The Petitioner during the Preliminary Hearing of Case Number 173/PUU-XXIV/2026 concerning the judicial review of Law Number 37 of 2004 on Bankruptcy and Suspension of Debt Payment Obligations, Thursday (4/6/2026). Photo: MKRI Public Relations/Bay

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JAKARTA, MKRI – PT Sejin Silicone, represented by its Director Jang Gun Sang, has filed a petition for judicial review of Article 55 paragraph (1) of Law Number 37 of 2004 on Bankruptcy and Suspension of Debt Payment Obligations (Bankruptcy and PKPU Law) before the Constitutional Court (MK). The Petitioner argues that the provision under review has violated its constitutional rights, particularly the right to fair legal certainty in obtaining protection over its property.

“The implementation of Article 55 paragraph (1) of Law Number 37 of 2004 has harmed the Petitioner’s constitutional rights, namely the right to fair legal certainty in obtaining protection for the property it owns,” said the Petitioner’s legal counsel, Ali Sumali Nugroho, during the Preliminary Examination Hearing of Case Number 173/PUU-XXIV/2026 on Thursday (4/6/2026) at the Constitutional Court courtroom in Jakarta.

The Petitioner argued that, under Article 55 paragraph (1) of Law Number 37 of 2004, separatist creditors have the right to execute collateral belonging to a bankrupt debtor to obtain repayment of their receivables as if bankruptcy had not occurred, including when the debtor is in a state of insolvency or unable to fulfill its financial obligations to creditors. One fundamental principle in the execution of collateral belonging to a bankrupt debtor, according to the Petitioner, is that the secured assets must be sold at a fair and competitive value.

The Petitioner emphasized that this principle is essential because the proceeds from the sale of bankrupt debtor assets do not only concern the interests of secured creditors (separatist creditors), but also affect the rights of other creditors. If collateral is sold at an undervalued price, there is a risk that the debtor’s assets will not be realized optimally, resulting in avoidable losses.

The Petitioner further explained that separatist creditors—those holding security rights such as mortgage rights, fiduciary security, pledges, or mortgages—retain the authority to execute collateral despite bankruptcy proceedings. However, such execution must still uphold the principle that the collateral is sold at a reasonable (fair value) and competitive price.

According to the Petitioner, this issue became apparent in the bankruptcy case of PT Universe Design Indonesia. On 25 June 2025, the Commercial Court at the Central Jakarta District Court issued a decision in Case Number 392/Pdt.SusPKPU/2024/PN.Niaga.Jkt.Pst, declaring PT Universe Design Indonesia bankrupt with all legal consequences.

On 20 August 2025, the Bankruptcy Curator Team of PT Universe Design Indonesia recorded the Petitioner’s claim in the Permanent List of Receivables as a creditor of PT Universe Design Indonesia amounting to Rp7.533 billion. In addition, PT Universe Design Indonesia also had an outstanding debt to PT Bank KEB Hana Indonesia as a mortgage holder creditor amounting to Rp13.981 billion.

Subsequently, on 1 July 2025, the Bankruptcy Curator Team determined that the bankrupt estate consisted only of a plot of land and building covering 12,049 square meters registered under PT Universe Design Indonesia, with a Tax Object Sales Value (NJOP) of Rp21.834 billion.

On 28 July 2025, the Curator Team announced that the insolvency period of PT Universe Design Indonesia began on 8 July 2025.

However, during the insolvency period, on 4 September 2025, the State Asset and Auction Service Office (KPKNL) Purwakarta organized and announced the winner of an auction for PT Universe Design Indonesia’s collateral asset, namely the 12,049-square-meter land and building, which was acquired by PT Bank KEB Hana Indonesia through the Agunan Yang Diambil Alih (AYDA) mechanism—an asset takeover mechanism—with a value of Rp14.260 billion.

The Petitioner argued that the AYDA auction value determined by PT Bank KEB Hana Indonesia, amounting to Rp14.260 billion against an asset with an NJOP value of Rp21.834 billion, eliminated the possibility of fulfilling the Petitioner’s receivable claim of Rp7.533 billion.

The Petitioner stated that if PT Bank KEB Hana Indonesia, as the mortgage holder creditor, had exercised its rights during the insolvency period through an auction mechanism other than AYDA, the asset could have obtained a fair and competitive auction value, at least equivalent to the minimum value reflected in the NJOP.

In such circumstances, PT Bank KEB Hana Indonesia would still have obtained priority repayment as a secured creditor, while the Petitioner would have retained the possibility of receiving payment based on the principle of pari passu pro rata parte.

