Homologation of Debt Payment Suspension in the Perspective of Pancasila Legal Theory of Justice

1. Introduction

The inability of debtors to fulfill debt obligations is an inevitable aspect of commercial transactions. Indonesia has established a legal framework to protect both creditors and debtors, as codified in Law No. 37 of 2004 concerning Bankruptcy and Suspension of Debt Payment Obligations (UUKPKPU). Prior to entering the domain of bankruptcy, the law grants debtors the right to suspend their debt payments through a mechanism known as the Suspension of Debt Payment Obligations (PKPU).

The disparity between default (wanprestasi) and a debtor's inability to pay often leads to misinterpretations within bankruptcy institutions. The question arises: is the debtor truly unable to pay, or simply unwilling? Generally, default refers to a voluntary breach by one party in a legally binding agreement, deviating from the agreed terms and potentially causing harm to the other party. Default only arises after a valid agreement has been made and executed. This concept aims to provide legal protection for the parties during the implementation of the agreement. As it falls within the realm of private law rather than public law, the rules governing default should only regulate the rights and obligations of the parties involved in the contract.

In the context of bankruptcy law, the concept of debt plays a central role. Without the existence of debt, the essence of bankruptcy itself becomes void, as bankruptcy is a legal mechanism intended to liquidate the debtor's assets to fulfill obligations to creditors. The definition of debt in Article 1 point (6) of the UUKPKPU is notably broad, particularly due to the phrase "expressed in monetary terms." This opens the possibility that a financially quantifiable default may be considered a debt in bankruptcy petitions. Given the expansive nature of this definition, which may cause confusion in legal practice, it is essential to clarify and reinforce the meaning of debt within the bankruptcy framework. In principle, debt arises from a legal obligation resulting from a right previously received. In this regard, a debt relationship is viewed as a legal relationship, wherein one party has the right to demand performance from another, even through judicial proceedings if necessary.

The UUKPKPU serves as a legal umbrella for the protection of both debtors and creditors within the bankruptcy domain, embodying legal certainty in accordance with Indonesia's status as a state governed by law. Historically, discussions on the ideals of law cannot overlook the profound influence of Gustav Radbruch—a German legal scholar, philosopher, bureaucrat, and politician—who adhered to the school of relativism. Radbruch emphasized that law, as a cultural product, must not be merely formal; it must be directed toward the ultimate ideal of justice. To realize justice, utility becomes the second essential element of legal ideals. The meaning of utility depends on various perspectives regarding the state and law. Complementing formal justice and relative utility, Radbruch introduced security as the third component of legal ideals. Utility demands legal certainty—law must be clear and reliable. Justice and certainty are fixed elements of legal ideals, standing beyond political debate, while utility carries a relative nature, including the relationship among the three elements. Determining whether utility outweighs justice, or security dominates utility, depends on the prevailing political system.

Pancasila, as the ideological foundation of the state, must embody the sense of justice itself. Before delving into its legal implications, it is necessary to examine the epistemology of Pancasila's truth theory. Pancasila, as a philosophical system, is conceptual in nature. According to Kattsoff, such concepts emerge through a process of generalization and abstraction from various experiences and events over time. Pancasila is the product of abstract thought reflecting the historical experiences and life journey of the Indonesian nation. Notonagoro asserts that the values within Pancasila originate from longstanding traditions, cultural practices, and religious teachings embedded in Indonesian society. The conceptual structure of Pancasila philosophy is rational, meaning each principle is logically interconnected. As a philosophical system, Pancasila must be comprehensive, capable of encompassing all aspects of life and adapting to social dynamics. It addresses existential human concerns: relationships with oneself, with others, and with God. Furthermore, Pancasila must be coherent, with integrated elements that do not contradict one another. Each principle complements the others and holds a distinct role and position. The elaboration of its values proceeds systematically and consistently, without deviating from its foundational truths.

The UUKPKPU allows debtors to reach a peace agreement with creditors through PKPU, enabling deliberation on debt repayment methods, including full or partial payment plans and, if necessary, debt restructuring. A peace plan that has been accepted and approved through the Peace Deliberation Meeting/Voting Meeting becomes legally binding upon homologation by the Commercial Court.

The homologation of PKPU remains a prominent topic among legal scholars and business law practitioners. However, the question persists: does PKPU homologation reflect legal justice in accordance with the nation's ideology—Pancasila? In light of this, the author is compelled to explore this issue through a journal entitled: "Homologation of Debt Payment Suspension in the Perspective of Pancasila's Justice-Oriented Legal Theory."

