1. In commercial matters the Supreme Court is not bound by its own practice and may tacitly overrule its previously established practice.

2. General provisions of Civil Code on the obligations arising under a purchase and sale contract apply to the sale of the participatory interest in the charter capital of MChJ.

3. If the term for the fulfilment of obligations is violated, and it is clearly evident from the contract that the seller has lost interest in the fulfilment of the contract, the seller may demand its termination and the restoration of its violated rights in kind on the grounds that the condition for the fulfilment of the contract within a strictly defined term has been substantially violated.

The facts of the case

Mr. S (‘claimant’) applied to the court, requesting that the agreement dd 3 February 2021 be terminated due to Mr. T’s (‘respondent’) non-payment of the [price] of the participatory interest in the MChJ, and that the claimant be returned the right to the participatory interest of 15.89% in the charter capital.

Tashkent City Court satisfied the claim. The agreement dd 3 February 2021 was terminated, and the right to the participatory interest of 15.89% was returned to the claimant. The respondent appealed.

The respondent’s (appellant) position

During the proceedings, the respondent’s representative stated that the claimant should have applied to the court not with the claim to terminate the contract, but with a claim to recover the value of the participatory interest with [accrued] interest. When examining the court practice, it was found that a similar case No 4-1001-2211/20770 had previously been considered [by the JCEC of the Supreme Court on 15 December 2022] and the court refused to satisfy the claim. Based on this, the case No 4-1001-2211/20770 indicated that the claimant should have applied to the court not with a claim to terminate the contract, but with a claim to recover the value of the participatory interest with [accrued] interest. The representative would submit this [previous] resolution of the [Supreme] court to the court and requested that the [appellate] complaint be satisfied.

The claimant’s position

The claimant’s representative objected, stating that the respondent did not make the payment and did not submit a receipt or other evidence to the court confirming the payment. The respondent’s argument that the contract had a term of three days and that the contract could be terminated during this period cannot be accepted, because the claimant has the right to demand termination of the contract due to non-payment of money under the contract of purchase and sale and requested that the complaint be dismissed.

The Supreme Court’s position

[The Collegium has cited Arts 234 II and 236 CC on the sources of obligations and general provision on the binding force of obligations.] In this case, the obligations of the parties arose from the contract of purchase and sale.

[The Collegium has cited Art 386 I CC on the overarching definition of the contract of purchase and sale.] Pursuant to Clause 4 of the participatory interest purchase and sale agreement dd 3 February 2021, the buyer (the respondent) agreed to pay the amount specified in Clause 1 of the agreement (313,500,000 soums) in cash within three banking days from the date of signing the agreement.

However, the respondent did not fulfil the terms of the agreement and did not make the payments for the participatory interest in the charter capital of the MChJ.

[The Collegium has cited Art 382 I-III CC on the grounds of amending and terminating contracts and Art 384 CC on the mode of amending and terminating the contracts.] The claimant, based on these norms of civil legislation, requested the termination of the agreement concluded with the respondent and the return of the right to the participatory interest in the charter capital of the company that was the subject matter of the contract. Therefore, the court of first instance came to the correct conclusion to satisfy the claim.

However, the judgement rationale of the decision referred to Article 20 of the Law [on MChJ], that is, the court [of first instance] applied a legislative act that should not have been applied. This shows that the court of first instance incorrectly applied the substantive law in making the decision, which led to a partially illegal decision.

The court does not agree with the respondent’s arguments that the claimant was paid in cash for the purchased participatory interest, that the minutes of the meeting of the company’s participants dated 3 February 2021 and the company’s constituent documents were personally signed by the claimant, that although the participatory interests were previously bought and sold between the founders several times, no confirming documents were issued, and that payment for the purchase and sale of participatory interests in cash has become a commercial practice for the participants. Because the claimant denies that the purchase price was paid, and the respondent did not submit to the court the claimant’s receipt or a document confirming that the respondent handed over 313,500,000 soums to the claimant. The fact that the minutes of the meeting of the company’s participants dated 3 February 2021 and the company’s constituent documents have been signed by the claimant does not mean that the claimant received the value of the sold participatory interest from the respondent. This is because the disputed agreement and these documents were concluded on the same day, and according to the agreement, the respondent agreed to pay the value of the participatory interest within three banking days from the date of signing the agreement.

The respondent’s arguments that the termination of the contract is allowed during its entire term, that the disputed agreement was valid for 3 banking days, and that it was explained in the Supreme Court Plenary Resolution to dismiss the claim when it was determined that the contract had expired are also unfounded. Because the three banking days specified in the agreement are not the term of the contract, but the term for making payments for the participatory interest purchased by the respondent, that is, the [term for] fulfilment of the obligation.

The Collegium disagrees with the argument of the respondent’s representative that the claimant, in accordance with Art 419 CC, can only demand money if the obligations are not fulfilled, and not to demand the participatory interest. This is because in civil law relations, if the term for the fulfilment of obligations is violated, and it is clearly evident from the contract that the seller has lost interest in the fulfilment of the contract, the seller may demand its termination and the restoration of its violated rights in kind on the grounds that the condition for the fulfilment of the contract within a strictly defined term has been substantially violated.