During a legal dispute, the parties often come to a compromise formalized in a settlement agreement. It sets out the conditions for the fulfillment of mutual obligations.
Despite the fact that it is concluded under conditions that suit the warring parties, in practice there are violations of the provisions of the settlement agreement, which lead to the defendant’s failure to comply with its provisions.
However, what to do when the terms of the settlement agreement are not fulfilled within the allotted time frame? How to go to court with a statement of non-fulfillment of a settlement agreement and restore your rights? We'll tell you in this article.
What are the consequences of the defendant’s failure to comply with the settlement agreement?
Is it possible to cancel the settlement agreement due to non-performance? First you need to understand what this document is. This is, in fact, an agreement that sets out all the conditions for resolving the dispute between the parties.
This could be debt write-off or forgiveness of a certain part of it. In addition, in order to resolve a dispute, certain property may be transferred to the opposing party.
The settlement agreement is approved by the court and serves as the basis for termination of the proceedings. But what to do next if it is violated and the agreement is not fulfilled?
What are the consequences of failure to comply with a court order? There are several ways to do this.
One can question the very determination of the court to approve the settlement agreement. However, only 15 days are allotted for this.
Therefore, it makes sense to appeal the ruling when there is confidence that the defendant may fail to comply with the settlement agreement. In fact, the obligation will not be fulfilled.
Petition for the issuance of a writ of execution for forced execution of a settlement agreement
Nuances and requirements for a settlement agreement in bankruptcy
The decision of the meeting of creditors to conclude a settlement agreement is adopted by a majority vote of creditors and is considered adopted if all creditors for obligations secured by a pledge of the debtor’s property vote for it. Important clarification: Secured creditors have some privilege. Thus, if the arithmetic majority of creditors is in favor of a settlement agreement, but among the minority that is against there is at least one secured creditor, then the settlement agreement cannot be concluded . On the part of the citizen-debtor, the decision on a settlement agreement is made by the citizen; on the part of the debtor - a legal entity, it is made by the head of the debtor, the acting head of the debtor or the corresponding arbitration manager.
If a settlement agreement in a bankruptcy case is a transaction for the debtor, which, in accordance with federal laws and (or) the debtor’s constituent documents, is made on the basis of a decision of the debtor’s management bodies or is subject to agreement with the debtor’s management bodies, the decision to conclude a settlement agreement on behalf of the debtor may be adopted after a decision by the debtor's management bodies.
Settlement agreement in case of non-fulfillment: what to do, possible consequences
If a settlement agreement approved by the court is not implemented, where should I turn?
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Since a settlement agreement in civil proceedings, and even in arbitration, is a type of contract, you can try to terminate it in court.
However, not all courts make decisions in favor of the creditor in certain disputes.
Therefore, an alternative under the Civil Procedure Code and the Arbitration Procedure Code is to apply to the court for the issuance of a writ of execution if the settlement agreement is not fulfilled voluntarily. It is not subject to state duty.
After the court makes its decision, the writ of execution is handed over to the bailiffs to force the debtor to comply with the terms of the settlement agreement.
Then deductions from the debtor’s income and seizure of his property are already possible. Everything will depend on the size of the claims and the subject of the claim.
For example, if a settlement agreement regarding alimony is not fulfilled, then the penalty may be applied to the wages and other income of the alimony payer.
Then there will already be liability for failure to comply with the settlement agreement, and specifically for violation of the legislation on enforcement proceedings, which consists of a fine under Art. 17.14, 17.15 Code of Administrative Offenses of the Russian Federation.
What to do if the defendant does not comply with the settlement agreement?
Grounds for refusal
The court has the right to refuse to approve a settlement agreement in bankruptcy if the obligation to repay the debt under the claims of first and second priority creditors has not been fulfilled on the date of approval of the agreement, as well as in the case of:
- violation of the procedure for concluding a settlement agreement established by bankruptcy law;
- failure to comply with the form of the settlement agreement;
- violations of the rights of third parties;
- contradictions between the terms of the settlement agreement and federal laws and other regulatory legal acts;
- the presence of other grounds for the nullity of transactions provided for by civil law.