2. Homologation of Suspension of Debt Payment Obligations (PKPU)

Law No. 37 of 2004 regulates the mechanism of Suspension of Debt Payment Obligations (PKPU). In commercial law discourse, PKPU is commonly referred to as surseance van betaling or suspension of payment, which denotes a period determined by a ruling of the Commercial Court, during which the debtor and creditors are granted space to negotiate a debt settlement scheme. Within this period, the debtor may propose a repayment plan—either in full or in part—including the option of debt restructuring if deemed necessary.

A petition for PKPU may be submitted by either the debtor or the creditor, provided that the debtor has at least two creditors. However, this does not imply that creditors are authorized to initiate the peace plan; such authority remains exclusively with the debtor. The PKPU process consists of two stages as stipulated in Article 225 of the Bankruptcy and PKPU Law (UUKPKPU): the Temporary PKPU stage, lasting 45 days, and the Permanent PKPU stage, lasting up to 270 days. During the Temporary PKPU stage, the court is required to appoint a Supervisory Judge from the Commercial Court and designate one or more Administrators to manage the debtor's assets jointly with the debtor. Immediately following the issuance of the Temporary PKPU ruling, the Administrator is obligated to announce the decision through the State Gazette of the Republic of Indonesia and at least two daily newspapers as determined by the Supervisory Judge. The announcement must also include an invitation to parties claiming to be creditors and the schedule of meetings to be held during the Temporary PKPU period, including the Creditors' Meeting and the Judicial Deliberation Meeting.

There are two types of peace agreements regulated under the UUKPKPU: first, a peace plan proposed during the PKPU process; and second, a peace plan submitted during the settlement of bankruptcy assets or after the debtor has been declared bankrupt. The procedural differences between these two types of peace agreements can be outlined as follows:

1. During PKPU: Once the Temporary PKPU ruling is issued, the debtor is granted time during the Temporary PKPU period to submit a peace plan. If the PKPU petition is filed in response to a bankruptcy petition, and following the Creditors' Meeting the PKPU petition is accepted, the debtor's bankruptcy status is revoked and replaced with PKPU status. Conversely, if the PKPU petition is rejected, the debtor is automatically declared bankrupt by the Commercial Court.
2. During Bankruptcy: After the Commercial Court declares the debtor temporarily bankrupt, the debtor retains the right to propose a peace plan to the creditors.

The procedure for submitting a peace plan within the framework of PKPU, as regulated under Law No. 37 of 2004 on Bankruptcy and PKPU, includes the following stages:

1. A PKPU petition, as stipulated in Article 222, must be filed with the court in accordance with Article 3 of the UUKPKPU and must be signed by the petitioner and their legal counsel (advocate).
2. If the petitioner is the debtor, the petition must be accompanied by a list detailing the types and amounts of receivables and payables, along with sufficient supporting documentation.
3. If the petition is submitted by a creditor, the court is obliged to summon the debtor via a bailiff using registered express mail, no later than seven days prior to the scheduled hearing.
4. During the hearing as referred to above, the debtor must present a list containing details of receivables and payables along with supporting evidence, as well as the peace plan if it has been prepared.
5. The peace plan referred to in Article 222 of the UUKPKPU may be attached to the petition as mentioned in point two.
6. The provisions of Article 6 paragraphs (1) through (4) shall apply mutatis mutandis as procedural guidelines for submitting a PKPU petition as referred to in point one.

2.1 Supreme Court Decree No. 109/KMA/SK/IV/2020 on the Enforcement of the Guideline Book for the Settlement

Supreme Court Decree No. 109/KMA/SK/IV/2020 provides regulatory guidance on the procedures for peace agreements in PKPU proceedings, as follows:

1. Submission of the Peace Plan: A debtor who has obtained a PKPU ruling is entitled to submit a peace plan to the creditors. The plan must be drafted in a clear, realistic, and acceptable manner, and must be capable of gaining approval from the majority of creditors.
2. Content of the Peace Plan: The plan may include various debt restructuring schemes, such as rescheduling, debt reduction (haircut), debt-to-equity conversion, or other forms of settlement mutually agreed upon by the parties.
3. Creditor Approval: A peace plan is deemed valid if approved by more than 50% of the creditors present at the meeting, representing at least two-thirds of the total recognized value of claims.
4. Court Ratification (Homologation): Upon receiving creditor approval, the peace plan must be submitted to the Commercial Court for ratification. Once ratified, the agreement acquires binding legal force upon all parties involved.
5. Legal Consequences: If the peace agreement is ratified, the debtor avoids bankruptcy status and may continue business operations. Conversely, if the agreement is rejected or fails to be implemented, the debtor may be declared bankrupt and subject to asset liquidation.

