Re PT Garuda Indonesia (Persero) Tbk and another matter

• Jurisdiction: Singapore
• Judge: Kannan Ramesh JAD
• Judgment Date: 18 January 2024
• Neutral Citation: [2024] SGHC(I) 1
• Hearing Date: 25 September 2023,26 September 2023
• Docket Number: Originating Application No 5 of 2022 and Summons No 34 of 2023
• Citation: [2024] SGHC(I) 1
• Court: International Commercial Court (Singapore)
• Year: 2024
• Published date: 18 January 2024

[LawNet Admin Note: The following judgment is displayed as received from source]

Christopher Scott Sontchi IJ (delivering the judgment of the court): Introduction

The present application, SIC/OA 5/2022 (“OA 5”), is brought by Mr Irfan Setiaputra (“Mr Setiaputra”) and Mr Prasetio (collectively, the “Applicants”), in their capacity as foreign representatives of PT Garuda Indonesia (Persero) Tbk (“Garuda Indonesia”), an Indonesian state-owned limited liability company, for the recognition of foreign proceedings and upon recognition, relief in terms of recognition and enforcement of a restructuring plan. The application is made under the Third Schedule (the “Third Schedule”) of the Insolvency, Restructuring and Dissolution Act 2018 (2020 Rev Ed) (the “IRDA”), which sets out the Model Law on Cross-Border Insolvency (30 May 1997) (the “Model Law”) promulgated by the United Nations Commission on International Trade Law (“UNCITRAL”), as adopted in Singapore.

The Applicants seek, amongst others, the following orders for recognition and relief to be granted in support of Garuda Indonesia’s restructuring proceeding in Indonesia: An order recognising Suspension of Payment Case No. 425/Pdt.Sus-PKPU/2021/PN.Niaga.Kjt.Pst (the “PKPU Proceeding”) filed on 22 October 2021 in the Jakarta Commercial Court as a foreign main proceeding within the meaning of Article 2(f) of the Third Schedule. An order recognising the Applicants as foreign representatives within the meaning of Article 2(i) of the Third Schedule. An order staying all claims, enforcement, execution, and dealings against Garuda Indonesia and/or its assets under Article 20 of the Third Schedule. An order recognising and enforcing the restructuring plan (the “Composition Plan”) approved by the PKPU Proceeding and homologated by the Jakarta Commercial Court on 27 June 2022 as a foreign order and to grant any appropriate relief under Article 21(1) of the Third Schedule. An order entrusting the Applicants with the administration and realisation of all or any part of Garuda Indonesia’s property and assets in Singapore, to effectuate and/or to implement the Composition Plan.

The non-parties in the present case are Greylag Goose Leasing 1410 Designated Activity Company (“Greylag 1410”) and Greylag Goose Leasing 1446 Designated Activity Company (“Greylag 1446”) (collectively, the “Greylag Entities”). The Greylag Entities do not challenge that the PKPU Proceeding is a foreign main proceeding within the meaning of Article 2(f) of the Third Schedule. Instead, their grounds of opposition are two-fold. First, that OA 5 was filed prematurely in light of pending proceedings before the Indonesian courts that might lead to the annulment of the Composition Plan and hence extinguish the substratum upon which OA 5 was brought. Second, that recognition of the PKPU Proceeding would be contrary to the public policy of Singapore under Article 6 of the Third Schedule.

Prior to the hearing of OA 5, the Greylag Entities filed SIC/SUM 34/2023 (“SUM 34”) for an order that the Applicants produce certain categories of documents requested by the Greylag Entities. The documents related to the impact of the Composition Plan on Garuda Indonesia’s subsidiary company, Garuda Indonesia Holiday France (“Garuda France”). SUM 34 was filed on 12 September 2023 following a request for production of documents that was served by the solicitors for the Greylag Entities on 28 August 2023 on the solicitors for the Applicants, which the latter rejected on 7 September 2023. We dismissed SUM 34 on 25 September 2023, the first day of the hearing of OA 5, with costs reserved pending the determination of OA 5. We address SUM 34 in detail at [36]–[44] below.

Having considered the parties’ submissions, we allow the Applicants’ application in OA 5 for the PKPU Proceeding to be recognised as a foreign main proceeding in Singapore. In so doing, we dismiss the two grounds of objections raised by the Greylag Entities. We further grant the reliefs sought by Garuda Indonesia as set out at [2] above. We add, however, that our orders granting the mandatory stay of proceedings under Article 20 of the Third Schedule and recognition and enforcement of the Composition Plan under Article 21(1) of the Third Schedule are subject to terms which are set out at [161]–[162] below.

