Can Two Penalties Be Charged for One Ongoing Violation in the Sale of Property at Auction in Bankruptcy Proceedings: Supreme Court's Answer

If the untimely signing of the act of property acquisition at auction and the failure to assign the claim right result from the same inaction by the auction organiser, the simultaneous collection of penalties, as stipulated in Articles 87 and 88 of the Commercial Procedure Code of Ukraine (CPCU), for the same period of delay may lead to double liability for a single violation. This contravenes Article 61 of the Constitution of Ukraine. Furthermore, the penalty established by these CPCU provisions is of a private law nature and may be reduced by the court in accordance with Article 551 of the Civil Code of Ukraine. This conclusion was reached by the Commercial Cassation Court of the Supreme Court (CCC SC) in case No. 925/1240/21.

The CCC SC reviewed a cassation appeal in a case initiated by an individual entrepreneur against an arbitration manager. The entrepreneur sought the collection of penalties for the untimely assignment of the claim right, penalties for the untimely signing and submission of the act of property acquisition at auction, and damages in the form of court fees incurred during the appeal of the liquidator’s actions in separate court proceedings.

The dispute arose following an auction for the sale of the debtor’s accounts receivable. The plaintiff contended that, despite full payment for the purchased lot, the liquidator failed to sign or deliver the act of property acquisition at auction, did not assign the claim right, and unjustifiably issued an act declaring the auction invalid. The claim right was transferred to the buyer only a considerable time after the auction’s completion.

The court of first instance, a decision upheld by the appellate commercial court, partially granted the claim. It ordered the collection of penalties under Articles 87 and 88 of the CPCU, reducing their amount by 50%, and also awarded damages for court fees.

COURT’S ASSESSMENT

The CCC SC noted that the CPCU provisions establish two distinct obligations for the auction organiser upon its completion: to formalise the auction results by drawing up and signing the act of property acquisition, and to transfer the purchased property to the buyer or assign the claim right.

The Supreme Court affirmed that these obligations possess independent legal significance; consequently, Articles 87 and 88 of the CPCU formally stipulate liability for different types of violations.

However, the panel of judges emphasised that when deciding on the application of liability, it is imperative to assess not only the formal content of the relevant provisions but also the actual nature of the violation in the specific case.

The CCC SC determined that the failure to sign the act of property acquisition at auction and the failure to assign the claim right were interconnected consequences of a single inaction by the liquidator. The absence of a formalised act effectively precluded the transfer of the claim right to the buyer, thereby rendering both violations a single, ongoing breach of the auction organiser’s obligations.

Under these circumstances, the Supreme Court concluded that the simultaneous collection of penalties under Articles 87 and 88 of the CPCU for the same period of delay would constitute double liability for a single violation, which is inconsistent with the guarantees provided by Article 61 of the Constitution of Ukraine.

The court also observed that the penalty established by the CPCU provisions concerning the auction organiser’s liability is not a public-law sanction. It is a lawful penalty payable to the counterparty, and as such, general provisions of civil law regarding penalties apply to it.

Accordingly, the CCC SC confirmed the possibility of applying Article 551 of the Civil Code of Ukraine to reduce such a penalty if the amount of liability is excessive or other significant circumstances exist.

Separately, the Supreme Court highlighted that procedural costs incurred by a party during the consideration of another court case do not qualify as damages under civil law and cannot be recovered through a separate claim for compensation.

From the foregoing, it follows that while Articles 87 and 88 of the CPCU provide for liability for different violations, in instances where both violations are in fact covered by a single inaction and constitute a single ongoing violation, the simultaneous collection of two penalties for the same period of delay is impermissible.

As a result of the review, the Supreme Court concluded that there were no grounds for collecting the penalty under Article 87 of the CPCU and damages in the form of court costs. The court decisions regarding the collection of the penalty under Article 88 of the CPCU, reduced by 50%, remained unchanged.

Further details and the text of the CCC SC ruling dated 28.05.2026 in case No. 925/1240/21 (925/268/25) can be found at this link.

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