2.2 Benefits of the Suspension of Debt Payment Obligations (PKPU) as a Preventive Measure Against Bankruptcy

The Suspension of Debt Payment Obligations (PKPU) mechanism offers several advantages in preventing bankruptcy, which may be categorized as follows:

1. Economic Benefits

As widely recognized, PKPU serves as an effective legal instrument to avert bankruptcy. If a PKPU petition is granted on a permanent basis and a peace agreement is successfully reached, the debtor company may avoid bankruptcy status and continue its business operations. This condition yields several positive economic impacts, including:

• The debtor's ability to resume and sustain business activities;
• Prevention of employment termination;
• Preservation of business continuity, including supply chains and customer relationships;
• Creditors' opportunity to recover the full amount of outstanding debts.

Moreover, the company continues to contribute to national development through tax payments, job creation, and its role as a driver of economic growth. Accordingly, when a bankruptcy petition is filed concurrently with a PKPU petition, the court is obligated to promptly issue a temporary suspension of debt payment obligations. The purpose of this suspension is to provide the debtor—who is subject to the bankruptcy petition—with sufficient time to formulate and submit a peace plan, whether for full or partial repayment, thereby enabling the debtor to avoid bankruptcy status.

2. Social Benefits

Beyond its economic implications, the PKPU mechanism also embodies social values, including:

• Upon the permanent approval of PKPU and the successful conclusion of a peace agreement between debtor and creditors, the debtor is afforded the opportunity to continue business operations. This outcome holds significant meaning for the debtor in maintaining its role and existence within society.
• Furthermore, the continuity of the company's operations enables contributions to various social domains, such as support or donations for community activities, sports, and the arts.

3. Legal Benefits

Once a debtor is declared bankrupt, and based on the Supervisory Judge's assessment, the Commercial Court holds the authority to order the detention of the debtor. Such detention may be carried out either in a correctional facility typically used for criminal defendants or at the debtor's residence under supervision by authorized officials, in accordance with Article 84 of the Bankruptcy and PKPU Law. Additionally, during the bankruptcy process, a declared bankrupt debtor is prohibited from leaving their residence without prior approval from the Supervisory Judge, as stipulated in Article 88 of the same law.

In relation to property rights, once bankruptcy is declared, the debtor legally loses the authority to freely undertake legal actions concerning assets included in the bankruptcy estate (boedel pailit), including the right to manage or administer such assets, as regulated under Article 22 of the Bankruptcy and PKPU Law.

Given the various legal consequences arising from a bankruptcy declaration, the existence of the PKPU mechanism provides a legal alternative that enables debtors to avoid such impacts if the PKPU petition is granted permanently. Therefore, from a juridical standpoint, the PKPU mechanism offers substantial legal advantages to debtors.

According to Article 1851 of the Indonesian Civil Code (KUHPerdata), a peace agreement is defined as a form of contract in which both parties agree to transfer, promise, or withhold an object as part of dispute resolution. In the context of the Suspension of Debt Payment Obligations (PKPU), provisions regarding peace agreements are regulated under Chapter III, Section Two, Articles 265 to 294 of the Bankruptcy and PKPU Law. Article 265 stipulates that once a debtor submits a PKPU petition, they are entitled to propose a peace plan to the creditors. This plan must be carefully formulated to secure creditor approval. Only proposals deemed feasible and beneficial by the creditors will be accepted.

Munir Fuady identifies several common forms of debt restructuring within peace plans, including:

1. Moratorium – postponement of matured debt payments;
2. Haircut – reduction of principal and interest amounts;
3. Interest rate reduction;
4. Extension of repayment period;
5. Debt-to-equity conversion;
6. Debt forgiveness – partial or full discharge of debt;
7. Bailout – assumption of debt, for example by the government in the case of private sector obligations;
8. Write-off – removal of debt from accounting records.

A peace plan within the PKPU process may be accepted by the Commercial Court if it obtains approval from more than half of the creditors present at the meeting, provided that their claims have been legally recognized and they represent at least two-thirds of the total value of acknowledged concurrent creditor claims. For the peace plan to attain binding legal force (inkracht), it must undergo ratification (homologation) by the Commercial Court. Once the plan is ratified, the agreement becomes legally binding on all parties involved. This means that the settlement between debtor and creditors—whether in its original form or as amended—shall be valid and enforceable following homologation by the court.

