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RESOLUTION OF THE PLENUM OF THE CONSTITUTIONAL COURT OF THE AZERBAIJAN REPUBLIC

of November 19, 2004

About compliance of the resolution of Judicial Board on cases on economic disputes of the Supreme Court of the Azerbaijan Republic of April 22, 2004 to the Constitution and the laws of the Azerbaijan Republic in connection with the claim of Baku Telephone Communication Production association

Name of the Azerbaijan Republic

Plenum of the Constitutional Court of the Azerbaijan Republic as a part of F. Abdullaev (chairman), F. Babayeva, B. Garibov, R. Gvaladze (judge-speaker), E.Mamedova, I. Nadzhafova, S. Salmanova and A. Sultanov,

with participation of the court secretary I. Ismaylov,

representatives of the applicant of the acting as CEO of Baku Telephone Communication Production association A. M. Guliyev and lawyer A. M. Guseynli,

the specialist - the independent auditor N. M. Talybov

according to part V of article 130 of the Constitution of the Azerbaijan Republic according to the procedure of the constitutional legal proceedings in proceeding in open court at the request of Baku Telephone Communication Production association considered the constitutional case on check of compliance of the resolution of judicial board on cases on economic disputes of the Supreme Court of the Azerbaijan Republic of April 22, 2004 to the Constitution and the laws of the Azerbaijan Republic. The constitutional case is considered without participation of defendant.

Having heard the report of the judge R. Gvaladze, speech of the representative applicant A. M. Guseynli and the specialist N. M. Talybov in case, having researched and having discussed case papers the Plenum of the Constitutional Court Established:

The decision of Local economic court No. 1 of the Azerbaijan Republic of March 17, 2003 the claim of National Bank of the Azerbaijan Republic (NB) for collection of the principal and interest-bearing debt which is not returned on the credits issued to Joint investment bank "Pochtbank" (AIB) as guarantee of providing the agreements signed between NB and the Baku Telephone Communication Production Association (BTCPA) decides collection of principal debt at AIB "Pochtbank" for benefit of National Bank according to two credit agreements 7.500.000.000 and 2.000.000.000 manats, only 9.500.000.000 manat of principal debt and respectively 758.219.178 and 139.726.027 manat of interest-bearing debt. And the claim concerning Baku Telephone Communication Production association is rejected.

The resolution of the Trial Court was left by the decision of Economic Court of the Azerbaijan Republic of June 23, 2003 without changes.

The above-stated decision of Economic Court of the Azerbaijan Republic was cancelled by the resolution of judicial board on cases on economic disputes of the Supreme Court of the Azerbaijan Republic (SKDES) of December 11, 2003, and case was sent to the same court for new trial.

The decision of Economic Court of the Azerbaijan Republic of February 20, 2004 the decision of Local economic court No. 1 of the Azerbaijan Republic of March 17, 2003 cancelled and made the new decision, the claim of National Bank at the expense of POBTS is satisfied, collection at the defendant of principal debt 9.500.000.000 manat and interest-bearing debt 897.945.205 manat for benefit of National Bank is decided, the claim against AIB "Pochtbank" is rejected.

The above-stated decision of Appeal Court is left by the resolution SKDES of the Supreme Court of the Azerbaijan Republic of April 22, 2004 without changes. POBTS in the claim addressed to the Constitutional Court including the last court order of cassation instance illegal and groundless, asks about check of compliance of this resolution of the Constitution and to the laws of the Azerbaijan Republic.

The claim was proved by the fact that court of cassation instance, having misinterpreted requirements of Articles 453. 1, 470.1 and 472.1 Civil C (CC) and disregarding execution of subsidiary responsibility of POBTS to National Bank instead of making the demand against the primary debtor of AIB "Pochtbank", pushed it against POBTS which bears the accessorial liability.

In connection with the claim Plenum of the Constitutional Court notes following.

Apparently from the facts of the case established by courts between National Bank and AIB "Pochtbank", since June 27, 2001 for a period of 180 days in the amount 7.500.000.000 manat, since October 17, 2001, respectively, for a period of 14 days in the amount 2.000.000.000 manat credit agreements No. 501-180-01 and 522-14-01 on issue of interbank credit are signed.

During the conclusion of credit agreements between National Bank (creditor), AIB "Pochtbank" (debtor) and POBTS (guarantor) agreements on guarantee are signed.

According to the specified agreements, in case of default on obligations of complete and timely return of the credit obtained by the debtor at bank (creditor), the guarantor undertook the obligation according to the first written requirement of bank, in the time appointed by bank completely to pay debt with money for the agreement (the principal debt, percent, penalty and other payments connected with the credit).

According to agreements on guarantee, the guarantor bears subsidiary responsibility according to obligations of the debtor to bank.

The Appeal Court which considered the merits of the case that not in forces to return to AIB "Pochtbank" the credit, and POBTS, according to agreements on guarantee undertakes the obligation to completely pay debt in case of not accomplishment by the debtor of the obligation for credit agreements, referring to Articles 470.1 and 453.2 of group of companies, directed debt repayment to POBTS.

The plenum of the Constitutional Court considers that for the dispute resolution, correct from the legal point of view, which arose between the parties, the analysis of conditions of credit agreements and agreements on guarantee, and also some provisions of the civil legislation connected with guarantee and accomplishment of obligations is of great importance.

According to Item 1.4. both credit agreements, AIB "Pochtbank" undertook the obligation to pay principal debt. Payment of the added percent in quarter from AIB "Pochtbank" no later than the 20th day of the last month of quarter into the account of National Bank is provided in Item 1.3 of the same agreements.

For accomplishment of obligations, according to Article 448.1 of group of companies providing responsibility of the debtor, the debtor is responsible for all cases of non-execution of the obligations entering risk circle if other is not provided by this Code or the agreement. According to article 448.2 of this Code, the debtor bears responsibility for each guilty violation or the obligation (action or failure to act).

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