The Controversial of Bankruptcy Court Judgment of PT Asuransi Jiwa Manulife (PT

AJMI) which is submitted by PT Dharmala Sakti Sejahtera Tbk (PT DSS)

I. Background

Manulife Financial Corporation is an insurance company from Canada which operates

in Asia, Canada and United States of America. Manulife is known as a big public company,
while IFC is an enterprise from employees pension fund of World Bank. PT Asuransi Jiwa
Manulife Indonesia (PT AJMI) is a part of Manulife Financial Corporation which is founded
by Manulife Financial Corporation (Manulife) with 2.295 shares or 51%, PT Dharmala Sakti
Sejahtera Tbk (PT DSS) with 1.800 shares or 40%, and International Finance Corporation
(IFC) with 405 shares or 9%. Manulife Indonesia offers a range of financial services
including life insurance, accident and health insurance, investment and pension fund services
to individual customers and businesses in Indonesia. Manulife Indonesia has a vision to help
customers realize their dreams and aspirations, and a mission to help Indonesian families
achieve their dreams and aspirations, and to live in full of confidence.
At the time, PT AJMI faced a civil lawsuit in the Commercial Court of Central
Jakarta. It might be not a something new for PT AJMI facing a lawsuit in the Court, because
PT AJMI has ever faced the similar case in between 2001-2002 and settled in Commercial
Court. PT AJMI was sued by PT DSS, the reason that PT AJMI did not pay the dividend in
corporate profits. PT DSS submitted an application to the Commercial Court about a
bankruptcy proposal for PT AJMI, in 1998 PT DSS has 40% shares in PT AJMI. On the other
hand, later PT DSS is bankrupt and its shares in PT AJMI is auction and purchased by
Manufacturer Life Insurance. The reason from PT DSS submitted a bankruptcy proposal to
PT AJMI is by the declaration of bankruptcy of PT AJMI, everything related to the
management of PT DSS assets is entirely done by the Curator, now the position of PT DSS
is as a debtor bankrupt. Now PT Dharmala Sakti Sejahtera Tbk (DSS/in bankruptcy), which
is represented by the curator, feel that PT DSS is entitled to receive the dividends from PT
AJMI in 1999. The reason is according to the deed of the joint venture agreement in June 10,
1988, PT DSS is the holder of 40% of the shares in PT AJMI. In the same agreement, it was
stated that PT DSS is entitled to a dividend of 40% of profits or surplus which is obtained by
PT AJMI accordance with the financial statements.
PT DSS was declared bankrupt in September 2000, claimed that they are entitled to a
dividend payment for the financial year 1999 of PT AJMI plus the dividends between January
to September 2000. By this lawsuit filed, AJMI never pay such dividends. The Curator of PT
DSS in this complaint, made strengthen the basis of his complaint and also mention the
judgment of the Commercial Court and cassation of PT AJMI bankruptcy case. On the
judgment of Commercial Court which stated that PT AJMI is bankrupt, the Curator of PT
DSS stated that there is a legal basis that states that PT AJMIs debt unpaid to PT DSS.
Meanwhile, the Attorney of PT AJMI stated that the Curator of PT DSS does not have a legal
standing to submit a lawsuit. It is because the amount stock of PT AJMI which was belonged
to PT DSS has been held by Manufacturer Life Insurance. The decision not to distribute the
dividends of PT AJMI to the shareholders in 1999, including PT DSS, is the decision of
General Meeting of Shareholders (GMS). From the PT AJMI Attorney point of view, the
GMS decision to postpone the dividend distribution due to the provisions of the Risk Based
Capital (RBC) which applies to the insurance company.
For the dividends in 2000, the Attorney of PT AJMI explained that the dividend is
newly approved in GMS 2001. Meanwhile, on October 26, 2000 PT DSS stock in PT AJMI
was sold the new buyer. So, it makes PT DSS is also not entitled to claim the dividends in
2000. Conversely, after the court in Commercial Court of Central Jakarta. The Curator of PT
DSS said that the legal action taken by his client in accordance with the Supreme Court
Judgment. Regarding the legal mediation effort that must be taken first, PT DSS Curator
affirms it was no problem. However, he stressed, in the mediation process it is only willing to
talk about the nominal value of the lawsuit. But for juridical issues, he states not willing to
compromise.

