SCHEDULE !.-DECISIONS AND ORDERS FROM WHICH AN APPEAL
LIES TO THE HlGH COURT UNDER SECTION 75 (2) • SCHEDULE 11.-PROVISIONS OF THE ACT APPLICATION OF WHICH MAY BE 13ARRED BY STATE GoVF.RN:MENTS, SCHEDULE III.-[Repeated].
4
Act 5 of 1920.1 PROVINCIAL INSOLVENCY 75
LIST OF AMENDING ACTS AND ADAPTATION ORDERS
1. The Devolution Act, 1920 (38 of 192'0) .
2. The Insolvency (Amendment) Act, 1926 (9 of 1926).
3. The Provincial Insolvency (Amendment) Act, 1926 (39 of
1926).
4. The Insolvency (Amendment) Act, 1927 (11 of 1927). ~ 5. The Repealing Act, 1927 (12 of 19~7) .
6. The Repealing and Amending Act, 1930 (8 of 1930) .
7. The Insolvency Law (Amendment) Act, 1930 (10 of
1930).
8. 'l'he Provincial Insolvency (Amendment) Act, 1935 (10 of 1935).
9. The Government of India (Adaptation of Indian Laws) Order, 1937.
10. The Financial Insolvency (Punjab Amendment), 1939 (Punjab Act 3 of 1939) .1 ·
11. The Repealing and Amending Act, 1939 (34 of 1939).
12. The Indian Independence (Adaptation of Central Acts and Ordinances) Order, 1948.
13. The Provincial Insolvency (Amendment) Act, 1948 (25 of
1948).
14. The Adaptation of Laws Order, 1950.
15. The Insolvency Law (Amendment) Act, 1950. (3 of 1950).
16. The Adaptation of Laws (No. 3) Order, 1956.
17. The Punjab Laws (Extension No. 5) Act, 1958 (Punjab Act 30 of 1958)2•
A. 0. 1937.
A. o. 1948
LIST OF ABBREVIATIONS USED
for Government of India (Adap- tation of Indian Laws) Order,
1937.
'' Indian Independence (Adap- tation of Central Acts and Ordinances) Order, 1948.
1 For Statement of Objects and Reasons, see Punjab' Government Gazette (Extraordinary), 1938, Part· I, page 1538. 2For Statement of Objects and Reasons, see Punjab Government Gazette (Extraordinary), 1958, page 1494.
5
16 I PROVINCIAL INSOLVENCY [Act 5 of 1920. A. 0. 1950 .. for Adaptation of Laws Order,
1950.
Cl. ,, Clause. .. G. G. in C. ,, Governor General in Council. .. Ins. ,, Inserted. ••
P. " Page . .. Pt. ,, Part. .. Reg. " Regulation. .. Rep. " Repealed. .. s. ,, Section. .. Sch. ,, Schedule. Subs. " Substituted. ..
w.e.f. ,, With effect from . ..
•
6
Act 5 of 1920.] PROVINCIAL INSOLVENCY
1 THE PROVINCIAL INSOLVENCY ACT, [920
'(Act 5 of 1920)
77
[25th February, 1920.] An Act to consolidate and amend the Law relating to Insolvency 2* * *, as administered by Courts having jurisdiction outside the Presidency-towns
30 lfc * Whereas it is expedient to consolidate and amend the law relating to insolvency2* * *, as administered by Courts having jurisdic.tion outside the Presidency- towns ao * *; It is hereby enacted as follows:-
1. ( 1) This Act may be called the Provincial Insol- Shoirt title and vency Act, 1920. extent.
(2) It extends to4
[the whole of India except5
[the territories which, immediately before the 1st Novem- ber, 1956, were comprised in Part B States] and] the Scheduled Districts.6
1 This Act has been extended to Berar by the Berar Laws Act, 1941 ( 4 of 1941), to the whole of Madhya Pradesh by M.P. Kcf 28 of 1958, to Dadra and Nagar Haveli by Reg. 6 of 1963 (w.e.f. 1-7-1965), to Lacca- dive. Minicoy and Amindivi Islands by Reg. 8 of 1965 (w.e.f.
1-10-1967) and to Pondicherry by Act 26 of 19618; it has been amend- ed in the Punjab by Punjab Acts 7 of 1964 and 3 of 1939, in Bombay by Bombay Act 15 of 1939, in the C. P. by C. P. Act 2 of 1936, in Himachal Pradesh by H. P. Act 10 of 1953, in Madras by Mad. Act 7 of 1953 and in U. P. by U. P. Act 24 of 1954. Rep. in its application to Malabar District by Kerala Act J.8 o'f 1957 and Bellary District by Mysore Act 14 of 1955.
:iThe words "in the Provinces of India" omitteld by the A. 0. 1950. 3The words "and the town of Karachi" rep~ by the A. 0. 1948. In the long title the word, "Karachi" had been subs. ~ the A 0. 1937 for "Rangoon". In the preamble the words "town of Karachi" had been subs. by the A. 0. 1937 for "towns of Rangoon and Karachi"
which had been subs. by the Insolvency (Amendment) Act, 1926, (9 of 1926), s. 11, for "town of Rangoon".
Andaman Islands (subject to modifications)-See Gazette o'f India, 1936, Pt. I, p. 234.
It has also declared to be in 'force in Panth Piploda by the Panth Piploda Laws Regulation 1 of 1929, s. 2.
7
Definitions. Insolvency jurisdiction.
78
I
PROVINCIAL INSOLVENCY [Act 5 of 1920.
2. ( 1) In this Act, unless there is anything repug- nant in the subject or context,-
(a) "creditor" includes a decree-holder, "debt"
includes l;l judgment-debt, and "debtor"
includes a judgment-debtor;
(b) "District Court" means the principal Civil Court of original jurisdiction in any area - outside the local limits for the time being of the Presidency-towns1* * •;
( c) "prescribed'' means prescribed by rules made under this Act;
(d) "property" includes any property over which or the profits of which any person has a disposing power which he may exercise for his own benefit; I
{e) "secured creditor" means a person holding a mortgage, charge or lien on the property of the debtor or any part thereof as a security for a debt due to him from the debtor; and
(f) "transfer of property" includes a transfer of any interest in property and the creation of any charge upon property.
(2) Words and expressions used in this Act and defined in the Code of Civil Procedure, 1908, and not 5 of
hereinbefore defined shall have the same meanings as 1908. those respectively attributed to them by the said Code.
PART I
Constitution and Powers of Court
3. ( 1) The District Courts shall be the Courts having jurisdiction under this Act :
Provided that the State Government may, by noti- fication in the Official Gazette, invest any Court sub- ordinate to a District Court with jurisdiction in any
8
'
•
Act 5 of 1920.] PROVINCIAL INSOLVENCY 79 class of cases, and any Court so invested shall within the local limits of its jurisdiction have concurrent jurisdiction with the District Court under this Act.
(2) For the purposes of this Act, a Court of Small Causes shall be deemed to be subordinate to the District Court.
4. (1) Subject to the provisions of this Act, the Power of Court Court shall ~ave full _PO:Ver to decide all questions ~~!1f~~! :~\sing whether of title or priority, or of any nature whatso- in insolvency. ever, and whether involving matters of law or of fact, which may arise in any case of insolvency coming with- in the cognizance of the Court, or which the Court may deem it expedient or necessary to decide for the pur- pose of doing complete justice or making a complete distribution of property in any such case.
(2) Subject to the provisions of this Act and not- withstanding anything contained in any other law for the time being in force, every such decision shall be final and binding for all purposes as between, on the one hand, the debtor and the debtor's estate and, on the other hand, all claimants against him or it and all persons claiming through or under them or any of them.
(3) Where the Court does not deem it expedient or necessary to decide any question of the nature referred to in sub-section ( 1), but has reason to believe that the debtor has a saleable interest in any property, the Court may without further inquiry sell such interest in such manner and subject to such conditions as it may think fit.
5. (1) Subject to the provisions of this Act, the General powers Court, in regard to proceedings under this Act, shall of Courts . have the same powers and shall follow the same pro- cedure as it has and follows in the exercise of original civil jurisdiction.
(2) Subject as aforesaid, High Courts and District Courts, in regard to proceedings under this Act in Courts subordinate to them, shall have the same powers and shall · follow the same procedure as they respectively have and follow in regard to civil suits.
9
80 PR=1 INSOLVENCY [Act 5 of 1920.
PART II
Proceedings from Act of Insolvency to Discharge Acts of insolvency
Acts of insol- 6. A debtor commits an act of insolvency in each vency. of the following cases, namely : -
(a) if in1
[India] or elsewhere, he makes a trans- fer of all or substantially all his property to f
a third person for the benefit of his creditors generally;
(b) if, in1
[India] or elsewhere, he makes a trans- fer of his property or of any part thereof with intent to defeat or delay his creditors;
(c) if, in1
[India] or elsewhere, he makes any transfer of his property, or of any part there- of, which would, under this or any other enactment for the time being in force, be void as a fraudulent preference if he were adjudged an insolvent;
(d) if, with intent to defeat or delay his cre- ditors,- .