If the court refuses to approve the settlement agreement, it is considered not concluded. However, refusal does not prevent the conclusion of a new settlement agreement.
The determination to approve or refuse to approve a settlement agreement may be appealed to a higher court.
If the ruling on approval of the settlement agreement is cancelled, bankruptcy proceedings are resumed from the bankruptcy procedure in which the decision to conclude the settlement agreement was made.
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How to write a statement to the court about non-fulfillment of a settlement agreement
So, it is submitted to the justice authority at the place of residence or location of the defendant. The claim must indicate the details of the court, as well as the parties to the case. After this, a brief mention should be made of the legal dispute on which the parties reached a consensus.
Then you need to describe the terms of the document itself, indicating what obligations are recorded in it. For example, you should indicate the amount of debt with its maturity date. If payments must be periodic, you need to indicate their dates.
Finally, they are asked to issue a writ of execution indicating the exact amounts to be collected. If the agreement concerned actions of a non-property nature, it is necessary to clearly indicate what they are.
A sample application can be seen at this link. Everyone can modify it based on their specific situation and certain terms of the settlement agreement.
Application for the issuance of a writ of execution for forced execution of a settlement agreement
Rights of the defendant.
If the plaintiff fails to comply with the settlement agreement, the defendant may receive a writ of execution. Each party has the same rights. Bailiffs inform the citizen about the debt.
If he does not respond to the information, then they have the right to apply the following sanctions to the violator:
- deductions from wages or other sources of income;
- seizure of financial assets;
- ban on leaving the country;
- seizure of property, etc.
If the whereabouts of the debtor are unknown, the bailiffs may put him on the wanted list. The larger the amount of the settlement agreement, the more urgent and serious the measures will be taken.
Settlement agreement in civil proceedings.
Example of an application for approval of a settlement agreement
In arbitration cases, the parties often manage to resolve the dispute through a compromise at an intermediate stage. All agreements are reflected in the settlement agreement, which is approved by the court.
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A ruling is issued that contains all the conditions for reconciliation point by point. However, it happens that the settlement agreement is subsequently ignored. Then there is nothing left to do but apply to the arbitration court again.
An application for non-fulfillment of the settlement agreement is filed. Its purpose is to obtain a writ of execution to enforce the arbitration court's ruling. Below is an example form of the document.
Arbitration Court of Moscow
Bolshaya Tulskaya street, 17
Plaintiff: Limited Liability Company "Vympel"
Tretyakovsky proezd, 8, office 2
Defendant : Private
st. Dubinina, 4, building 5, office 1
Case No. 169384-18
Statement
on obtaining a writ of execution due to non-fulfillment of a settlement agreement
On June 5, 2021, Vympel LLC filed a claim with the Moscow Arbitration Court against the Black Sea Fleet Avers to collect a debt in the amount of 200,000 rubles. The defendant did not fulfill his obligations to pay for the goods received under the supply agreement.
By ruling dated June 12, 2018, proceedings were opened in arbitration case No. 169384-18. During the proceedings, the parties to the dispute came to a settlement agreement, which was approved by the court (ruling dated 09/05/2018).
Its terms stipulate that the defendant will repay the debt in full by December 25, 2021. However, as of January 10, 2021, money has not been received from the Black Sea Fleet Avers to the bank account of Vympel LLC. Moreover, the defendant stopped making contact.
I believe that the ruling made by the arbitration court on approval of the provisions of the settlement agreement requires forced execution (Part 2 of Article 142 of the Arbitration Procedure Code of the Russian Federation). To do this, in accordance with Part 2 of Art. 318 of the Arbitration Procedure Code of the Russian Federation, a writ of execution is issued. It is drawn up by the arbitration court that adopted the relevant judicial act during the consideration of the case.
