The court seems to lean toward the debtor/fiduciary’s grantor side to protect the (usually) weaker party in a typically similar contract.
The Constitutional Court decided in early January to reinterpret the enforcement mechanism of fiduciary security.
In a 127-page decision, the panel of judges unanimously agreed that Article 15 paragraph (2) and Article 15 paragraph (3) of Law No. 42/1999 on fiduciary security were unconstitutional unless they were interpreted in the event a debtor/ fiduciary grantor (a party who give a fiduciary security right) objects against the occurrence of a breach of contract (default) and delivers a fiduciary security object voluntarily and the enforcement action mandates an assistance from the court; and a creditor needs a debtor’s admission of such default. Otherwise, the determination must be made through a legal remedy.
The petitioners, including a debtor/ fiduciary grantor who agreed to make their car as a fiduciary security of their vehicle loan, had requested the Constitutional Court to revisit Article 15 paragraph (2) and (3) on fiduciary security in engaging the arbitrariness of a creditor/ fiduciary grantee (a party who receive a fiduciary security right), namely a multifinance company and its the debt collectors who had forcefully taken away their car.
Before the January decision, a multifinance company as a fiduciary grantee would — upon the occurrence of a default and if faced with fiduciary grantor’s unwillingness to admit they have violated a term in the contract or to voluntarily deliver of the fiduciary security object (the grantor keeps the possession of the security object) — still take away the fiduciary security object directly by citing that the fiduciary certificate (a proof that the pertaining object has been given a fiduciary security right) is equivalent to a final and binding court decision.
The court appeared to realize that it was the wrong way to enforce a fiduciary security right (which we agree and would discuss below), especially given that confiscation is usually performed with intimidation and threats.
Under the Fiduciary Security Law, the creditor/fiduciary grantee would first need to apply to a court to issue an order to the fiduciary grantor to perform what they have agreed to (i.e. surrender the fiduciary security object).
The court, through the decision, merely restated the correct way of how to carry out an action of fiduciary security enforcement against a “stubborn” debtor/fiduciary grantor.
Share your experiences, suggestions, and any issues you've encountered on The Jakarta Post. We're here to listen.
Thank you for sharing your thoughts. We appreciate your feedback.