ARTICLE
30 October 2024

Execution Proceedings Pertaining To Commercial Papers And Bills

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Sakar Law Office

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Commercial papers and bills are documents that have an essential place in commercial relations and provide a secure way of securing debts.
Turkey Insolvency/Bankruptcy/Re-Structuring

Commercial papers and bills are documents that have an essential place in commercial relations and provide a secure way of securing debts. The Execution and Bankruptcy Code (EBC) regulates two types of methods pertaining to commercial papers and bills as execution and bankruptcy, which allows creditors to obtain their rights in a swift manner.

Article 167 of the Execution and Bankruptcy Code: A creditor whose receivable is based on a check, promissory note or bill of debenture payable at sight, even if the receivable is secured by a pledge, may proceed by way of attachment according to the special procedures in this section or by way of bankruptcy if the debtor is a person subject to bankruptcy.

The creditor is obliged to specify in the request for proceedings which of the attachment and bankruptcy procedures against the debtor subject to bankruptcy he seeks, in addition to the matters specified in Article 58, and to attach to the request for proceedings the original bill of exchange and as many certified copies of the bill of exchange as the number of debtors.

We have already mentioned the bankruptcy method pertaining to commercial papers and bills in our article titled "Bankruptcy Proceedings". In this article, we will examine the execution method pertaining to commercial papers and bills. The procedure for execution method is regulated under Articles 168, 169 and 170 of the Execution and Bankruptcy Code. The characteristic of execution proceedings pertaining to commercial papers and bills are as follows:

  • Execution proceeding pertaining to commercial papers and bills is an execution proceeding without judgement. However, unlike other execution procedures, there is no obligation to apply for a pledge first.
  • The authorized execution office for the execution proceeding of commercial papers and bills is determined in accordance with the principles regarding jurisdiction in the Code of Civil Procedure with the reference in Article 50 of the Execution and Bankruptcy Code. However, unlike the Code of Civil Procedure, for the receivables arising from the contract, the enforcement office where the contract is concluded is also authorized.
  • To initiate an execution proceeding for bills of exchange, the receivable must have arisen from a check, promissory note or draft duly issued and due. The execution officer shall determine ex officio that the bill of exchange is valid and due. The execution officer shall determine that the paper has the characteristics of a negotiable instrument by examining the formal requirements stipulated in the TCC. However, the examination that is carried out by execution officer shall be in formal scope.
  • The elements that must be included in the payment order to be issued in the execution proceeding for bills of exchange are listed in Article 168 of the EBC. In the payment order, the debtor is notified to (i) Pay the debt and the costs of the proceedings to the enforcement office specified in the payment order within 10 days or (ii) Object execution proceeding regarding the merits of the debt within 5 days (iii) Make a declaration of property within 10 days if no objection is made and the debt is not paid; within 3 days if the objection is objected and the objection is not accepted.

The debtor must raise objections within 5 days following the notification of the payment order. In the Execution and Bankruptcy Code, the debtor's objection to the payment order is regulated in two different ways: objection to the signature and objection to the debt.

Debtor's Objection to Signature

If the debtor denies that the signature belongs to him, he must declare this to the enforcement court with a petition within the five-day objection period. Otherwise, the signature on the paper shall be deemed to belong to the debtor. If the debtor has duly raised this objection, no execution proceedings other than the sale shall be suspended. Before the execution court's final decision, the Court may decide to suspend the execution proceedings. If it is understood that the signature does not belong to the debtor, the Court shall decide to accept the objection and cancel the execution proceedings. In addition, if the Court finds the creditor has been grossly at fault or in bad faith to initiate an execution proceeding, the Court shall impose a fine amounting 10% of the receivable and a bad faith indemnity amounting not less than 20% of the receivable subject to the proceeding against the creditor.

At the end of the judgment, if it is determined that the denied signature belongs to the debtor and the execution is suspended with the objection, the debtor shall be sentenced to a denial indemnity amounting not less than 20% of the receivable and a fine amounting of 10% of the receivable subject to execution and his objection shall be rejected.

Debtor's Objection to Debt

The debtor must notify the execution court with a petition within the five-day objection period that he/she is not a debtor, that the debt has been paid, that he/she has been given an extension of time, that the receivable is time-barred, or that he/she objects to jurisdiction. This objection does not stop the execution proceedings other than the sale.

Pursuant to Article 169/a-1 of the EBC, the judge shall call the parties to the trial within thirty days. If it is proved that there is no debt or the debt has been paid or that a deadline has been given with an official or signed document, the judge may decide to suspend the execution proceedings. A suspension order is an interim injunction; it does not prevent the execution court from examining the basis of the objection to the debt. The provision of the temporary suspension of the proceedings shall continue until the decision of the execution court on the basis of the objection. Pursuant to Article 169/a of the EBC, the execution ceases with the resolution of acceptance of the objection. If the debtor is wrong in his objection, the objection shall be rejected, and the creditor shall resume the proceedings.

If the court accepts the objection to the debt and concludes that the creditor is grossly at fault or in bad faith, it shall impose a fine amounting 10% of the receivable against the creditor and a bad faith compensation amounting not less than 20% of the receivable subject to the proceeding in favor of the debtor.

If the creditor exercises its right to file a lawsuit under the general provisions, the collection of the awarded compensation shall be postponed until the end of the lawsuit.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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