The Petitioner argued that because Article 55 paragraph (1) of Law Number 37 of 2004 does not provide limitations on the use of the AYDA mechanism by mortgage holder creditors in executing their rights, the provision has caused constitutional harm by undermining the right to fair legal certainty and protection of property rights.

Article 55 paragraph (1) of Law Number 37 of 2004 states:

“While observing the provisions as referred to in Articles 56, 57, and 58 of Law Number 37 of 2004, every creditor holding a pledge, fiduciary security, mortgage right, hypothec, or other security rights over assets may execute their rights as if bankruptcy had not occurred.”

The Petitioner argued that the provision contradicts Article 28D paragraph (1) of the 1945 Constitution, which guarantees:

“Every person shall have the right to recognition, guarantees, protection, and fair legal certainty as well as equal treatment before the law.”

Therefore, the Petitioner maintained that an auction mechanism should not merely be conducted openly but must also be competitive so that the resulting price reflects a proper, objective, and fair market value.

The Petitioner also argued that, empirically, the implementation of AYDA auctions by banks has generated various legal issues, particularly concerning potential conflicts of interest. This is because, under the AYDA mechanism, banks occupy a dual and dominant position.

On one hand, banks act as creditors seeking repayment of outstanding debts from collateral that forms part of the bankrupt estate. On the other hand, banks also control the collateral and determine various aspects of the asset disposal process, including price assessment, timing of sale, selection of auction mechanisms, and coordination with appraisers and auction providers.

According to the Petitioner, these overlapping positions may create an imbalance of interests between banks, debtors, and other parties with interests in the collateral assets. In practice, AYDA auctions during insolvency periods have created legal disputes, including those reflected in Commercial Court Decision Number 11/Pdt.Sus-Gugatan Lain-Lain/2023/PN Niaga Sby in conjunction with Number 13/Pdt.Sus-Pailit/2022/PN Niaga Sby dated 11 September 2024, and Supreme Court Decision Number 187 K/Pdt.Sus-Pailit/2025 dated 13 March 2025.

Theoretically, a conflict of interest arises when a party has authority or power to make decisions that may affect its own interests, potentially reducing objectivity and independence in decision-making. In the context of AYDA, banks have a direct interest in immediately resolving non-performing loans (NPLs).

Such interests, the Petitioner argued, may encourage banks to prioritize the speed of collateral disposal rather than ensuring protection of the debtor’s asset value, thereby affecting the economic rights of other parties with interests in the collateral. This situation becomes increasingly sensitive when AYDA auction prices are determined significantly below market value.

Accordingly, in its petition, the Petitioner requested the Court to grant the application and declare Article 55 paragraph (1) of Law Number 37 of 2004 conditionally unconstitutional and without binding legal force insofar as it is not interpreted as:

“While observing the provisions as referred to in Articles 56, 57, and 58, every creditor holding a pledge, fiduciary security, mortgage right, hypothec, or other security rights over assets, other than through the Agunan Yang Diambil Alih (AYDA) mechanism, may execute their rights as if bankruptcy had not occurred.”

The petition was examined by a panel of constitutional justices chaired by Constitutional Justice Enny Nurbaningsih, accompanied by Constitutional Justices Ridwan Mansyur and Arsul Sani.

During the advisory session, Justice Ridwan stated that the Petitioner must further elaborate on the AYDA issue, which was claimed to frequently create problems, and connect it with the constitutional issue arising from the challenged provision.

The Petitioner was also advised to strengthen the argument regarding the alleged conflict between Article 55 paragraph (1) of Law Number 37 of 2004 and the constitutional provision used as the basis for review. The Petitioner must demonstrate and convince the Court that the challenged provision has caused constitutional harm.

“Actually, it is easier because it begins with a concrete issue, but the problem is that there are indeed many issues arising from this matter. You may later elaborate further in the grounds of the petition, including issues that affect the constitutionality of the norm,” Ridwan stated.

Before closing the hearing, Justice Enny informed the Petitioner that it had one opportunity to revise the petition within 14 days. The revised petition documents, both soft copy and hard copy, must be submitted to the Court no later than Wednesday, 17 June 2026, at 12.00 WIB.

 

Explore the Case: Petition No. 173/PUU-XXIV/2026

 

Author               : Mimi Kartika
Editor                 : Lulu Anjarsari P.

PR                     : Raisa Ayuditha M.
Translator          : SO

 

Disclaimer: The original version of the news is in Indonesian. In case of any differences between the English and the Indonesian versions, the Indonesian version will prevail.

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