out both regarding the principal and interest and costs.”
The article emphasizes that the position of the Guarantor who has carried out his obligations under the guarantee agreement for the Debtor’s negligence in the principal agreement does not necessarily make the Guarantor a debtor. Because if that is the case, then the law will not recognize the right of the Guarantor to sue the Debtor for what the Guarantor has done to the Creditor due to the Debtor’s default, or which in practice is known as the regression right. This means that the implementation of obligations by the Guarantor actually makes the Guarantor a new Creditor for the Debtor who has failed in the principal agreement.
Postponement of Debt Payment Obligations (hereinafter referred to as “PKPU”) as one of the legal rights that can be exercised by Debtors and Creditors, so the Debtors should propose settlement draft(s) to restructure collectively to the Creditors is oftenly being the most effective solution and the choice of the Creditors in practice. However, in order for PKPU to be granted, the conditions must be fulfilled as stipulated in Article 222 Paragraphs (1) and (2) of Law Number 37 of 2004 concerning Bankruptcy and Postponement of Debt Payment Obligations (hereinafter referred to as the “KPKPU Law”) which stipulates that a PKPU petition can be submitted in the event that there is more than 1 (one) Creditor, where there is a debt that has fallen due and can be collected.
Then what if the Creditor intends to file a PKPU petition against the Debtor who defaults in the principal agreement coincidentally with the Guarantor who has waived his privilege in the guarantee agreement? Is that possible? Here is the discussion.
Regarding the case above, Article 254 of the KPKPU Law has actually provided instructions with the norms contained in it as follows:
“The postponement of debt payment obligations does not apply to the interests of fellow Debtors and Guarantors.”
The article seems to indicate that the PKPU status does not apply to the Guarantor, including the Guarantor who has waived his privileges. However, the provisions in Article 254 of the KPKPU Law cannot be said to be clear and actually there is no explanation for the article, so that in practice the application of this article still leaves problems because it still has multiple interpretations, then the decisions regarding the legal problem normed in Article 254 of the KPKPU Law are often inconsistent with each other. This difference causes in some cases such petitions to be granted by the panel of judges and some others to be rejected. For those who accept the petitions, generally due to the view that the position of the Guarantor who has waived his privileges is equivalent to the Main Debtor, the argument is as adopted in the Commercial Court Decision at the Central Jakarta District Court Number 141/Pdt.Sus-PKPU/2020/PN. However, for some others who refused, it was usually based on the provisions of Article 254 of the KPKPU Law, as the argument was adopted in the Commercial Court Decision at the Central Jakarta District Court Number 212/Pdt.Sus-PKPU/2019/PN Niaga.Jkt.Pst.
Although the author basically agrees with the norms in Article 254 of the KPKPU Law, on the other hand the author can also understand that in practice the court’s decision regarding PKPU petitions against the Guarantor together with the Principal Debtor is still not consistent with each other. This is because there are often more complex factual problems related to the issue of PKPU petitions against the Guarantor coincidence with the Main Debtor, including but not limited to if the Principal Debtor and Guarantor should be suspected of not being in good faith since the agreement was made. These problems are part of the complex problems in the practice of Guarantee Agreements.
In dealing with factual legal problems such as those mentioned above which are often more complex than the norms in an Act, the author has another perspective, that the judges in examining and adjudicating these problems should not need to feel ‘bound’ by the provisions of Article 254 of the Law KPKPU. This is because it can limit the power of the judges in applying the law, which in essence does not only come from the provisions of Article 254 of the KPKPU Law. In fact, if the application of Article 254 of the KPKPU Law is ‘forced’ in every examination of a PKPU petition against the Guarantor coincidence with the Main Debtor, then the resulting decision has the potential to be away from justice values. Therefore, the Court should be more critical and look comprehensively at each case of the Guarantor who has waived his privileges in a PKPU petition coincidence with the Main Debtor. Other than that, policymakers also need to pay attention as an effort to end the issue of unclear law application regarding the PKPU petition against the Guarantor coincidence with the Main Debtor, at least by explaining the norm of the related issue clearly in the Bankruptcy and Postponement of Debt Payment Obligation draft bill, which has been planned since any times ago.