Such ratification also carries indirect implications for the debtor's shareholders, given their integral role within the corporate structure. Although the Bankruptcy and PKPU Law does not explicitly require approval of the peace plan through a general meeting of shareholders, the acceptance or rejection of the plan nonetheless affects the shareholders' position and interests. If the peace plan is rejected by the court, the debtor will be immediately declared bankrupt and all assets will be subject to liquidation. Moreover, the impact on the company's performance—whether resulting from the approval or rejection of the peace plan—will directly affect the shareholders.

2.3 Pancasila-Based Legal Theory of Justice in the Homologation of Suspension of Debt Payment Obligations (PKPU)

The Suspension of Debt Payment Obligations (PKPU) serves as the legal foundation for granting equal rights to both creditors and debtors to file a PKPU petition, as stipulated in Article 222 paragraph (1) of the Bankruptcy and PKPU Law (UUKPKPU), despite the fact that the debtor is the party most aware of their own financial condition. This principle aligns with the Constitutional Court Decision No. 23/PUU-XIX/2021 dated 1 December 2021, in which the ratio decidendi (judicial reasoning) affirms that the creditor's right to propose a PKPU petition is grounded in two key legal principles: the principle of balance and the principle of justice.

In practice, Indonesian bankruptcy law tends to favor the interests of creditors, particularly in granting access to the entirety of a bankrupt debtor's assets, which are then transferred to the curator for management, as regulated under the UUKPKPU. According to Hikmahanto Juwana, the current formulation of Law No. 37 of 2004 concerning Bankruptcy and PKPU reflects a tendency to strengthen the position of the curator. In contrast, Satjipto Rahardjo, the originator of progressive legal theory, defines legal protection as a form of state guardianship over human rights that have been harmed by others. Such protection is intended to ensure that individuals can enjoy the rights guaranteed by law. Rahardjo's view emphasizes that legal protection inherently involves the recognition of human rights.

Within the context of the relationship between debtors and the theory of legal protection, debtors possess the right to receive protection from the state, in accordance with the mandate of the fourth paragraph of the Preamble to the 1945 Constitution of the Republic of Indonesia, which includes the objective of protecting all Indonesian people and the entirety of the nation. This concept of legal protection reflects the active role of the state in formulating regulations aimed at safeguarding the rights of debtors.

These values are also embodied in the fifth principle of Pancasila: social justice for all Indonesian people. This principle is rooted in and inspired by the preceding principles—Belief in One Supreme God, Just and Civilized Humanity, the Unity of Indonesia, and Democracy Guided by the Inner Wisdom of Deliberation and Representation. The fifth principle contains fundamental values that represent the nation's goals in collective life. The notion of social justice referred to here is a form of justice that lives within society, derived from the essence of human justice—justice in the relationship between individual.

2.4 Case Study: Revocation of PKPU Homologation in the Bankruptcy of PT Sri Rezeki Isman (Sritex)

In practice, there has been a notable case in which a PKPU homologation was revoked, resulting in the declaration of bankruptcy for PT Sri Rezeki Isman (Sritex). The Commercial Court of Semarang granted a petition for the annulment of the peace agreement within the PKPU process, filed by PT Indo Bharat Rayon. The petition was registered on 24 August 2024 under Case Number: 2/Pdt.Sus-Homologasi/2024/PN Niaga Smg jo. 21/Pdt.Sus-PKPU/2021/PN Niaga Smg. The request for annulment was submitted due to Sritex's failure to fulfill its debt repayment obligations to PT Indo Bharat Rayon, which held verified claims amounting to Rp127,969,059,783.

It is important to note that in May 2021, Sritex was officially placed under PKPU status by the Semarang Commercial Court through Decision No. 12/Pdt.Sus-PKPU/2021/PN.Niaga.Smg, with total claims reaching approximately Rp12.9 trillion. Seven months later, in January 2022, the peace plan proposed by Sritex was approved by its creditors and subsequently ratified through a homologation ruling. However, two years after the homologation, Sritex failed to implement the terms of the agreed peace proposal.

In its ruling, the panel of judges fully granted the petition for annulment submitted by the applicant. The court declared that the respondents had failed to fulfill the obligations outlined in the Peace Agreement ratified by the Semarang Commercial Court Decision No. 12/Pdt.Sus-PKPU/2021/PN.Niaga Smg dated 25 January 2022, which had been executed between the respondents and their creditors. Based on these findings, the court revoked the previously ratified Peace Agreement.