Based on this information, and guided by Art. Art. 142, 318, 319 Arbitration Procedure Code of the Russian Federation,
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I ask the court:
Issue a writ of execution in the prescribed form for the purpose of forcing the execution of the settlement agreement concluded between Vympel LLC and the Black Sea Fleet "Avers" and approved by the ruling of the Moscow Arbitration Court dated September 5, 2021 in the framework of case No. 169384-18.
Application:
A copy of the court ruling approving the settlement agreement
Director of Vympel LLC Kuzmin A. Yu.
Responsibility for non-fulfillment
Having received a corresponding application, the court has the right:
- set a specific date, after which all negative consequences previously provided for by the contract or the provisions of the law will occur for the guilty party;
- establish a time period during which the defendant must consistently and fully fulfill his obligations;
- cancel the existing agreements of the parties and issue a writ of execution to the plaintiff, motivating these actions by the non-compliance of the defendant, who is delaying the resolution of the conflict.
In this case, the court has the right to be guided by the previously approved text. This means that in addition to the legal penalties - paying a fine for late payment, penalties - additional reprisals may be applied to the guilty party for violations against the defendant, which were agreed upon before the document was approved.
The only condition is that they must not contradict the provisions of the law and affect the interests of third parties.
Legislative regulation
The Civil Procedure Code does not contain the concept of a settlement agreement in civil proceedings. It is given only a few words in the text of the law. In Russia, at the time of the adoption of the procedural code, there was almost no experience related to agreements of this kind. And the participants in the process were left with ample room for maneuver in resolving their disputes. There is only one requirement for their content - it does not violate the law and the rights and interests of the participants in the process and other persons.
Nothing is said about the consequences of failure to comply. The Arbitration Procedure Code, on the contrary, contains provisions that answer the question of how to solve this problem. But this applies to the arbitration process, how to solve the dilemma in a civil case?
The clarifications of the RF Armed Forces on the application of legislation on enforcement proceedings indicate that the interested person must submit an application for the issuance of a writ of execution and contact the bailiffs. The legal basis is the application of the law by analogy.
The court or bailiff may refuse to issue a writ of execution or open proceedings because they have no information about the non-fulfillment of the settlement agreement in enforcement proceedings. This argument is unfounded; the bailiff is obliged to find out within the framework of the proceedings whether the terms of the agreement were fulfilled.
Types of agreements
A settlement agreement is drawn up to resolve the dispute by agreement of the parties and to determine mutual rights and obligations.
Depending on the nature of the dispute, the document may be drawn up:
- when considering a civil or arbitration case in the courts
- in this case, the parties to the agreement will be the plaintiff and the defendant, and the document must be approved by the court; - within the framework of enforcement proceedings
, the document is drawn up by the claimant and the debtor, and the procedure for its approval is not defined by law; - during bankruptcy
- an agreement is drawn up between creditors and the debtor, and to enter into force the document is approved by the arbitration court during its meetings.
The consequences that occur after approval of the agreement in each of the listed cases are significantly different. However, signing a document always entails the termination of certain procedures - court cases, bankruptcy, enforcement proceedings.
An important nuance is that no one can be forced to sign a settlement agreement. If at least one side does not agree with him, there will be no peace. Therefore, the parties have to maneuver, make mutual concessions, and take into account each other’s interests. A settlement agreement will not be concluded by someone who is stubborn and does not want to negotiate.
If the refusal comes from the bailiff
Bailiffs often violate the law by refusing to open enforcement proceedings. There are several reasons: workload, ignorance of the legislation, including that regulating the activities of the bailiff.
An employee’s refusal to open proceedings is appealed to the head of the department, and then to the department or in court. The second method takes longer - it requires preparing a full-fledged claim, but it is more effective. Judges often agree with the plaintiffs; in addition, bailiffs, having received summonses to court, try to cancel their own illegal decision before the start of the process. And this despite the fact that a citizen or representative of an organization has previously contacted them.