II. Problem Statement

In this case, there will be some controversial judgment about the bankruptcy case of
PT AJMI which is submitted by PT DSS as following:
- Is the dividend charged by the Curator of PT DSS can be grouped into
maturity debt which can be as a requirement to declare the bankruptcy of PT
AJMI?
- Does it make sense to declare bankruptcy of the solvent and bona fide
company?
- Can we equate the meaning the term of unable to pay and term of not paying?
- Is the bankruptcy petition in UUK is grouped into a simple case (sumir)?
- Are the shareholders entitled to submit a bankruptcy proposal?
- Who is entitled to become a curator?
- What is the correct step by step to submit a bankruptcy petition to the
Commercial Court?
 III. Viewpoint

The law problem in this case is concerned on The Controversial Judgments by The
Commercial Court in the case of bankruptcy of PT AJMI.

IV. Bankruptcy Petition and Exception

This case began from the lawsuit of PT DSS to PT AJMI that does not pay the
dividends of corporate profits in 1999. The application was submitted by Paul Sukran S.H, as
an applicant who served as a Curator in the company which has ben declared the bankruptcy,
that is PT Dharmala Sakti Sejahtera Tbk (PT DSS). PT DSS has 40% of shares in PT AJMI in
1998, but its 40% shares were auction and purchased by other company, that is Manufacturer
Life Insurance. As for its consideration, the applicant in this bankruptcy case said that in deed
a joint venture agreement on article X states that among the shareholders, in the term of
profits once it had obtained a surplus to distribute to the shareholders for any financial year
(as can be seen in the audited financial statements with respect to the financial year in
concerned), all parties will arrange for PT AJMI to distribute the dividends at least for 30%
from the amount of surplus that exceeds 100 millions. Based on financial statements of fiscal
year 1999 and 1998, made by Ernst Young as independent editor, called as Consolidated
Financial Statement December 31, 1999 and 1998 has been determined that PT AJMI had
earned surplus from the corporate profits as for Rp 186.306.000.000.
Based on these and and referred to article X as mentioned before, PT DSS is entitled
to the payment of dividends from PT AJMI as big as its owned shares in PT AJMI. As for the
calculation is 40% of the surplus amounting Rp 22.356.720.000. The defendants total
liabilities to applicant after the dividend payable was added with the interest, since January 1,
2000 to April 30, 2002 (2 years and 4 month), with 20% of annual interest rates is amounting
Rp 32.789.856.000. The defendant of bankruptcy for various reasons tried to avoid its
obligations to pay the dividends that has been billed by the applicant, even until the
submitting of a bankruptcy proposal is currently to the Commercial Court in Central Jakarta
District Court, the Defendant of bankruptcy did not also satisfy such the obligations, despite
having been reproved repeatedly, either orally or in writing. The non-fulfillment of the
defendants obligations to the applicant to make a debt payment on dividends in referred, it