(i) he departs or ~emains out of2
[the terri- tories to which this Act extends],
(ii) he departs from his dwelling-house or usual place of business or otherwise absents himself,
(iii) he secludes himself so as to deprive his creditors of the means of communica- ting with him;
(e) if any of his property has been sold in execu- tion of the decree of any Court for the pay- ment of money;
(f) if he petitions to be adjudged an insolvent under the provisions of this Act;
(g) if he gives notice to any of his creditors that he has suspended, or that he is about to suspend, payment of his debts; or
lSubs. by the A. 0. 1950 for "the Provinces".
cisubs. by the Adaptation of Laws (No. 3) Ortler, 1956, for "Part A States and Part C States".
•
10
I
•
Act 5 of 1920.] PROVINCIAL INSOLVENCY 81
(h) if he is imprisoned in execution of the decree of any Court for the payment of money;
l* * * Explanation.-For the purposes of this section the act of an agent may be the act of the principal.2
Petition
7 S b . t t th d"t· "fi d . th" A ti Petition and . u Jee o e con 1 10ns spec1 e 1n IS .. c , adjudication if a debtor commits an act of insolvency, an insolvency ·
petition may be presented either by a creditor or by
the debtor, and the Court may on such petition make
an order (hereinafter called an order of adjudication) adjudging him an insolvent.
Explanation.-The presentation of a petition by the debtor shall be deemed an act of insolvency with- in the meaning of this section, and on such petition the Court may make an order of adjudication. r 1
8. No insolvency petition shall be presented Exempti?n of . t· . t . t· corporation, etc., against any corpora 10n or aga1ns any associa 10n or from insolvency company registered under any enactment for the proceedings.
time being in force.
1G"
9. (J) A creditor shall not be entitled to present CoZ?-ditions. on
· 1 t·t· · t d bt 1 which creditor an mso vency pe 1 10n agams a e or un ess- may petition.
(a) the debt owing by the debtor to the creditor, or, if two or more creditors join in the petition, the aggregate amount of debts owing to such creditors, amounts to five hundred rupees; and
(b) the debt is a liquidated sum payable either immediately or at some certain future time; and
(c) the act of insolvency on which the petition is grounded has occurred within three months before the presentation of the oPtition:
1 In the application df the Act to Bombay, a new clause (i) has been ins. here by the Presidency Towns Insolvency and the Provin- cial Insolvency Bombay (Amendment) Act, 1939 (Born. 15 of 1939),
11
Conditions on which debtor may: petition.
82 PROVINCIAL INSOLVENCY [Act 5 of 1920. 1 [Provided that where the said period o[ three months referred to in clause (c) expires on a day when the Court is closed, the insolvency petition may be presented on the day on which the Court re-opens.].
(2) If the petitioning creditor is a secured cre- ditor, he shall in his petition either state that he is willing to relinquish his security for the benefit of the creditors in the event of the debtor being adjudged insolvent, or give an estimate of the value of the security. In the latter case, he may be admitted as a petitioning creditor to the extent of the balance of the debt due to him after deducting the value so estimated in the same way as if he were an unsecured creditor. ·
10. (1) A debtor shall not be entitled to present an insolvency petition, unless he is unable to pay his debts and-
(a) his debts amount to2five hundred rupees; or ['(aa) his debts amount to two hundred and fifty rupees, and he satisfies the court that he is entitled to summary administration of his estate under section 74 of this Act; or)
(b) he is under arrest or imprisonment in exe- cution of the decree of any Court for the payment of money; or
(c) an order of attachment in execution of such a decre~ has been made, and is subsisting, against his property.
(2) A debtor in respect of whom an order of ad-
judication4
[whether made under the Presidency- towns Insolvency Act, 1909, or under this Act] has 3 df. been annulled, owing to his failure to apply, or to 1909. prosecut~ an application for his discharge, shall not be entitled to present an insolvency petition without the leave of the Court by which the order of adjudication was annulled. Such Court shall not grant leave unless it is satisfied either that the debtor was pre- vented by any reasonable cause from presenting or prosecuting his application, as the case may be, or that llns. by Act 3 of 1950, s. 6.
i1n the C. P. read "two hundred rupees", see the Provincial In- i:olvency (C. P. Amendment) Act, li936 (C. P. 2 of 1936), s. 2. Sln the application of the Act to the Punjab, a new clause (aa) h&s been ins. here by the Punjab Relief of Indebtedness Act, 1934 (Pun. 7 of 1934), s. 3.
'
•
12
I
Act 5 of 1920.J PROVINCIAL INSOLVENCY ~3 the petition is founded on facts substantially different from those contained in the petition on which the order of adjudication was made.
11. Every insolvency petition shall be presented Co~r~ to which C h · . . . d: . d th· A . pet1t1on shall be to a ourt avmg Juns 1ct10n un er 1s ct 1n any presented. local area in which the debtor ordinarily resides or
carries on business; or personally works for gain, or if
he has been arr~sted or imprisoned, where he is in
custody :
Provided that no objection as to the place of pre-
sentment shall be allowed by any Court in the exercise
of appellate or revisional jurisdiction unless
such objection was taken in the Court by which the
petition was heard at the earliest possible opportunity
and unless there has been a consequent failure of
justice.
12. Every insolvency petition sha'll be in writing VerJ~cation of and shall be signed and verified in the manner pres- petition. s of t9os cribed by the Code of Civil Procedure, 1908, for signing
• and verifying plaints.
I
· 13. (1) Every insolvency petition presented by a Contents ~ debtor shall contain the following particulars, petition. namely:-
(a) a statement that the debtor is unable to pay his debts;
(b) the place where he ordinarily resides or carriers on business or personally works for gain, or, if he has been arrested or imprison- ed, the place where he is in custody; ·(c) the Court (if any) by whose order he has been arrested or imprisoned or by which an order has been made for the attachment of his pro- perty, together with particulars of the decree in respect of which any such order has been made;
( d) the amount and particulars of all pecuniary claims against him, together with the names
13
84
I
PROVINCIAL INSOLVENCY [Act 5 of 1920.
and residences of his creditors so far as they are known to, or can by the exercise of reasonable care and diligence be ascer- tained by, him;
( e) the amount and particulars of all his pro- perty together with-
(i) a specification of the value of all such pro- perty not consisting of money;
(ii) the place or places at which any such pro- perty is to be found; and
(iii) a declaration of his willingness to place at the disposal of the Court all such pro- perty save in so far as it includes such particulars ( not being his books of account) as are exempted by the Code of Civil Procedure, 1908, or by any other 5 of enactment for the time being in force 1908. from liability to attachment and sale in execution of a decree;
!
(f) a statement whether the debtor has on any previous occasion filed a petition to be adjudged an insolvent, and (where such a petition has been filed)-
(i) if such petition has been dismissed, the reasons for such dismissal, or
'
(ii) if the debtor has been adjudged an insol- vent, concise particulars of the insol- vency, including a statement whether any previous adjudication has been annulled and, if so, the grounds there- for. •
(2) Every insolvency petition presented by a creditor or creditors shall set forth the particulars re- garding the debtor specified in clause (b) of sub-section (1), and shall also specify-
(a) the act of insolvency committed by such debtor, together with the date of its commission; and
• 5 of
1908.
Act 5 of 1920.J PROVINCIAL INSOLVENCY 85
(b) the amount and particulars of his or their pecuniary claim or claims against such debtor.
14. No petition, whether presented by a debtor or Withdrawal of by a creditor, shall be withdrawn without the leave of petitions. the Court .
15. Where two or more insolvency petitions are Consolidation of presented against the same debtor, or where separate petitions. petitions are presented against joint debtors, the Court may consolidate the proceedings or any of them, on such terms as the Court thinks fit.
16. Where the petitioner does not proceed with Pow~r to change due di_li~ence on his petition, _the Court may substitute ~!!d\~~~- of pro- as petitioner any other creditor to whom the debtor · may be indebted in the amount required by this Act
in the case of a petitioning creditor.
17. If a debtor by or against whom an insolvency Continu!'lnce of petition has been presented dies, the proceedings in the ~~~~hed;~ebf~r. matter shall, unless the Court otherwise orders, be continued so far as may be necessary for the realisation and distribution of the property of the debtor.
/ i I
I
18. The procedure laid down in the Code of Civil Proc.ed!,1re -!or . adm1ss10n of
Procedure, 1908, with respect to the admission of petition. plaints, shall, so far as it is applicable, be followed in the case of insolvency petitions.
19. ( 1) Where an insolvency petition is admitted, !J~i~~;:; 0~n
the Court shall make an order fixing a date for hearing petition. the petition.
(2) Notice of the order under sub-section (1) shall be given to creditors in such manner as may be pres- cribed.