Subsequently, the court declared PT Sri Rezeki Isman Tbk, PT Sinar Pantja Djaja, PT Bitratex Industries, and PT Primayudha Mandirijaya bankrupt, along with all associated legal consequences. The court appointed Haruno Patriadi, a Commercial Court Judge at the Semarang District Court, as Supervisory Judge in the case. Additionally, Denny Ardiansyah, Nur Hidayat, Fajar Romy Gumilar, and Nurma Candra Yani Sadikin were appointed as Curators responsible for managing and settling the bankruptcy estate. The curators' fees will be determined upon the completion of the bankruptcy proceedings. The court also ordered the respondents—PT Sri Rezeki Isman Tbk and affiliated parties—to pay the litigation costs arising from the annulment petition, amounting to Rp3,245,000.00 (three million two hundred forty-five thousand rupiah).

Fundamentally, the PKPU mechanism represents a form of amicable settlement within bankruptcy law that takes place outside the formal trial process. The resulting peace agreement is the product of deliberation based on mutual consent between debtor and creditors. If such efforts fail to produce an agreement, the debtor is immediately declared bankrupt without a separate examination of the bankruptcy petition, and the bankruptcy ruling is issued concurrently with the rejection of the peace proposal. Conversely, if a peace agreement is successfully reached, the debtor may submit a petition for ratification (homologation) of the proposed plan to the presiding judge at the Commercial Court.

The original purpose of the PKPU institution is to uphold the principle of balance between creditors and debtors. However, this principle is not always realized in practice, and the peace agreement may fail to materialize due to various considerations. Such outcomes fall short of the ideals of justice as envisioned in Pancasila-based legal theory, which emphasizes equitable and humane resolution.

3. Progressive Legal Theory and Pancasila-Based Justice in PKPU Homologation

Progressive legal theory originates from the thought of Professor Satjipto Rahardjo, reflecting a deep concern over the administration of law in Indonesia. Despite the emergence of various legal issues amid social and political transitions, the legal system continues to operate as though under stable and normal conditions. This theory emphasizes the need for a legal approach that returns to its philosophical essence—namely, that law must serve humanity. As a justice-oriented and people-centered legal framework, progressive law places human needs and rights at the core of its attention. Accordingly, the law must be responsive to the dynamics and challenges that arise within human relationships.

The status of Pancasila as the source of all sources of law has evolved alongside the development of statutory regulations. Initially codified in Law No. 10 of 2004 on the Formation of Legislation, this concept was later repealed and replaced by Law No. 12 of 2011, which was most recently amended by Law No. 13 of 2022. Both Article 2 of Law No. 10 of 2004 and Article 2 of Law No. 12 of 2011 affirm Pancasila as the foundational source of national law, although the phrase "source of all sources of law" is no longer explicitly stated. The elucidation of Article 2 in Law No. 10 of 2004 underscores that the placement of Pancasila as the source of law aligns with the Preamble of the 1945 Constitution, which establishes Pancasila as the state's foundation, national ideology, and philosophical basis of the nation. Consequently, every substantive provision in legislation must be consistent with the values embodied in Pancasila.

The homologation of PKPU is expected to fulfill a sense of justice for both debtors and creditors within the PKPU and bankruptcy institutions. In cases where the debtor is a large corporation, bankruptcy can be catastrophic for related parties—particularly the company's employees. Many bankrupt debtors have laid off workers and factory laborers as a result of insolvency, thereby undermining the justice envisioned by Pancasila-based legal theory as reflected in the UUKPKPU. In such instances, the ideals of justice that should be realized through the PKPU mechanism remain unfulfilled.

4. Conclusion

The Suspension of Debt Payment Obligations (PKPU) mechanism serves as a legal instrument to prevent bankruptcy, which would otherwise result in the liquidation of the debtor's assets. PKPU is intended to function as a bridge between debtors and creditors, facilitating a resolution to the financial difficulties faced by debtors in fulfilling their obligations. From the perspective of Pancasila-based legal theory of justice, homologation within PKPU can be viewed as an effort to uphold the principle of balance between debtors and creditors, even though in practice, there remain cases in which peace agreements are revoked.

Debtors have the right to formulate a payment plan concerning the full or partial settlement of their debts, including, if necessary, the restructuring of obligations owed to creditors. The homologation of PKPU should ideally ease the burden on debtors in resolving their debts, guided by the principles of balance and justice as envisioned in Pancasila legal theory. In this way, Pancasila—as the ideological foundation of the state—can fulfill its intended function within the legal system.

The designation of Pancasila as the source of all sources of law is considered appropriate, as it no longer positions Pancasila as the sole source of law, which could risk marginalizing other legal traditions within society. Customary law, religious norms, and social conventions continue to play a vital role as integral components of the national legal system. The emerging challenge lies in how these diverse sources of law can contribute to or be shaped by the development of national law, particularly in the context of globalization and rapid technological advancement.