Court Grants Investohills Vesta’s Appeal and Invalidates the Electronic Auction to Sell a Non-complete Construction Project in Kyiv
On August 9, 2022, the Eastern Appellate Commercial Court granted an appeal in case No. 922/2817/18 (910/1119/16) based on the claim of TOV Mega Aster against DP Setam and TOV Vesta Tsentr with the involvement of the third parties without standalone claims concerning the subject matter of the dispute on the side of defendants, namely TOV FC Investohills Vesta and TOV BC Vesta, with the involvement of the State Enforcement Service Department of the Ministry of Justice of Ukraine as the third party without standalone claims concerning the subject matter of the dispute on the side of the 2nd defendant, to invalidate the auction and reverse the certificate within the scope of the bankruptcy case.
In January 2016, Mega Aster applied to the Kyiv City Commercial Court with a claim against Vesta Tsentr and Setam for the invalidation of the electronic auction to sell a non-completed construction project being an office/exhibition building with a shop and a cafe with the total area of 2250 square meters and the level of readiness of 18% located at 68 Povitroflotskyi Prospekt in Kyiv and owned by Mega Aster. The auction took place on January 13, 2016.
It was the point of contention that the State Enforcement Service Department of the Ministry of Justice of Ukraine offered the above non-completed project held by PAT European Gas Bank in mortgage for the forced auction sale within the scope of its proceedings to enforce the court decision to collect a debt under a loan from TOV Mega Aster to the Benefit of PAT European Gas Bank (succeeded by TOV FC Investohills Vesta by buying the claim under loans from an auction organized by the DGF).
However, someone decided to use the situation and profit from it. It is not a secret that the value of auctioned objects is often artificially understated, while parties to enforcement proceedings are restricted in their ability to appeal against actions taken by the enforcement officers and the results of their valuation. It is achieved by informing the parties too late about the progress of the enforcement proceedings and the property valuation.
And, it has happened in this case. It became evident from a report on the valuation of the non-completed construction project owned by Mega Aster that the price was understated severalfold. The non-completed project was assigned a value of UAH 5 million. However, the same object was valued at UAH 50 million when mortgaged to the bank. Furthermore, the total area of the non-completed construction project was wrongly and, from the looks of it, deliberately indicated as 2,250 square meters, while it is 40,736 square meters in fact, with 2,250 square meters being the project’s footprint area.
Having disagreed with the valuation, Mega Aster filed its objections against the report back in 2015, and the state enforcement officer issued a resolution to review the valuation report.
However, contrary to what the law requires, Setam held an electronic auction on January 13, 2016, and found TOV Vesta Center with its bid of UAH 5,911,162 a successful bidder; two days after the auction had already taken place, the state enforcement officer sent the notice of review of the property valuation report dated January 11, 2016, to the parties to the enforcement proceedings, including Mega Aster. These actions deprived the property owner of their right to appeal against valuation results in court.
It has taken several years to try this case. The case has been tried in the appellate and cassation instances. Eventually, the Eastern Appellate Commercial Court, trying the appeals by TOV FC Investohills Vesta and the liquidator of TOV Mega Aster against the Decision of the Kharkiv Oblast Commercial Court to dismiss the claim, considered instructions of the cassation instance, which the courts needed to review during the retrial and which had been ignored by the judge of the Kharkiv Oblast Commercial Court issuing its decision on this case, dismissed the unlawful court decision, and issued a new decision to grant the appeal and invalidate results of the electronic auction.