(3) Where the debtor is not the petitioner, notice of the order under sub~section (.I) shall be served on him in the manner provided for the service of summons.
15
86 PROVINCIAL LsoLVENCY [Act 5 of 1920.
~ppo_int.men~ of 2&. The Court w'il.en making an order admitting interim receiver. h . . d h h d bt · th t·t· t e petition may, an w ere t e e or 1s e pe} 10ner ordinarily shall, appoint an interim receiver of the
property of the debtor or of any part thereof, and may
direct him to take immediate possession thereof or of
any part thereof, and the interim receiver shall there-
upon have such of the powers1conferrable on a receiver
appointed under the Code of Civil Procedure, 1908, as
the Court may direct. If an interim receiver is not so
appointed, the Court may make such appointment at
any subsequent time before adjudication and the pro-
visions of1
[this section] shall apply accordingly.
5 of
1908.
~ntEtrim proceed- 21. At the time of making an order admitting the fi;f' a_glllnat deb- petition or at any subsequent time before adjudication the Court may either of its own motion or on the
application of any creditor make one or more of the
following orders, namely : -
( 1) order the debtor to give reasonable security
for his appearance until final orders are
made upon the petition, and direct that, in
default of giving such security, he shall be
detained in the civil prison;
(2) order the attachment by actual seizure of the whole or any part of the property in the possession or under the control of the debtor, other than such particulars (not being his books of account) as are exempted by the Code of Civil Procedure, 1908, or by any 5 of
other enactment for the time being in force 1908· from liability to attachment and sale in execution of a decree;
•
(3) order a warrant to issue with or without bail - for the arrest of the debtor, and direct either f
that he be detained in the civil prison until the disposal of the petition , or that he be released on such terms as to security as may be reasonable and necessary :
Provided that an order under clause (2) or clause
(8) shall not' he mad0 unles:::; the Court i8
16
'
Act 5 of 1920.] PROVINCIAL INSOLVENCY 87 satisfied that the debtor, with intent to defeat or delay his creditors or to avoid any process of the Court-
(i) has absconded or has departed from the local limits of the jurisdiction of the Court, or is about to abscond or to depart from such limits, or is remaining outside them; or
( ii) ihas failed to diclose or has concealed, destroyed, transferred or removed from such limits, or is about to conceal, des- troy, transfer or remove from such limits, any documents likely to be of use of his creditors in the course of the hearing, or any part of his property other than such particulars as aforesaid.
22. The debtor shall on the making of an order ad- Dutie~ of deb. mitting the petition produce all books of account, and tors. shall at any time thereafter give such inventories of his property, and such lists of his creditors and debtors and of the debts due to and from them, respectively, submit to such examination in respect of his property or his creditors, attend at such times before the Court or receiver, execute such instruments, and generally do all :mch acts and things in relation to his property as may be required by the Court or receiver, or as may be prescribed.
23. ( 1) At the time of making an order admitting Release of deb-
the petition or at any subsequent time before adjudica- tor. tion, the Court may, if the debtor is under arrest or imprisonment in execution of the decree of any Court for the payment of money, order his release on such terms as to security as may be reasonable and necessary.
,,
(2) The Court may at any time order any person who has been released under this section to be re- arrested and re-committed to the custody from which he was released.
',~
17
Procedure at hearing.
88 PROVINCIAL IN1LVENCY [Act 5 of 1920. _(3) At the time of making any order under this sect10n, the Court shall record in writing its reasons therefor .
. ~4. ( 1) On the day fixed f ~r the hearing of the petition, or_ on any subsequent day to which the hearing may be adJourned, the Court shall require proof of the following matters, namely: -
(a) that the creditor or the debtor as the case may be, is entitled to present the petition:
Provided that, where the debtor is the petitioner, he shall, for the purpose of proving his inability to pay his , debts, be required to furnish only such proof as to satisfy the Court that there are prima facie grounds for believing the same and the Court, if and when so satisfied, shall not be bound to hear any further evidence thereon;
(b) that the debtor, if he does not appear on a petition presented by a creditor, has been served with notice of the order admitting the petition; and
(c) that the debtor has bommitted the act of insolvency alleged against him.
(2) The Court shall also examine the debtor, if he is present, as to his conduct, dealings and property in the presence of such creditors as appear at the hearing, and the creditors shall have the right to question the debtor thereon.
'
(3) The Court shall, if sufficient cause is shown, • grant time to the debtor or to any creditor to produce 9'- any evidence which appears to it to be necessary for the proper disposal of the petition.
( 4) A memorandum of the substance of the exami- nation of the debtor and of any other oral evidence given shall be made by the Judge, and shall form part of the record of the case.
18
I
• Act 5 of 1920,J PROVINCIAL INSOLVENCY 89
25. (1) In the case of a petition presented by a Dipfissal otf
creditor, where the Court is not satisfied with the proof pe1ion. of his right to present the petition or of the service on the debtor of notice of the order admitting the petition, or of the alleged act of insolvency, or is satisfied by the debtor that he is able to pay his debts, or that for any other sufficient cause no order ought to be made, the Court shall dismiss the petition.
( 2) In the case of a petition presented by a debtor, the Court shall dismiss the petition if it is not satisfied of his right to present the petition.
26 1) Wh t ·t· t d b d"t Award of com .. . ( ere a pe 1 10n presen e y a ere 1 or pensation. is dismissed under sub-section ( 1) of section 25, and
the Court is satisfied that the petition was frivolous or
vexatious, the Court may, on the application of the
debtor, award against such creditor such amount, not
exceeding one thousand rupees, as it deems a reason-
able compensation to the debtor for the e:xipense or
injury occasioned to him by the petition and the pro-
ceedings thereon, and such amount may be realised
as if it were a fine.
(2) An award under this section shall bar any suit for compensation in respect of such petition and the proceedings thereon.
Order of adjudication.
27. (1) If the Court does not dismiss the petition, Order of adjudi- it shall make an order of adjudication, and shall specify cation. in such order the period within which the debtor shall apply for his discharge.
(2) The Court may, if sufficient cause is shown, extend the period within which the debtor shall apply for his discharge, and in that case shall publish notice of the order in such manner as it thinks fit.
28. ( 1) On the making of an order of adjudication, Effect of an the insolvent shall aid to the utmost of his power in ord_er of adjudi- the realisation of his property and the distribution of cation. the proceeds among his creditors.
19
--------~
90 PROVINCIAL INSOLVENCY [Act .5 of 1920.
(2) On the making of an order of adjudication, the whole of the property of the insolvent shall vest in the Court or in a receiver as hereinafter provided, and shall become divisible among the creditors, and thereafter, except as provided by this Act, no creditor to whom the insolvent is indebted in respect of any debt pro- vable under this Act shall during the pendency of the insolvency proceedings have any remedy against the property of the insolvent in respect of the debt, or "
commence any suit or other legal proceeding, except with the leave of the Court and on such terms as the Court may impose.
(3) For the puriposes of sub-section (2), all goods being at the date of the presentation of the petition on which the order is made, in the possession, order or dis- position of the insolvent in the trade. or business, by the consent and permission of the true owner, under such circumstances that he is the reputed owner thereof, shall be deemed to be the property of the in- solvent.
( 4) All property which is acquired by or devolves on the insolvent after the date of an order of adjudica- tion and before his discharge shall forthwith vest in the Court or receiver, and the provisions of sub-section
(2) shall apply in respect thereof.
(5) The property of the insolvent for the purposes of this section shall not include any property (not being books of account) which is exempted by the Code of Civil Procedure, 1908, or by any other enactment for 5 of the time being in force from liability to attachment and 1908 sale in execution of a decree.
( 6) Nothing in this sectiJn shall affect the power of any secured creditor to realise or otherwise deal with his security, in the same manner as he would have been entitled to realise or deal with it if this section had not been passed.
(7) An order of adjudication shall relate back to, and take effect from, the date of the presentation of the petition on which if is made.
•
20
25 of
1948.
25 of
1948.
•
Act 5 of 1920.] PROVINCIAL INSOLVENCY 91
•
1
[28A. The property of the insolvent shall com- Insolvent's pro- prise and shall always be deemed to have comprised pe_rty to cpm- 1 th . t . d k a· prise certam a so e capac1 y to exercise an to ta e procee mgs capacity. for exercising all such powers in or over or in respect
of 1property as might have been exercised by the in-
solvent for his own benefit at the commencement of his
insolvency or before his discharge:
Provided that nothing in this section shall affect
any sale, mortgage or other transfer of the property of
the insolvent by a Court or receiver or the Collector
acting under section 60 made before the commencement
of the Provincial Insolvency (Amendment) Act, 1948
which has been the subject of a final decision by a
competent Court :
Provided further that the property of the insolvent
shall not be deemed by reason of anything contained
in this section to comprise his capacity referred to in
this section in respect of any such sale, mortgage or
other transfer of property made in the State of Madras
after the 28th day of July, 1942, and before the com-
mencement of the Provincial Insolvency (Amend-
ment) Act, 1948.]
