Sham Set-Off in Russian Bankruptcy: Verifying the Counterclaim

A set-off in bankruptcy is not a sham merely because no payment occurred or creditor priority was breached. First establish whether both claims existed, whether set-off was declared and what effects were actually intended. Those findings determine the evidence and remedy.

This guide is for a counterparty or creditor of a bankrupt company where a receivable is said to have been discharged by a disputed set-off. It examines the reality of the debt and transaction. General restrictions and avoidance of preferential set-offs and the distinction between contractual net-balance calculation and set-off are covered separately.

① Sham, disguised transaction, absent debt and preference

Under Russian Civil Code Article 170(1), a sham transaction is made only for appearance, without intending the corresponding legal effects. Article 170(2) deals with a disguised transaction concealing a different transaction. These are different grounds. Paragraph 17 of Supreme Court Plenum No. 6 confirms that a unilateral set-off can be invalid under Civil Code Chapter 9.

If discharge was genuinely intended but a non-existent counterclaim was used, absence of that counterclaim does not by itself establish that the set-off declaration was a sham. Distinguish the defect in the counterclaim’s basis from the intended effect of the declaration itself. A general allegation of fictitious conduct does not replace that analysis.

② Examine each claim separately

Civil Code Article 410 and Plenum No. 6, paragraphs 10–14, require examination of the set-off conditions and declaration. A unilateral declaration is sufficient, but it must be delivered or legally deemed delivered. Mutuality, homogeneity and maturity of the active claim are assessed separately; the existence of two different contracts does not itself prevent set-off.

1. Who owes whom. Identify the parties to each obligation, assignments and other creditor changes. Matching names in a reconciliation statement are insufficient.
2. How the debt arose. Connect the contract with goods delivered, work performed, a loan or another basis. A signature on an acceptance document does not explain the entire operation.
3. What remains outstanding. Deduct earlier payments, returns and prior discharge, and eliminate duplicate amounts.
4. How set-off was declared. Examine the wording, authority, date and delivery evidence. A reconciliation statement does not necessarily express an intention to discharge obligations.
5. Which bankruptcy stage applied. Even proven debts do not automatically authorise discharge outside the special regime.

The absence of an original from the bankrupt company’s files does not automatically establish that no debt existed. Compare information held by the counterparty, banks, carriers and other participants. See the separate guide to a repayment claim where primary records were not handed over.

③ Evidence for examining the transaction’s reality

Plenum No. 25, paragraph 86, recognises that a sham transaction may also have formal performance for appearance. An accounting entry or signed acceptance document therefore does not exclude a sham. Conversely, a missing document, lack of a bank transfer in a cashless set-off, or affiliation does not replace proof of the relevant legal ground.

④ Do not treat a paper figure as an established discharge

Illustrative example. A counterparty owes the company RUB 900,000 and asserts set-off of its own RUB 650,000 claim. Its arithmetic balance is RUB 250,000. The review identifies supporting records for only RUB 200,000 of the counterclaim; a further RUB 450,000 remains disputed.

RUB 900,000 − RUB 650,000 = RUB 250,000 calculates the asserted version, not an established legal result. If the court finds a claim capable of set-off of only RUB 200,000 and the set-off is permissible in that part, the balance is RUB 700,000. If set-off produced no effect, the original claim may survive in a different amount. Neither RUB 250,000 nor RUB 700,000 can be accepted as final merely from a spreadsheet.

Separate disputed items by reason: a non-existent delivery, an already paid debt, an unproven amount and an unmatured claim are different issues. Arithmetic neither proves sham intent nor determines payment priority.

⑤ A written position: facts followed by relief

Identify the procedural task first: resisting an assertion that a receivable was discharged, independently challenging the set-off, or disputing the counterclaim’s basis. Federal Law No. 127-FZ, Article 61.1, permits general civil-law and special bankruptcy grounds for invalidity, but they are not interchangeable. Before filing, separately check standing, jurisdiction, limitation, the relief sought and court fees.

“The opposing party considers claim [basis, amount] discharged by set-off dated [date]. I object on these separate grounds: [existence and amount of counterclaim]; [declaration and delivery]; [facts supporting the chosen invalidity ground, if asserted]. Evidence for each argument: [list]. I request [specific procedural relief and consequences].”

Do not list every ground without facts. For sham intent, explain the appearance created; for a disguised transaction, identify what was concealed; for preference, establish the special provision’s conditions. The company transaction-avoidance guide helps check the route. Tailor consequences to the transaction actually established rather than requesting reinstatement of a counterclaim known not to exist.

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