Court proceedings are not interrupted despite the declaration of insolvency if the respondent voluntarily appears in court.

The former employee of a company subject to insolvency procedure through judicial administration (Legislative Decree No. 270/1999) sued the said company as per art. 404 of the Italian Code of Civil Procedure.

The respondent, represented by the judicial receiver (commissario straordinario) at that stage, voluntarily appeared in court and requested the halting of the proceedings due to insolvency, but still made detailed defences on the merits .

Against the said preliminary objection of the respondent, the claimant (represented by our firm) challenged the halting of the procedure on the ground that the company's voluntary appearance in court through the receivership justified the continuation of the proceedings since it "remedied all procedural defences" and should be equated to "an act of procedural impulse" as per art. 299 and 302 of the Italian Code of Civil Procedure, meaning that it proved the interest of the respondent in carrying on with the proceedings.

There is no doubt that, technically speaking, that the starting of the insolvency procedure implies a "halting event" of the proceedings. Indeed:

  • From a substantial point of view, art. 19 of Legislative Decree no. 270/1999 recall art. 142 of the Insolvency Code (Codice della Crisi d'Impresa), which expressly provides that "the opening of the judicial liquidation determines the halting of the proceedings. The period to resume the interrupted proceedings begins when the halting is declared by the Judge";
  • From a procedural point of view, the respondent through its legal representative (to whom the claimant had formally notified the claim and the decree summoning the parties in court before the opening of the insolvency) had lost the right to appear before the Court, while the company had been legitimized by the judicial liquidation, in the person of the judicial receiver (to whom the management of the company had been entrusted, appointed by Decree of the Minister of Enterprise).

Whereas a strictly formalistic interpretation of the law could lead to favour the halting of the proceedings, which would have entailed a significant extension of the procedural deadlines in detriment of the claimant, our firm, through an articulated reconstruction of the ratio behind the provisions allowing for the halting, asked the Judge to dismiss the preliminary objection of the respondent, emphasizing in particular that:

  1. The company had not only correctly qualified itself as legitimated to be in court (having formally appeared through the receivership), yet by doing so it also proved that its right to a fair trial and discussion in court was not impaired (to the contrary it demonstrated specific knowledge of the facts and presented articulated defences and preliminary requests);
  2. the spontaneous and timely appearance of the respondent constituted an act of procedural impulse, implying the intention not to halt the proceedings;
  1. on the other hand, any halting of the proceedings as requested by the insolvent company would ultimately not have benefitted it, while, on the contrary, it would have entailed an extension of the procedural deadlines, forcing the claimant to resume the proceedings against the same company, with clear violation of the principles that prescribe a speedy and fair trial.

In the light of the claimant's counter observations, the Court held that there was no need to halt the proceedings and allowed it to continue according with the provisions of the arts. 299 and 302 of the Italian Code of Civil Procedure.

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