29. Any Court in which a suit or other proceeding Stay of_ pending is pending against a debtor shall, on proof that an order proceeding. of adjudication has been made against him under this Act, either stay the proceedings, or allow it to continue on such terms as suoh Court may impose.
38. Notice of an order of adjudication stating the Publication of name, address and description of the insolvent, the or~er of adjudi- date of the adjudication, the period within which .the cation. debtor shall a,pply for his discharge, and the Court by which the adjudication is made, shall be published in the Official Gazette and in such other manner as may be prescribed.
Proceeding consequent on order of adjudication.
31. ( 1) Any insolvent in respect of whom an Protection order. order of adjudication has been made may apply to the ----~--·------ . ---·--·- -----
lJns. by Act 25 of l 948, s. 2.
21
Court for protection and the Court may on such afpli~ cation make an order for the protection of the mso ven
92
PROVINCIAL tSOLVE~CY [Act 5 of 1920.
from arrest or detention. ' (2) A protection order m~Y apply either to all the dehts of the debtor, or to any of them as the Court may think proper, and may commence and take effect _at and for such time as the Court may direct, and may 1:>e ,, revoked or renewed as the Court may think fit.
(3) A protection order shall protect the insolvent from being arrested or detained in prison for any debt to which such order applies, and any insolvent arrested or detained contrary to the terms of such an order shall be entitled to his release :
Provided that no such order shall operate to pre- judice the rights of any creditor in the event of such order being revoked or the adjudication annulled.
(4) Any creditor shall be entitled to appear and oppose the grant of a protection order. Power to arrest
after adjudica-
tion.
32. . At any time after an order of adjudication has been made, the Court may, if it has reason to believe on the application of any creditor or the receiver, that the debtor has absconded or departed from the local limits of its jurisdiction with intent to avoid any obli- gation which has been, or might be, imposed on him by or under this Act, order a warrant to issue for his arrest, and on his appearing or being brought before it, may, if satisfied that he was absconding or had de- parted with such intent. order his release on such terms as to security as may be reasonable or necessary, or if such security is not flrrnished, direct that he shall be detained in the ci.vil prison for a period which may Schetlule of
creditors.
extend to three months.
I
33. (1) When an order of adjudication has been made under this Act. all persons alleging themselves to be creditors of the insolvent in respect of debts provable under this Act shall tender proof of their respective debts by producing evidence of the amount and particu1ars thereof. and the Court shall. by order determine the personc:; ,vho have proved themselves to
22
'
•
Act 5 of 1920.] PROVINCIAL IN SOL VEN CY 93 be creditors of the insolvent in respect of such debts, and the amount of such debts, respectively, and shall frame a schedule of such persons and debts :
Provided that, if, in the opinion of the Court, the value of any debt is incapable of being fairly estimated, the Court may make an order to that effect, and there- upon the debt shall not be included in the schedule.
(2) A copy of every such schedule shall be posted in the Court-house.
(3) Any creditor of the insolvent may, at any time before the discharge of the insolvent, tender proof of his debt and apply to the Court for an order directing his name to be entered in the schedule as a creditor in respect of any debt provable under this Act, and not entered in the schedule, and the Court, after causing notice to be served on the1
[receiver] and the other creditors who have proved their debts, and hearing their objections (if any), shall comply with or reject the application.
I
34. ( 1) Debts which have been excluded from the Debts provable schedule on the ground that their value is incapable under the Act. of being fairly estimated and demands in the nature of unliquidated damages arising otherwise than by reason
of a contract or a breach of trust shall not be provable under this Act.
(2) Save as provided by sub-section (1), all debts and libilities, present or future, certain or contingent; to which the debtor is subject when he is adjudged an insolvent; or to which he may become subject before his discharge by reason of any obligation incurred before the date of such adjudiciation, shall be deemed to be debts provable under this Act.
Annulment of ad1udication.
35. Where; in the opinion of the Court, a debtor Po:we~ to_ annul ought not to have been adJ"udO'ed insolvent or where it ?'dJudication of
• • • I', - , insolvency.
23
PROVINCIAL INSOLVENCY (Act 5 of 1920.
of the insolvent have been paid in full, the Court shall, on the application of the debtor, or of any other person interested, by order in writing, annul the adjudicat~on
1
[and the Court may, of its own motion or on applica- tion made· by the receiver or any creditor, annul any adjudication made on the petition of a debtor who was, by reason of the provisions of sub-section (2) of section 10, not entitled to present such petition].
94
Power to cancel 36. If, in any case in which an order of adjudica- one dfdooncurf - tion has been made, it shall be proved to the Court by
rentorerso . h · l d adjudication. 1 which such order was made t at mso vency procee - ings are pending in another Court against the same
debtor, and that the property of the debtor can be
more conveniently distributed by such other Court,
the Court may annul the adjudication or stay all pro-
ceedings thereon.
ProceedmO on 37. (1) Where an adjJdication is annulled, all
annulment. sales and dispositions of property and payments duly made, and all acts theretofore done, by the Court or
receiver, shall be valid; but, subject as aforesaid, the
property of the debtor who was adjudged insolvent
shall vest in suoh person as the Court may appoint, or,
in default of any such appointment, shall revert to the
debtor to the extent of his right or interest therein on
such conditions (if any) as the Court may by order
in writing, declare. '
I
(2) Notice of every order annulling an adiudication ' shall be published in the Official Gazette and in such other manner as may be prescribed.
Compositions and schemes of arrangement. Compositions and 38. ( 1) Where a debtor after the making of an :
schemes of arrange- d . . . ment. or ~1: of _adJu~1cati~n, submits a proposal for a com- pos1t10n m satisfaction of his debts, or a proposal for a
scheme of arrangement of his affairs. the Court shall
fix a ~ate for th~ considerati<;>n of the proposal, and
shall issue a notice to all creditors in such manner as
may be prescribed.
11ns. by Act 11 of 1927, s. 5.
24
•
Act 5 of 1920.] PROVINCIAL INSOLVENCY 95
(2) If, on the consideration of the proposal, a majority in number and three-fourths in value of all the creditors whose debts are proved and who are present in person or by pleader, resolve to accept the proposal, the same shall be deemed to be duly' accepted by the creditors.
(3) The debtor may at the meeting amend the terms of his proposal if the amendment is, in the opinion of the Court, calculated to benefit the general body of creditors.
( 4) Where the Court is of opinion, after hearing the report of the receiver, if a receiver has been appointed, and after considering any objections which may be made by or on behalf of any creditor, that the terms of the proposal are not reasonable or are not calculated to benefit the general body of creditors, the Court shall refuse to approve the proposal.
( 5) If any facts are proved on proof of which the Court would be required either to refuse, suspend or attach conditions to· the debtor's discharge, the Court shall refuse to approve the proposal unless it provides reasonable security for payment of not less than six annas in the rupee on all the unsecured debts provable against the debtor's estate.
(6) No composition or scheme shall be approved by the Court which does not provide for the payment in priority to other debts of all debts directed to be so paid in the distribution of the property of an insolvent.
(7) In any other case the Court may either approve or refuse to approve the proposal .
.I 39. If the Court approves the proposal, the terms Order on shall be embodied in an order of the Court, and1* * * approval. the order of adjudication shall be annulled, and the provisions of section 37 shall apply, and the composition or scheme shall be binding on all the creditors2
[so far --- ------- --------------· -·-----
25
Power to re-ad- judge debtor
insolvent.
Discharge.
96 PROVINCIAL INSOLVENCY [Act 5 of 1920.
as relates to any debt due to ~hem from the debtor and provable under this Act].
40. If default is made in the payment of any ins- talment due in pursuance of the composition or scheme, or if it appears to the Court that the composition or scheme cannot proceed without injustice or undue delay, or that the approval of the Court was obtained by fraud, the Court may, if it thinks fit, re-adjudge the debtor insolvent and annul the composition or scheme but without prejudice to the validity of any transfer or payment duly made or of anything duly done under or in pursuance of the composition or scheme. When a debtor is re-adjudged insolvent under this section, all debts provable in other respects which have been contracted before the date of such re- adjudication shall be provable in the insolvency. Dischdrge
41. (1) A debtor may, at any time after the order of adjudication and shall, within the period specified by the Court, apply to the Court for an order of dis- charge, and the Court shall fix a day, notice whereof shall be given in such manner as may be prescribed, for hearing such application, and any objections which may be made thereto.
(2) Subject to the provisions of this section the Court may, after considering the objections of any creditor and, where a receiver has been appointed, the report of the receiver-
( a) grant or refuse an absolute order of discharge; or I
(b) suspend the operation of the order for a specified time; or
(c) grant an order of dJcharge subject to any con- ditions with respect to any earnings or income which may afterwards become due to the insolvent, or with respect to his after- acquired property.