has been simply proven (sumir or summiere procedure) that is based on the legal facts that
the defendant had debts to the applicant who has matured and could be charged. PT DSS
applied a Sequestration (Conservatoir Beslag) to the Commercial Court in Central Jakarta
about the assets of PT AJMI and appointed a temporary curator to oversee the business
management of PT AJMI and the payment to the creditors, and also to oversee the transfer or
the utilization of corporate wealth.
Based on the petition above, the applicant of bankruptcy pleaded to the Chairman of
Commercial Court in Central Jakarta to examine and judge the following:
- Accept and grant the petition from PT DSS
- Declared the bankruptcy of PT AJMI with all the consequences
- Declared valid and valuable of the sequestration which has been laid on the assets
of PT AJMI for land, buildings complete with its contents, all accounts and
deposits on behalf of PT AJMI (IDR and USD), the Indonesian Bank Certificate
(SBI), the entire portfolio of stocks, bonds and mutual funds
- Appointed a Supervisory Judge from the Commercial Court Judges in District
Court of Central Java to oversee the management and settlement of the bankruptcy
estates
- Appointed a temporary curator during the bankruptcy proceedings is running, and
then as the Curator in Bankruptcy Defendant or as the Board if in the process of
Suspension of Debt Payment (PKPU)
- Punished the defendant to pay the court costs
In this case, the controversial of bankruptcy judgment began when PT Asuransi Jiwa
Manulife Indonesia was declared bankrupt based on the Commercial Court judgment in
Central Jakarta by No. 10/PAILIT/2002/PN.NIAGA.JKT.PST dated June 13, 2002. Not
accept with the petition from PT DSS, then PT AJMI submitted exceptions on the bankruptcy
petition which is basically following:
- The bankruptcy petition is premature, because of not getting yet the license from
the Supervisory Judge and Creditor Committee
- The bankruptcy petition is wrong address, because PT AJMI is not the party to the
Joint Venture Agreement On June 10, 1988
- Supposedly PT DSS submitted a lawsuit at the beginning to the shareholders: The
Manufacturers Life Insurance Company and International Finance Corporation
(IFC) in the Commercial Court
- The bankruptcy petition is premature, because still there is party questioned the
share ownerships
- Roman Gold Asset (RGA) stated as the new owner of PT DSS
- The petition is submitted by the applicant of bankrupt not for the creditors behalf
- PT DSS has not done payment yet to the creditors
- This case need a not simple proof
 Regarding to the bankruptcy petition, the Commercial Court in Central Jakarta
District Court has taken a judgment, that is the judgment on dated June 13, 2002 that its
verdict as the following:
- Reject exception of PT AJMI
- Grant the petition of PT DSS
- Appoint Erwin Mangatas Malau S.H as a Supervisory Judge from the Commercial
Court in Central Jakarta District Court
- Appoint Kali Sutan S.H as the Curator
- Determine the amount of remuneration of curator will be determined later
- Charge the court fee as for Rp 5 millions to PT DSS (applicant)

