Supreme Court of Lithuania Pronounced on Exercise of the Mortgagees or the Pledgees Rights in Takeover of the Mortgaged/Pledged Property
The Supreme Court of Lithuania (hereinafter, the SCL) examined a civil case regarding property of a company under bankruptcy where such property is sold at auction (civil case No. 3K-3-338/2010).
The SCL in this case pronounced on the application of the provisions of Article 33 of the Enterprise Bankruptcy Law, the right of the pledgee and the mortgagee to take over a thing sold at auction at the price determined by the market at the time of its sale.
The SCL noted that according to the provisions of the Enterprise Bankruptcy Law, property of a company under bankruptcy and a bankrupt company must be sold at the largest price possible. This derives from the interests of both the company and its creditors. In this case provisions of Article 33 of the Enterprise Bankruptcy Law were analysed and explained. Pursuant to paragraph 5 of Article 33 of the Enterprise Bankruptcy Law, pledged/mortgaged property is to be sold at auction. The pledgee and mortgagee, no later than within 20 days after the auction, can address the creditors meeting with a proposal to take over the property that was not sold at the auction for the initial sale price. But the SCL notes that these provisions mean that it is only in case the pledged/mortgaged property is not bought at the auction, that the pledgee and mortgagee can take over the property for the initial sale price set in the auction. These provisions cannot be interpreted so that in later auctions, in case the pledged/mortgaged property is not bought, the sale price of such property cannot be reduced. Considering this, the SCL arrived at the conclusion that the mortgagee can take over the property at the price determined by the market at the time of its sale and namely at that moment at which such property is sold.