• -
26
•
Act 5 of 1920.] PROVINCIAL INSOLVENCY 97 f t t Cases in which 42. (1) The Court shall re use . o gran a~ court must re- absolute order of discharge under sect10n 41 on proo.1. f1;1se an absolute h f 11
. , f t l . discharge. of any oft e o owmg ac s, name y .-
(a) that the insolvent's assets are not of a value equal to eight annas in th~ r1:1I?e_e on the amount of his unsecured hab1lities, unless he satisfies the Court that the fact that the assets are not of a value equal to eight annas in the rupee on the amount of his unsecured liabilities has arisen from circumstances for which he cannot justly be held responsible;
(b) that the insolvent has omitted to keep such books of account as are usual and proper in the business carried on by him and as suffi- ciently disclose his business transactions and financial position within the three years immediately preceding his insolvency;
(c) that the insolvent has continued to trade after knowing himself to be insolvent;
(d) that the insolvent has contracted any debt provable under this Act without having at the time of contracting it any reasonable or probable ground of expectation ( the burden of proving which shall lie on him) that he would be able to pay it;
(e) that the insolvent has failed to account satis- factorily for any loss of assets or for any de- ficiency of assets to meet his liabilities;
(f) that the insolvent has brought on, or contribu- ted to, his insolvency by rash and hazardous speculations,1 or by unj'.ustifiable extra- vagance in living, or by gambling, or by culpable neglect of his business affairs;
(g) that the insolvent has, within three months preceding1the date ofi the presentation of the petition, when unable to pay his debts as they became due, given an undue pre- ference to any of his creditors;
27
98 PROVINClAL loLVENCY [Act 5 of 1920.
(h) that the insolvent has on any previous occasion been adjudged an insolvent or made a composition or arrangement with · his creditors ; I
(i) that the insolvent has concealed or removed his property or any part thereof, or has been guilty of any other fraud or fraudulent breach of trust.
(2) For the purposes c.1 d1is section, the report of the receiver shall be deemed to be evidence; and the Court may presume the correctness of any statement contained therein.
(3) The powers of suspending, and of attaching conditions to, an insolvent's discharge may be .exercised concurrently.
Adjudication to 43. (1) If the debtor does not appear on the day b~
1
annulled o
28
•
Act 5 of 1920.1 PROVINCIAL INSOLVENCY
99
(b) any debt or liability incurred by means of any fraud or fraudulent breach of trust to which he was a party;
(c) any debt or liability in respect of which he has obtained forbearance by any fraud to which he was a party; or
(d) any liability under an order for maintenance made under section 488 of the Code of Criminal Procedure, 1898.
· (2) Save as otherwise provided by ~uh-section (1), an order of discharge shall release the insolvent from all debts provable under this Actc
(3) An order of discharg:.· shall not release ~ny person who, at the date of the pres~ntation ~f the petition, was a partner or co-trustee with t~e. insol- vent, or was jointly bound or had made any Joint c?n- tract with him or any person who was surety for him.
PART III
ADMINISTRATION OF PROPERTY.
Method of proof of debts.
45. A creditor may prove for a debt not payable Debt payable at when the debtor is adjudged an insolvent as if it were a 1:uture time. payable presently, and may receive dividends equally with the other creditors, deducting therefrom
only a rebate of interest at the rate of six per centum per annum computed from the declaration of a divi- dend to the time when the debt would have become
payable, according to the terms on which it was con- - tracted.
46. Where there have been mutual dealings and set-off between an insolvent and a creditor proving or claim- Mutual dealings ing to prove a debt under this Act, an account shall be taken of what is due from the one party to the other in respect of such mutual dealings, and the sum due from the one party shall be set-off against any sum due from the other party, and the balance of the
29
Secured credi- tors.
Interest.
~----------
100 PROVINCIAL INSOLVENCY [Act 5 of 1920.
' account, and no more, shall be claimed or paid on either side, respectively.
I
, 47. (1) Where a secured creditor realises his security, he may prove for the balance due to him, after deducting the net amount realised. /
(2) Where a secured creditor relinquishes his security for the general benefit of the creditors, he • may prove for his whole debt.
( 3) Where a secured creditor does not either realise or relinquish his security, he shall, before being entitled to have his debt entered in the schedule, state in his proof the particulars of his security, and the value at which he assesses it, and shall be entitled to receive a dividend only in respect of the balance due to him after deducting the value so assessed.
(4) Where a security is so valued, the Court may at any time before realisation redeem it on payment to the creditor of the assessed value. .,
(5) Where a creditor, after having valued his security, subsequently realises it, the net amount realised shall be substituted for the amount of any valuation previously made by the creditor, and shall be treated in all respects as an amended valuation made by the creditor.
I
(6) Where a secured credito~ does not comply with the provisions of this section, he shall be excluded from all share in any dividend.
I
48. ( 1) On any debt, or sum certain whereon interest is not reserved or agreed for, and which is overdue when the debtor is adjudged an insolvent, and which is provable under this Act, the creditor may prove for interest at a rate not exceeding six per centum per annum-
( a) if the debt or sum is payable by virtue of a written instrument at a certain time from the time when such debt or sum was p~yable to the date of such adjudication; or
30
Act 5 of 1920.] PROVINCIAL INSOLVENCY l 01
(b) if the debt or sum is payable otherwise, from the time when a demand in writing has been made giving the debtor notice that interest will be claimed from the date of demand until the time of payment to the date of such adjudication.
(2) Where a debt which has been proved under this Act includes interest or any pecuniary considera- tion in lieu of interest, the interest or consideration shall, for the purposes of dividend be calculated at a rate not exceeding six per centum per annum, without prejudice to- the right of a creditor to receive out of the debtor's estate any higher rate of interest to which he may be entitled after all the debts proved have been paid in full.
119. (1) A debt may be proved under this Act by, Mode of proof. delivering, or sending by post in a registered letter, to the Court an affidavit verifying the debt.
(2) The affidavit shall contain or refer to a state- ment of account showing the particulars of the debt, and shall specify the vouchers (if any) by which the same can be substantiated. The Court may at any time cali for the production of the vouchers.
50. (1) Where the receiver thinks that a debt has Disallowan<;e b · I t d · th h d 1 h C and reduction een improper y en ere 1n e sc e u e, t e ourt of entries in may, on the application of the receiver and after notice schedule.
to the creditor, and such inquiry (if any) as the Court
thinks necessary, expunge such entry or reduce the
amount of the debt.
(2) The Court may also, after like inquiry, ex- punge an entry or reduce the amount of a debt upon the application of a creditor where no receiver has been appointed, or where the receiver declines to interfere in the matter or, in the case of a composition or scheme, upon the application of the debtor. Effect of insolvency on antecedent transactions
51. ( 1) Where execution of a decree has issued Restriction of aga~nst the property of a debtor, no person shall be f~~h~nd;r c:;i- entitled to the benefit of the execution against the cution.
31
102 PROVINCIAL iNSOLVENCY [Act 5 of 1920
recci vcr except in respect of assets realised in the course of the execu Lion by sale or otherwise before t~e date of the adn; :ssion of the petition.
(2) Not,hing in thi~ section shall affect the rights of a :c:ecured creditor in respect of the property against which the dee· : executed.
..
(3) A person whn godd fa5th purchases the f;
property of a debtor under a sale in execution shall in all cases acquire n good title to it agains! tlie receiver. Duties of Court CX• 5;.?;. c execution a decree has issued ~it~~~P~;f;ee Pit agai:ns~ any property of a debtor which is_ sal?abl_e in taken in exe- execut10n and hefore the sak thereof notice 1s given r:utions. to the Court executing the c.focree that an insolvency petition by or against the debtor has been admitted, the Court shall, on application, direct the property, if in the possession of the Court, to be delivered to the receiver, but the costs of the suit in which the decree was made and of the execution shall be a first charge nn the property ~,o delivered, and the receiver may sell thf' property or an adequate part thereof for the pur- pose of satjsfyinf!" the charge.
Avo~dance of 53. Any transfer of property not being a transfer ;tuntary trans- made before &nd in consideration of marriage or made in favour of a purchaser or jncumbrancer in good
faith and for valuable consideration shall, if the trans- feror is adjudged insolvent1
[on a petition presented] within two years after the date of the transfer, be voidable as against the receiver and may be annulled by the Court. I
Avoidance of' 54. (1) Every transfer of property, every pay- preference in ment made, every oblig_. ation incurred, and every certain cases judicial proceeding taken or suffered by any person unable to pay his debts as they become due from his own money in favour of any creditor, with a view of giving that creditor a preference over the other cre- ditors, shall, if such person is adjudged insolvent on a petition presented within three months after the date thereof, be deemed fraudulent and void as against the receiver, and shall be annulled by the Court. ~!mi. l;iy Act lO of 1~30, s. 6,
-\ ---------------~
32
Act 5 of 1920.1 PROVINCIAL INSOLVENCY 103 '
(2) This section shall not affect the rights of any person who in good faith and for valuable consideration
has acquired a title through or under a creditor of the insolvent. ·
1
[54A. A petition for any annulment of any ~Y whom peti-
. tions for annul- transfer under sect10n 53, or of any transfer, payment, ment may be obligation or judicial proceeding under section 54, made. may be made by the receiver, or, with the leave 0£ the Court, by any creditor who has proved his debt and woh satisfies the Court that the receiver has been requested and has refused to make such petition.]
