What happens if the court declares Tan Hoang Minh bonds invalid?

The Hanoi People's Court is holding a lengthy deliberation and will issue a verdict on 15 defendants in the case that occurred at Tan Hoang Minh Hotel Service Trading Company Limited (abbreviated as Tan Hoang Minh Group). In addition to the criminal liability of defendant Do Anh Dung, Chairman of the Board of Directors of Tan Hoang Minh Group, and his accomplices, an issue that many people are interested in is how will the rights of investors be resolved?

RETURN TO EACH OTHER WHAT YOU HAVE RECEIVED

During the debate, the representative of the Hanoi People's Procuracy (VKS) stated that the issuance of 9 lots of bonds and then selling them to investors by Tan Hoang Minh Group was against the law and should be revoked and destroyed. Therefore, the sale and purchase contract between the investor and Tan Hoang Minh Group is invalid and should be resolved according to the regulations on invalid transactions.

Currently, the prosecution agency is temporarily holding more than 8,600 billion VND, including: nearly 3,000 billion VND recovered during the investigation and more than 5,600 billion VND voluntarily paid by defendant Dung and his family. This amount is enough to remedy all the consequences of the case. Based on Clause 2, Article 47 and Clause 1, Article 48 of the Penal Code (on returning stolen property to the owner), the representative of the People's Procuracy proposed to handle the case to compensate the victims.

Defendants in the case involving Tan Hoang Minh Group

Lawyer Nguyen Ngoc Hung, Head of the Connecting Law Office, Hanoi Bar Association, cited the provisions of Article 30 of the Criminal Procedure Code: the settlement of civil issues in criminal cases is carried out together with the settlement of criminal cases; in cases where a criminal case has to settle the issue of compensation for damages and reimbursement without conditions for proof and without affecting the settlement of the criminal case, the civil issue can be separated for settlement according to civil procedure.

Compared to the Tan Hoang Minh case, the defendants’ criminal acts have been clarified, the number of victims and their damages are also quite clear, so it is likely that when the verdict is issued, the jury will also decide on the defendants’ compensation liability. However, there is another possibility, although less likely, because among the thousands of victims there are many different opinions (some only need to pay the principal, others demand the accrued interest), the court will reserve the right to sue the victims in another civil case.

Sharing the same view, Lawyer Nguyen Thi Kim Vinh (Ho Chi Minh City Bar Association), former judge of the Supreme People's Court, said that the bond purchase contract between investors and Tan Hoang Minh Group was intended to "cover up" the series of illegal acts committed by the defendants. Up to now, the prosecution has proven that the defendants also admitted to the act of fraud and appropriation of property, so in this criminal case, the court can order the defendants to compensate the amount of money that the victims spent to buy the wrongly created bond lots.

Returning to the proposal of the People's Procuracy on resolving bond purchase and sale contracts according to the regulations on invalid transactions, if the court accepts this view, what will happen?

Lawyer Nguyen Ngoc Hung said that Clause 2, Article 131 of the Civil Code stipulates that when a civil transaction is invalid, the parties shall restore the original status and return to each other what they have received; in case it is not possible to return in kind, the value in money shall be used for return. Thus, if the court determines that the bond transaction between the investor and Tan Hoang Minh is invalid, the defendants will have to return the amount (principal) that the investors (identified as victims) spent to buy the bonds. The bond lots, because they were created illegally, will of course be canceled.

Also because of "returning each other what has been received", investors will not be able to request Tan Hoang Minh to pay bond interest according to the signed contract, because the contract is invalid. Instead, they can request compensation for late interest (according to bank interest rates) for the prosecution agency to evaluate and consider.

DO INVESTORS HAVE TO PAY BACK INTEREST?

Case records show that from June 2021, companies under Tan Hoang Minh Group began issuing individual corporate bond lots. In April 2022, detecting signs of crime, the Ministry of Public Security's Investigation Police Agency issued a decision to prosecute the case, prosecute the accused, and temporarily detain Tan Hoang Minh Group's Chairman of the Board of Directors Do Anh Dung and his accomplices. At the same time, the State Securities Commission issued a document canceling 9 bond offerings related to Tan Hoang Minh.

From the time the bonds were issued until the crime was discovered, some investors had received interest from Tan Hoang Minh according to the contract. Others had not yet reached the payment deadline, and even bought bonds the day before, but the next day the group's leaders were arrested, so "they had not received any money". Also at the trial, defendant Do Anh Dung promised to pay interest on contracts that were due before he was temporarily detained.

The question that many people are interested in: if the bond purchase contract is determined to be invalid, do the investors who were paid interest according to the contract have to pay back Tan Hoang Minh?

Lawyer Nguyen Ngoc Hung cited the provisions of Clause 2, Article 131 of the Civil Code on resolving invalid civil transactions, stating that the parties must comply with the principle of "returning to each other what they have received". In particular, the defendants at Tan Hoang Minh Group will have to compensate the amount of more than VND 8,600 billion that they have appropriated from investors, and any investors who have received it back under bond purchase contracts must return it to this group.

"In case the court determines that the defendants are guilty and must pay compensation as stated, the interest that the victims have received will be deducted from the defendants' compensation obligation," said Lawyer Hung.

On the contrary, Lawyer Nguyen Thi Kim Vinh said that investors will not have to deduct the interest they have received. Because, before the time the crime was discovered, the bond purchase contract between the investor and Tan Hoang Minh Group was not considered illegal, the two parties still performed their obligations to each other as usual. This means that investors will receive that interest, the defendants must compensate the entire principal amount that the victims spent to buy the bonds. Of course, investors who have not received interest after the time the crime was discovered will not have the right to request interest payment, because the transaction contract is illegal.

The answer to the above question will be decided by the jury in the verdict announced on the afternoon of March 27.

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