V. The Controversial Judgment

The controversial judgment about the bankruptcy of PT AJMI is triggered by crucial

points both on the choice of concept used arrange the Bankruptcy Laws (UUK) and its
implementation. The last is about the art how the law is applied. In this case, the meaning of
bankrupt is not clearly determined, where bankruptcy is always associated to the term of
ability to pay. The meaning of unable to pay should be at least measured by two basic
analyses, cash flow conditions (cash flow test) and from the analysis of assets over liabilities
reflected in the balance sheet (balance sheet test). However, in this case, the bankruptcy
concept is not fully adopted in UUK even UUK dissociates the term of unable to pay from
the defendant of bankruptcy, whereas it is precisely the economic logic are essential. The
UUK in article 1 (1) does not explicitly provide a definition of bankruptcy, but set as the
following: the debtor having two or more creditors and did not pay at least a debt maturity
and billable, declared bankrupt by the Court's judgment. Necessarily, the term of unable to
pay is not same meaning with the term of not paying, from this different point of view, then
rising the controversial judgment to the PT AJMI bankruptcy case.
The first, logically, it does not make sense when a health company has a high level of
solvency, then declared bankruptcy because of a low claim than what is owned by the
company. The problems faced by PT AJMI is declared bankrupt because of claim as for Rp
32 billions, even though PT AJMI which has a financial position as of March 2000 by
recognized assets as for Rp 1.812 billions, liabilities as for Rp 1.596 billions, then the
calculation obtained that the solvency level is as for Rp 216 millions which is far larger than
the claim from the applicant.
 The second, the bankruptcy petition in UUK is grouped into a simple case (sumir).
The grouping of bankruptcy into a simple case, resulting in a simple way to establish and
limitations on the duration of the examination be logical that has to be completed in 30 days.
However, if we look at a bankruptcy petition which is submitted to the Commercial Court
which usually associates to a large company, a great asset and relates to the number of people
a lot, it is not logic that the bankruptcy petition is grouped into a simple case. The judge
should not plead to pursue effectiveness and efficiency in term of achieving a justice which is
a substantial nature.
The third, the bankruptcy petition from the Curator of PT DSS about the claim of the
right to dividend payments in 1999, then rising a new problem between the two sides. The
problem is, initially in GMS of PT AJMI had been decided that PT AJMI will not make a
dividend payment in order to improve its Risk Base Capital (RBC). The requirements
mentioned by Indonesia Minister of Finance that the insurance and reinsurance companies at
any time shall meet the solvency level at least 120% of the risk of loss that may arise as a
result of the deviation in the management of assets and liabilities. However, at the time, PT
AJMIs RBC is not eligible because the solvency level is lower than 120%, so the GMS
decides not to make a dividend payment until the solvency level in short term reaches 120%
and for the long term the company should strive to be an exemplary company that reached the
solvency level of 150%. Thus, the Defendant of Bankrupt has no obligation to pay the
dividends in 1999, so that the dividend bill by the Applicant of Bankrupt can not legally be
classified as overdue debt or debt that has to be repaid. From this point of view, the
interpretation from the judge which equalize the claim for payment of dividends (which had
been decided in the GMS of PT AJMI not to be shared) equal to the debt, is an inaccurate and
exaggerated interpretation.
The fourth, the controversial problem re-arise related to the question whether the
shareholders are entitled to submit a bankruptcy proposal. The UUK expressly does not allow
the shareholders to apply for bankruptcy petition. According to UUK, except for banks and
securities companies, that can submit the bankruptcy petition is the debtor itself, upon request
of one or more creditors, the prosecutor in the public interest. In its capacity as the
shareholder, PT DSS obviously can not submit a bankruptcy petition against PT AJMI.
However, if PT DSS through its curator, submit for a bankruptcy petition in its capacity as a
creditor on the dividend claims, the judge must carefully consider the crucial problem in the
third number as mentioned before.
 When the Curator PT DSS submitted the bankruptcy petition against PT AJMI, this
issue has entered the living system of law. To solve the problems, the procedural law
Commercial Court has set the dynamics of it. The judgment from the Commercial Court to
declare the bankruptcy of PT AJMI, as bad as the controversy in it, could not be canceled by
the Commercial Court itself. Therefore, the UUK does not allow the appeal, then the legal
effort can be done by PT AJMI is cassation or reconsideration (PK) to the Supreme Court
(MA). Now the problem is it is not as simple as imagined, the controversial judgment began
from the ignoring logic, especially in the economic logic, which result an inaccurate
interpretation that there is a different point of view between the term of unable to pay and not
paying from the company. The next problem resulting from this case is, there was a
simplification related to the existence of a company, the loss of civil right by completed with
the simple judicial process and simply proving (sumir). The controversy declaration of
bankruptcy for PT AJMI was also exacerbated by the Commercial Court in Center Jakarta
which judge inaccurate in determining the debt on dividends (which in GMS has decided not
to be shared) and the status of PT DSS, which is a shareholder of PT AJMI (1999) as a
creditor.
There are three reasons that should be the basis of the concerns for the stakeholders of
PT AJMI on the bankruptcy judgment. The first is, by the bankruptcy declaration of PT
AJMI, necessarily all of the assets of PT AJMI will be put under the sequestration, in
preparation for the liquidation. The second is, PT AJMI is a legal entity that is the subject of
law. With the result of the bankruptcy judgment, PT AJMI became incompetent to perform
the legal action in the field of wealth, while the authorities turn to the curator. The third is, in
the framework of rescuing the bankruptcy estate, the curator is given the authority to take a
legal action, including asset sales. The using of this authorities can cause problems if the legal
effort related to the bankruptcy judgment (cassation or reconsideration) is actually granted.