55. Subject to the foregoing provisions of this Act r~~~ec;t3~ of
with respect to the effect of insolvency on an execution, transactions. and with respect to the avoidance of certain transfers and preferences, nothing in this Act shall invalidate in the case of an insolvency-
( a) any payment by the inso 1verit to any of his creditors;
(b) any payment or delivery to the insolvent;
(c) any transfer by the insolvent for valuable consideration; or
(d) any contract or dealing by or with the insol- vent for valuable consideration:
Provided that any such trans:...ction takes place be- fore the date of the order of adjudication and that the person with whom such transaction takes place has not at the time notice of the presentation of any insolvency petition by or against the debtor.
Realisation of property.
56. (1) The Court mav at the time 0 -r the cr,~'"'r of Apt0?intment of · • • " ' · · ~· - receiver adJu_d1cation, or at any time afterwards, appoint a · receiver for the property of the insolvent, and such
property shall thereupon vest in .'c:uch receiver.
1 Ins. by Act 39 of 1926, s. 3,
Power to ap- point Official Receivers.
104 PROVINCIAL INSOLVENCY [Act 5 of 1920.
(2) Subject to such conditions as may be prescri- ed, the Court may-
(a) require the receiver to give such security as it thinks fit duly to account for what he shall receive in respect of the property; and
(b) by general or special order, fix the amount to be paid as remuneration for the services of the receiver out of the assets of the in- solvent.
I
(3) Where the Court appoints a receiver, it may remove the person in whose possession or custody any such property as aforesaid is from the possession or custody thereof :
Provided that nothing I in this section shall be• deemed to authorise the Court to remove from the possession or custody of property any person whom the insolvent has not a present right so to remove.
(4) Where a receiver appointed under this section-
(a) fails to submit his accounts at such periods and in such form as the Court directs; or
(b) fails to pay the balance due from him there- on as the Court directs; or
(c) occasions loss to the property by his wilful default or gross negligence,
the Court may direct his prbperty to be attached and sold, and may apply the proceeds to make good any balance found to be due from him or any loss so occasioned by him.
(5) The provisions of thib section shall apply, so far as may be, to interim receivers appointed under section
20.
I -
57. (1) The State Government may appoint such persons as it thinks fit (to be called "Official Receivers") to be receivers under this Act within such local limits as it may prescribe.
34
~--------------
Act 5 of 1920.] PROVINCIAL INSOLVENCY 105
(2) Where any Official Receiver has been so ap- pointed for the local limits of the jurisdiction of any Court having jurisdiction under this Act, he shall be the receiver for the purpose of every order appointing a receiver or an interim receiver issued by any such Court, unless the Court for special reasons otherwise directs.
(3) Any sum payable under clause (b) of sub- section ( 2) of section 56 in respect of the services of an Official Receiver shall be credited to such fund as the State Government may direct.
(4) Every Official Receiver shall receive such re- muneration out of the said fund or otherwise as the State Government may fix in this behalf, and no re- muneration whatever beyond that so fixed shall be received by the Official Receiver as such.
58. Where no receiver is appointed, the Court Powers of court shall have all the rights of, and may exercise all the if no. receiver f d . d th' A t appointed. powers con erre on, a receiver un er 1s c .
59. Subject to the provisions of this Act, the Duties and po- receiver shall, with all convenient speed, realise the wers df rece1v- property of the debtor and distribute dividends er. among the creditors entitled thereto, and for that purpose may-
( a) se11 all or any part of the property of the
insolvent;
(b) give receipts for any money received by him; and may, by leave of the Court, do all or any of the following things, namely : -
( c) carry on the business of the insolvent so far
as may be necessary for the beneficial wind- ing up of the same;
(d) institute, defend or continue any suit or other legal proceeding relating to the property of the insolvent;
(<') employ a pk•ader or other agent to take any proceedings or do any business which may be sanctioned by the Court;
35
106
I
PROVINCIAL INSOLVENCY [Act 5 of 1920.
(f) accept as the consideration for the sale of any property of the insolvent a sum of money payable at a future time subject to such stipulations as to security and otherwise as the Court thinks fit;
(g) mortgage or pledge any part of the property of the insolvent for the purpose of raising & money for the payment of his debts; P
(h) refer any dispute to arbitration, and compro- mise all debts, claims and liabilities, on such terms as may be agreed upon; and
\
(i) divide in its existing form amongst the creditors, according to its estimated value any property which, from its peculiar nature or other special circumstances, cannot readily or advantageously be sold. Power to re- 1[59A. ( 1) The Coutt, i°f specially empowered £uire ~;!~f~g in this behalf by an order of the State Government, or i~~~lvent's pro- any officer of the Court so empowered by a like order, perty. may, on the application of the receiver or any creditor who has proved his debt, at any time after an order of adjudication has been made, summon before it in the prescribed manner any person known or suspected to have in his possession any property belonging to the insolvent, or supposed to be indebted to the insol- vent, or any person whom the Court or such officer, as the case may be, may deem capable of _giving informa- tion respecting- the insolvent or his dealing-s or proper- ty, and the Court or such officer may require any such person to produce any documents in his custod:y or power relating to the insolvent or to his dealings or property . I -
(2) If any person so summoned, after having been tendered a reasonable sum, refuses to come before the Court or such officer at the time appointed, or refuses to produce any such document, liaving no lawful imnedjment made known to and allowed by thE' Court or ·such officer, the Court or surh offir:Pr may 1,v ---"--•----·--· .. ---·· ---------------
Act 5 ot 1920.l PROVINCIAL INSOLVENCY 107 warrant, cause him to be apprehended and brought up for examination.
(3) The Court or such officer may examine any perscm so brought before it or him concerning the insolvent, his dealings or property, and such person may be represented by a legal practitioner.]
60. (1) In any local area in which a declaration ~peci3:1 provl-
. . . s10ns 1n regard has been made under sect10n 68 of the Code of C1v1l to immoveable Procedure, 1908, and is in force, no sale of immovable property. property paying revenue to the Government or held or let for agricultural purposes shall be made by the receiver; but, after the other property of the insolvent has been realised, the Court shall ascertain- ( a) the amount required to satisfy the debts proved under this Act after deducting the-
moneys already received;
(b) the immovable property of the insolvent re- maining unsold; and
(c) the incumbrances (if any) existing thereon; and shall forward a statement to the Collector con- taining the particulars aforesaid; and thereupon the Collector shall proceed to raise the amount so required by the exercise of such of the powers conferred on him by paragraphs 2 to 10 of the Third Schedule to the said Code as he thinks fit; and subject to the provisions of those paragraphs so far as they are applicable, and shall hold at the disposal of the Court all sums that may come to his hands by the exercise of such powers.
(2) Nothing in this Act shall be deemed to affect any provisions of any ena<;tment for the time being in force prohibiting or restricting the execution of decrees or orders against immovable property; and any such provisions shall be deemed to apply to the enforce- ment of an order of adjudication made under this Act as if it were such a decree or order.
1
((3) In particular, and without prejudice to the generality of sub-section (2), when the whole or any
1 In the application of the Act to the Punjab, a new sub-section (3) has been added here by the Provincial Insolvency (Punjab Amend- ment) Act, 1939 (Pun. 3 of 1939), s. 2.
Priority of debts.
108 PROVINCIAL INSOLVENCY [Act 5 of 1920. '
part of the estate of an insolvent consists of land as defined in the Punjab Tenancy Act, 1887':, no such land shall be temporarily alienated by the receiver; but after the other property of the insolvent has been realised the court shall proceed in the manner pro- vided in sub-section (1), and the Col'lector shall there- upon proceed to raise the amount required by means of a temporary alienation in such form and for such period as may be legally permissible and as he thinks f
fit; and shall hold at the disposal of the court all sums which may thereby come to his hands :
Provided that such portions of the land shall be exempted from alienation as in the opinion of the Collector, having regard to the income of the judg- ment-debtor from all sources except such income as is dependent on the will of an other person, is sufficient to provide for the maintenance of the insolvent and the members of his family who are dependent on him, and such protion shall be deemed not to form part of the estate under administration.]
Distribution of property
61. (1) In the distribution of the property of the insolvent, there shall be paid in priority to all other debts- I
(a) all debts due to the Government or to any local authority; and
(b) all salary or wages, not exceeding twenty rupees in all, of any clerk, servant or labourer in respect of services rendered to the '.insolvent during four months before the date of the presentation of the petition.
