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Banking and payment services: The Supreme Court confirms the prohibition of entering the compulsory mortgage in the land and mortgage register after opening accelerated composition proceedings

Banking and payment services: The Supreme Court confirms the prohibition of entering the compulsory mortgage in the land and mortgage register after opening accelerated composition proceedings

In the resolution of February 26, 2021, issued in the case with reference number III CZP 23/20,  the Supreme Court ruled on the admissibility of the establishment of a compulsory mortgage on the debtor's property after the opening of accelerated composition proceedings.

The Supreme Court took the position that the provision of Art. 246 paragraph. 1 of the Restructuring Law also applies to the compulsory mortgage. The aforementioned provision states that it is not allowed to encumber the debtor's assets with a mortgage after the opening of accelerated composition proceedings in order to secure a claim arising before the opening of accelerated composition proceedings.

This means that, as a rule, entry of the compulsory mortgage in the land and mortgage register after the opening of accelerated composition proceedings will be unacceptable. The exception will be situations when:

  • the creditors' council will allow the real property to be encumbered to secure a debt not covered by the arrangement (e.g., if necessary, to secure the repayment of a loan taken during restructuring) (Article 129 (1) point 1 of the Restructuring Law),
  •  if the application for entry of the mortgage was submitted at least six months before the date of submitting the application for opening the proceedings (Article 246 (2) of the Restructuring Law).

The prohibition on entering a compulsory mortgage also applies to a compulsory mortgage established as security for claims (interim measure) pursuant to art. 730 and art. 7301 of the Code of Civil Procedure.



Marcin Kręglewski

Lawyer

Marcin Kręglewski

Barrister, Senior Counsel

Marcin Kręglewski

Contact:

Rondo ONZ 1
00-124 Warsaw