Background to Garuda Indonesia’s restructuring proceeding in Indonesia and related applications Garuda Indonesia’s business operations

Garuda Indonesia is the national airline of the Republic of Indonesia (the “ROI”). It is a full-service airline. Its business operations include providing domestic and international passenger travel, cargo services, reservation and IT services, hospitality and catering services, and repair and maintenance services. It is domiciled in Central Jakarta, and has its registered office at Garuda Indonesia Building, Jalan Kebon Sirih No 46A, Jakarta 10110, Indonesia (the “Jakarta Office”). Its principal place of business is located at the Soekarno-Hatta International Airport, Jakarta’s main international airport. All its directors and a majority of its employees are Indonesian nationals. Garuda Indonesia’s board meetings take place in Indonesia, and key business decisions are made in its Jakarta Office.

Garuda Indonesia is a publicly listed company on the Indonesian stock exchange. Its largest shareholder is the ROI, which holds (a) one share of Series A “Dwiwarna” (or “Golden Share”) entitling the ROI to certain stipulated privileges under Article 5 (4.c) of Garuda Indonesia’s Articles of Association, and (b) approximately 60.536% of Garuda Indonesia’s Series B shares. The remainder of the Series B shares are owned by PT Trans Airways (28.265%) and the general public (collectively holding 11.199% and with each shareholder holding less than 5%). As noted earlier, Garuda Indonesia is the parent company of Garuda France. Garuda France’s business operations are based in France.

Garuda Indonesia has been registered in Singapore as a foreign company since 11 August 1952 and has operated flights in and out of Singapore since 1966. It maintains an office at Singapore Changi Airport Terminal 3. Its assets in Singapore include aircraft physically located in Singapore from time to time as well as cash.

The Applicants are officers of Garuda Indonesia. Mr Setiaputra is Garuda Indonesia’s President and Chief Executive Officer while Mr Prasetio is the director of the finance and risk management department of Garuda Indonesia. They were appointed by Garuda Indonesia’s board of directors as the airline’s joint foreign representatives for the purpose of OA 5.

The Greylag Entities are two of Garuda Indonesia’s creditors. They are also creditors of Garuda France. The Greylag Entities are the lessors of two Airbus aircraft (collectively, the “Aircraft”). The first is an Airbus A330-200 aircraft bearing Manufacturer’s Serial Number 1410 (“Aircraft 1410”); the second is an Airbus A330-300 aircraft bearing Manufacturer’s Serial Number 1446 (“Aircraft 1446”).

The debts owed by Garuda Indonesia to the Greylag Entities

The debts owed by Garuda Indonesia to the Greylag Entities arose under two lease arrangements that involved the Greylag Entities, Garuda France, and Garuda Indonesia in respect of the Aircraft (the “Aircraft Leases”).

The original lessor of Aircraft 1410 was Denpasar Aircraft Leasing (Ireland) Limited (“DAL”), and the original lessor of Aircraft 1446 was Surabaya Aircraft Leasing (Ireland) Limited (“SAL”). The lessee of the Aircraft was Garuda France. By way of novation agreements entered into on 28 October 2016 between DAL, Garuda France, and Greylag 1410 (in respect of Aircraft 1410) and between SAL, Garuda France, and Greylag 1446 (in respect of Aircraft 1446) (the “Aircraft Headleases”), the Greylag Entities became the lessors of the Aircraft. Garuda France remained the lessee of the Aircraft. By way of two agreements dated 28 October 2016 (the “Aircraft Subleases”), Garuda France sub-leased the Aircraft to Garuda Indonesia on terms similar to those in the head-lease agreement between the respective original lessors (ie, DAL and SAL) and Garuda France.

On 27 September 2019, the Aircraft Subleases were amended to record the Greylag Entities as the new lessors of the respective Aircraft. At the same time, the parties also entered into two sets of agreements. The first set comprised two subordination agreements (the “Subordination Agreements”) in connection with the leasing arrangements for the Aircraft. The second set comprised two security agreements respectively (the “Security Agreements”) between Garuda France and Greylag 1410 (for Aircraft 1410), and between Garuda France and Greylag 1446 (for Aircraft 1446).

Paragraph 4(a) of each of the Subordination Agreements provides, in effect, that Garuda Indonesia’s rights under the Aircraft Subleases “are subject and subordinate in all respects” to the rights of the Greylag Entities under the Aircraft Headleases and the Security Agreements. Crucially, paragraph 12 of the Subordination Agreements prescribes that upon the giving of notice by Garuda France to Garuda Indonesia informing the latter that the Greylag Entities’ security interests under the Security Agreements had become enforceable, the Greylag Entities will be entitled to: exercise “all the rights, powers and discretions” that Garuda France might have under the Aircraft Subleases and “any other Operative Documents (as defined in the [Aircraft Subleases]”; and require the payment of all money payable by Garuda Indonesia under the Aircraft Subleases and any other Operative Documents to be directed to any bank accounts indicated by the Greylag Entities.

By letters dated 28 January 2020, 13 February 2020, 27 April 2020 and 4 January 2022, the Greylag Entities issued notices to Garuda Indonesia and Garuda France declaring, among others, what it termed “Events of...