(2) The debts specified in sub-section (1) shall rank equally between themselves, and shall be paid in full, unless the property of the insolvent is insufficient to meet them, in which case they shall abate in equal proportions between themselves.
l
(3) Subject to the retention of such sums as may be necessary for the expenses of administration or
38
Act 5 of 1920.] PROVINCIAL INSOLVENCY 1C9 otherwise, the debts specified in sub-section (1) shall be discharged forthwith in so far as the property of the insolvent is sufficient to meet them. ( 4) In the case of partners, the partnership pro- perty shall be applicable in the first instance in pay- ment of the partnership debts, and the separate pro- perty of each partner shall be applicable in the first instance in payment of his separate debts. Where there is a surplus of the separate property of the partners, it shall be dealt with as part of the partner- ship property; and where there is a surplus of the partnership property, it shall be dealt with as part of the respective separate property in proportion to the rights and interests of each partner in the partnership property.
(5) Subject to the provisions of this Act, all debts entered in the schedule shall be paid rateably according to the amounts of such debts respectively and without any preference.
(6) Where there is any surplus after payment of the foregoing; debts, it shall be applied in payment or interest from the date on which the debtor is adjudged an insolvent at the rate of six per cent per annum on all debts entered in the schedule.
62. (1) In the calculation of dividends, the re- ~a~culation of
. h 11 t . . h' h d ffi . t t t d1v1dends. ceiver s a re am In Is an s su cien asses o meet-
(a) debts provable under this Act and appearing, from the insolvent's statements or otherwise, to be due to persons resident in places so distant that in the ordinary course of communication they have not had sufficient time to tender their proofs;
(b) debts provable under this Act, the subject of claims not yet determined;
(c)' disputed proofs or claims; and
(d) the expenses necessary for the administration of the estate or otherwise.
(2) Subject to the provisions of sub-section ( 1), all money in hand shall be distributed as dividends .
•
39
Right of credi- tor who has not proved /debt before declara- tion of a divi- dend.
Final dividend. No suit for
dividend.
110 PROVINCIAL li.'4SOLVENCY [Act 5 of 1920.
63. Any creditor who has not proved his debt before the declaration of any dividend or dividends shall be entitled to be paid, out of any money for the time being in the hands of the receiver, any dividend or dividends which he may have failed to receive before that money is applied to the payment of any future dividend or dividends; but he shall not be en- titled to disturb the distribution of any dividend declared before his debt was proved by reason that he has not participated therein.
64. When the receiver has realised all the pro- perty of the insolvent or so much thereof as can, in the opinion of the Court, be realised without needlessly protracting the receivership, he shall declare final dividend; but before so doing, he shall give notice in manner prescribed to the persons whose claims to be creditors have been notified but not proved, that if they do not prove their claims within the time limited by the notice, he will proceed to make a final dividend without regard to their claims. After the expiration of the time so limited, or if the Court, on application by any ,such claimant, grants him further time for es- tablishing his claim, then on the expiration of such further time, the property of the insolvent shall be divided among the creditors entered in the schedule without regard to the claims of any other persons.
65. No suit for a dividend shall lie against the re- ceiver; but where the receiver refuses to pay any dividend, the Court may, on the application of any creditor who is entered in the schedule, order him to pay it, and also to pay out of his own money interest thereon for the time that it is withheld, and the costs of the application. . .
Management by 66. (1) The Court may aJpoint the insolvent him- and allowance lf · d h · f h to ins.olvent. se to supermten t . e management o t e property of the insolvent or of any part thereof, or to carry on
the trade (if any) of the insolvent for the benefit of
the creditors, and in any other respect to aid i_n ad-
ministering the property in such manner and on such
terms as the Court may direct.
(2) The Court may, from time to time, make such allowance as it may think just to the insolvent out of
40
•
Act 5 of 1920.] PROVINCIAL INSOLVENCY 111 his property for the support of himself and his family, or in consideration of his services if he is engaged in winding up his estate; but any such allow- ance may, at any time, be varied or determi:o.ed by the Court.
67. The insolvent shall be entitled to any surplus Right of insol- remaining after payment in full of his creditors with vent to5urplus . interest as provided by this Act, and of the expenses of the proceedings taken thereunder.
1
[67A. (1) The Court may, if it thinks fit, authorise committee of the creditors who have proved their debts to appoint inspection. a committee of inspection for the purpose of superin- tending the administration of the insolvent's property by the receiver.
(2) The persons appointed to a committee of in- spection shall be creditors who have proved their debts or persons holding general powers-of-attorney from such creditors.
(3) The committee of inspection shall have such powers of control over the proceedings of the receiver as may be prescribed. l
Appeal to Court against receiver
68. If the insolvent or any of the creditors or any App_eal to C~>Urt other person is aggrieved by any act or decision of the agamSt receiver. receiver, he may apply to the Court, and the Court may confirm, reverse or modify the act or decision complained of, and make such order as it thinks just :
Provided that no application under this section
shall be entertained after expiration of twenty-one days from the date of the act or decision complained of.
PART IV
PENALTIES
69. If a debtor, whether before or after the making offences b) f d f d . d' t· debtors. o an or er o a JU 1ca 10n,- ( a) wilfully foils to perform the duties imposed on him by section 22 or to deliver up
lJns. by i\ct 39 of 1926, s. 5-
Procedure on charge under section 69.
J 12 PROVINCIAL INSOLVENCY [Act 5 of 1920.
possession of any part of his property :which is divisible among his creditors under this Act, and which is for the time being in his possession or under his control to the Court or to any person authorised by the Court to take possession of it, or
(b) fradulently with intent to conceal the state • of his affairs or to defeat the objects of this
Act,-
(i) has destroyed or otherwise wilfully pre-
vented or purposely withheld the pro-
duction of any document relating to such of his affairs as are subject to in- vestigation under this Act, or
(ii) has kept or caused to be kept false books, or I
(iii) has made false entries in or withheld en- tries from or wilfully altered or falsi- fied any document relating to such of his affairs as are subject to investiga- tion under this Act. or
(c) fraudulently with intent to diminish the sum to be divided among his creditors or to give an undue preference to any of his creditors,- /
(i) has discharged or concealed any debt due to or from him, or
(ii) has made away with, charged, mortgaged or concealed any part of his property of any kind whatsoever,
he shall be punishable on conviction 1 * * *with imprisonment which may extend to one year.
2
[7&. Where the Court is satisfied, after such pre- liminary inquiry, if any, as it thinks necessary, that there is ground for inquiring into any offence referred -----·---
1The words "by the Court" rep. by Act 12 of 1927, s. 2 and Sch. ~subs. by Act 9 of 1926, s. 11, as a.-nended by the Repealing and
Amending Act, 1927 (10 of 1927), s. 3 and Sch. II, for the original section.
6 of
1898.
Act 5 of 1920.l PROVINCIAL INSOLVENCY 113 to in section 69 and appearing to have been committed by the insolvent, the Court may record a finding to that effect and make a complaint of the offence in writing to a Magistrate of the first class having juris- diction, and such Magistrate shall deal with such complaint in the manner laid down in the Code of Criminal Procedure, 1898.]
' 71. Where an insolvent has been guilty of any of c;riminal I!abi- the offences specified in section 69 he shall not be llty a:fter dis-. ,. · charge or com- exem pt from being proceeded against therefor by position.
reason that he has obtained his discharge or that a
composition or scheme of arrangement has been
accepted or approved.
' 72. (1) An undischarged insolvent obtaining Undischarged
credit to the extent of fifty rupees or upwards from in?o~vent ob:-
. th t · f · h th t h • tairung credit. any person w1 ou 1n orm1ng sue person a e 1s
an undischarged insolvent shall, on conviction by a
Magtstrate, be punishable with imprisonment for a term which may extend to six months, or with fine or with both.
(2). Where the Court has reason to believe that an undischarged insolvent has committed the offence referred to in sub-section (1), the Court, after making any preliminary inquiry that may be necessary, may send the case for trial to the nearest Magistrate of the first class, and may send the accused in custody or take sufficient security for his appearance before such Magistrate; and may bind over any person to appear and give evidence on such trial.
73. (1) Where a debtor is adjudged or re- Disqualifica- adjudged insolvent under this Act, he shall, subject tions of in- to the provisions of this section, be disqualified from- solvent.
(a) being appointed or acting as a Magistrate;
(b) being elected to any office of any local authority where the appointment to such office is by election or holding or exercising any such office to which no salary is attached; and
(c)' being elected or sitting or voting as member of any local authority.
43
ll4 PROVINCIAL INSOLVENCY [Act 5 of 1920.
(2) The disqualifications which an insolvent is subject to under this section shall be removed, and shall cease if-
I
(a) the order of adjudication is annulled under section 35; or
(b) he obtains from the Court an order of -.. discharge, whether absolute or conditional, ,.... with a certificate that his insolvency was caused by misfortune without any mis-
conduct on his part.
(3) The Court may grant or refuse such certifi- cate as it thinks fit, but any order of refusal shall be subject to appeal.