VI. Cassation
For all the controversial judgment faced by PT AJMI, the company submitted the
cassation to the Supreme Court, then PT AJMI is called as the Applicant Cassation I, the
other Creditors are called as Applicant Cassation II, and PT DSS is called as the defendant of
cassation. After the defendant of bankruptcy, PT AJMI, on 19 and 20, 2002 has submitted a
cassation petition and the copy of the cassation from the Applicant Cassation I and Applicant
Cassation II, submitted the counter against the cassation were accepted by the Secretariat of
the Commercial Court in Central Jakarta District Court dated 26 and 27 June, 2002. The
cassation petition including all the reason had been notified to the opposite party carefully
and submitted within the time and in the specified manner regulated by the constitution (UU),
therefore the cassation petition formally can be accepted. The objections submitted by the
Applicant of Cassation on its memory of cassation at substantially as following:
Applicant Cassation I
- The objective for the bankruptcy petition is only to kill PT AJMI in unhealthy
business competition. In fact, PT AJMI is a very healthy company, which could be
seen from Exhibit P-1 form of the Consolidated Financial Statements PT AJMI for
the period ended on December 31, 1999 and 1998 were audited by independent
public accounting firm ERNST & YOUNG, the prosecuted of dividends is not the
maturing debt and could be charged because it need a not simple proof.
Unfortunately, these things are not the concern from the judges even to the
exclusion of the rules in the UUK. By justifying the actions from the Applicant of
Bankruptcy, is same as shifting the good purpose from the UUK
- The Commercial Court judgment in Central Jakarta by No.
10/PAILIT/2002/PN.NIAGA.JKT.PST dated June 13, 2002 is inaccurate, trump
up and without applying the correct rules of evidence by Judex Facti
- The appointed curator, Kali Sutan S.H, has been out from the Association of
Curator and Management of Indonesia (AKPI). So, the appointment of judges is
erroneous and must be canceled
- Judex Facti has misapplied the law related to the bankruptcy where the curator
who submit for bankruptcy petition does not obtain the prior authorization from
the Supervisory Judge
- Judex Facti has misapplied the law related to the provisions on organ of legal
entity. Noted that the Joint Venture Agreement dated on June 10, 1988 binding PT
AJMI, even though the agreement is not made by the organ of legal entity from
PT AJMI, so it does not bind at all and PT AJMI is not becoming a party to the
agreement
- Judex Facti has misapplied the law of evidence. There is evidence in the form of
recognition that states dividend of PT AJMI stuck in a criminal case on the
exception and the answer proposed by PT AJMI
- Judex Facti misapplied the law by not applying jurisprudence because the
bankruptcy petition against the Insurance Company is the Exclusive Rights and
may only be submitted by the Minister of Finance
- Judex Facti did not provide a consideration of whether simple or not the evidence
 - Judex Facti misapplied the law because the dividends can not be grouped into
overdue debt related to the GMS decision which it can not distribute the dividends
regarding with the plan of company to achieve 120% of Risk Based Capital
- Judex Facti is not based on legal basis either Articles of Association and the Law
about PT and just consider that the presence of dividend automatically the income
must be distributed to the shareholders
- Judex Facti is wrong in applying the rules of evidence, as has been proved that
Eddy Salomon is not another creditor
Applicant Cassation II
- The declaration of bankruptcy did not fulfil the requirements of UUK
- PT AJMI is a solvent and bona fide company, which its shares owned by IFC and
Manulife Financial and the solvency level reached 167.26%
- Paul Sukran S.H, the Curator of PT DSS, is not the creditor who is entitled to
submit a bankruptcy petition
- PT DSS does not have rights and responsibilities to submit the bankruptcy
petition, meanwhile PT AJMI legally is a solvent company which is not duly to be
declared bankrupt. But, once again when PT AJMI is later formally declared
bankrupt by a court judgment (with legally enforceable), so PT AJMI is the party
that should take precedence or preference rights to receive the payment from the
bankruptcy payments

VII. Supreme Court Judgments

At the end of the stage, the Supreme Court finally judged as following:
- The objections can be justified as Judex Facti has misapplied the law
- The cassation petition from the applicant cassation I and applicant cassation II is
granted
- The bankruptcy petition / Curator in the loser side, must pay all the court cost both
in the level of Commercial Court and cassation
- Cancel the Commercial Court judgments in Central Jakarta District Court, dated
on June 13, 2002 by No. 10/PAILIT/2002/PN.NIAGA.JKT.PST
- Reject the bankruptcy petition from the applicant of bankruptcy, Paul Sukran S.H,
served as Curator of PT DSS
- Punish the defendant of cassation, formerly the applicant of bankruptcy / Curator
in each level of judgment, which is in the level cassation is amount of Rp 5
millions
From the bankruptcy case of PT AJMI, we can learn that the judge's court could have
broad impact, it can even damage the bilateral relations between the two countries. Therefore,
judges must be really careful to consider all parties (stakeholders) and all the related aspects.
Because only in this way, legal political of UUK can be realized.

VIII. Conclusion

From this case, we can conclude that:

- A
- B
- C
- D
- E
- F
- G

THANK YOU