PART V
· Summary Administration. Su.m.."Ilary ad- 74. When a petition is presented by or against a ministration. debtor, if the Court is satisfied by affidavit or other- wise that the property of the debtor is not likely to exceed in value five hundred rupees1, the Court may make an order that the debtor:'s· estate be administra- ted in a summary manner, and thereupon the pro-
visions of this Act shall be subject to the following modifications, namely:-
( i) unless the Court otherwise directs, no notice required under this Act shall be published in the Official Gazette;
(ii) on the admission of a petition by a debtor, the property of the debtor shall vest in the Court as a receiver;
(iii) at the hearing I of the petition, the Court shall inquire into the debts and assets of the debtor and determine the same by order in writing, and it shall not be necessary to frame a schedule under the provisions of section 33;
1 In Punjab read "two thousand rupees", see the Punjab Reliet' of
Indebtedness Act, 1934 (Pun. 7 of 1934), s. 4.
44
Act 5 of 1920. l PROVINCIAL INSOLVENCY I 15
(iv) the property of the debtor shall be realised V\[ith all reasonable despatch and there- after, when practicable, distributed in a single dividend;
(v) the debtor shall apply for his discharge within six months from the date of adjudication; and
(vi) such other modifications as may be pres- cribed with the view of saving expense and simplifying procedure :
Provided that the Court may at any time direct that the ordinary procedure provided for in this Act shall be followed in regard to the debtor's estate, and thereafter the Act shall have effect accordingly.
PART VI
Appeals
75. (1) The debtor, any creditor, the receiver or Appeals. any other person aggrieved by a decision come to or an order made in the exercise of insolvency juris- diction by a Court subordinate to a District Court may appeal to the District Court, and the order of the District Court upon such appeal shall be final :
Provided that the High Court, for the purpose of satisfying itself that an order made in any appeal decided by the District Court was according to law,
may call for the case and pass such order with respect thereto as it thinks flt :
Provided further, that any such person aggrieved by a decision of the District Court on appeal from a decision of a subordinate Court under section 4 may appeal to the High Court on any of the grounds men- of tioned in sub-section (1) of section 100 of the Code of 1908. Civil Procedure, 1908.
(2) Any such person aggrieved by any such decision or order of a District Court as is specified in Schedule I, come to or made otherwise than in appeal from an order made by a subordinate Court, may appeal to the High Court,
45
116 PROVINCIJ INSOLVENCY [Act 5 of 1920"
(3) Any such person aggrieved by any other order made by a District Court otherwise than in appeal from an order made by a subordinate Court may appeal to the High Court by leave of the District Court or of the High Court.
(4) The periods of limitation for appeals to the District Court and to the High Court under this section shall be thirty days and ninety days, respectively. •
PART VII
MISCELLANEOUS
costs. 76. The costs of any ptoceeding under this Act, including the costs of maintaining a debtor in the civil prison, shall, subject to any rules made under this Act, be in the discretion of the Court in which the proceeding is had.
Co11;r~s to be 77. All Courts having jurisdiction in insolvency auxiliary to each and the officers of such Courts, respectively, shall 0th
er. severally act in aid of and be auxiliary to each other Limitation.
in all matters of insolvency, and an order of a Court seeking aid with a request to another of the said Courts shall be deemed sufficient to enable the latter Court to exercise, in regard to the matters directed by the order, such jurisdiction as either of such Courts could exercise in regard to similar matters within their respective jurisdictions.
78. (1) The provisions of sections 5 and 12 of the f
9
g{ Indian Limitation Act, 1908, shall apply to appeals and applications under this Act, and for the purpose of the said section 12, a decision under section 4 shall be deemed to be a decree.
(2) Where an order of adjudication has been annulled under this Act, in computing the period of limitation prescribed for any suit or application for the execution of a decree [other than a suit or appli- cation in respect of which the leave of the Court was obtained under sub-section (2) of section 28] which might have been brought or made but for the making of an order of adjudication under this Act, the period
46
Act 5 of 1920.] PROVINCIAL INSOLVENCY 117 from ·the date of the order of adjudication to the date of the order of annulment shall be excluded :
Provided that nothing in this section shall apply to a suit or application in respect of a debt provable but not proved under this Act.
79. 1
[(1) The High Court may, with the previous Power to make sanction of the State Government, make rules for rules. carrying into effect the provisions of this Act.]
(2) In particular and without prejudice to the generality of the foregoing power, such rules may provide-
(a) for the appointment and remuneration of receivers (other than official Receivers), the audit of the accounts of all receivers and
the costs of such audit. 2
(b) for meetings of creditors; ( c) for the procedure to be followed where the debtor is a firm, J* * *
(d) for the procedure to be followed in the case of estates to be administered in a summary manner, 4 [ and
(e) for any matter which is to be or may be prescribed.]
(3) All rules made under this section shall be published5* * * in the Official Gazette,6* * * and shall, on such publication, have effect as if enacted in this Act.
89. (1) The High Court, with the like sanction, Delegation of may from time to time direct that, in any matters powf:rs to . in respect of which jurisdiction is given to the Court ~:,cial Receiv- by this Act, the Official Receiver shall, subject to the directions of the Court, have all or any of the follow- ing, namely:-
1* * * * * *
1 Subs. by the A. 0. 1937 for the original sub-section. 2In the application of the Act to Bombay, a new clause (aa) has been ins. here by the Presidency Towns Insolvency and the Provin- cial Insolvency (Bombay Amendment) Act, 1939 /(Born. 15 of 1939), s. 3.
3The word "and" omitted by Act 39 df 1926, s. 6. 4Jns. by s. 6. ibid.
~•The words ''in thc- G.i/.vtt,, "r lndiu ,,r" ntHitted by the A.0 t~:l7.
11 The words "as the case may Ii,;" m,Httvd, ibid. 7Cl. (a) omitted by Act 39 of 1926, s. 7 ,.;•❖•
47
118
I
PROVINCIAL INSOLVENCY [Act 5 of 1920.
(b) to frame schedules and to admit or reject proofs of creditors;
* * I
* * *
(e) to make interim orders in any case of urgency; and \
(f) to hear and determine any unopposed or ex parte action. \
(2) Subject to the appeal to the Court provided for by section 68, any order made or act done by the Official Receiver in the exercise of the said powers shall be deemed the order or act of the Court. Power of State 81. Any State Government2* * * may, by Government to t'fi t' • th Offi · 1 G d J h bar application no 1 ca 10n m e cia azette, ec are t at any o~ _certain pro: of the provisions of this Act specified in Schedule II
~1S1ons to certain shall not apply to insolvency proceedings in any Courts. . . Court or Courts having jurisdiction under this Act in
Savines.
Repeals.
any part of the territories administered by such State
Government.
82. Nothing in this Act shall-
(a) affect the Presidency-towns Insolvency Act, s of
1909,3
* * * or. 1909.
(b) apply to cases to which Chapter IV of the 7 of Dekkhan Agriculturists Relief, Act, 1879, 1879. is applicable.
83. 4* * * \ * * •
(2) Where in any enactment or instrument in force at the date of the commencement of this Act, reference is made to Chapter XX (of Insolvent Judgment-debtors) of the Code of Civil Procedure, 10 of 1877, or of the Code of Civil Procedure, 1882, or to 1877 any section of either of those Chapters, such reference l1af
shall, so far as may be practicable, be construed as applying to this Act or to the corresponding section thereof.
1 Cls. (c) and (d) omitted by Act 39 of 1926, s. 7. :JThe words 'with the previous sanction of the G. G. in C." omit- ted by Act 38 of 1920, s. 2 and Sch. I, Pt. I. llThe words and figures "or section 8 or the Lower Burma Courts
•Ac1:i, 1900" rep. bjy · Act 8 of 1930, s. 3 and Sch.
A.ct S of 1920] PR0V1N(IAL INSOLVENCY (Schedule I.)
SCHEDULE I
[See SECTION: 75(2).]
119
DECISION 1AND ORDBRS \FROM WHICH AN APPEAL LIES TO TH£ HIGH COURT UNDER SECTION 75(2)
Section
Nature of decision or order ------------------------
4 Decision of questions of title, priority, etc., arising in insolvency.
25 Order dismissing a petition.
26 Order awarding compensation.
27 Orders of adjudication
33 Order regarding entries in the schedule.
35 Order annuJiing adjudication.
37 Order declaring the conditions on which the debtor's property shall revert to him on annulment of adjudication.
41 Order on application for discharge.
50 Order disallowing or reducing entries in the schedule.
53 Order annulling a voluntary transfer.
54 Decision that a transfer of property is a preference in favour of a creditor.
* * * * * * * "' "' * * ---------- ·••----- ..
1
The entry relating 10 s. 69 rep, by Act, ]2 of 1927, s· 2 and sch.
49
120
PROVINCIAL INSOLVENCY (Act 5 of 1920.
(Scftedule fl.)
SCHD.ULEII
(See Section 81.)
PROVISIONS OF THE ACT APPLICATION OF WHICH MAYBE