PROVINCIAL INSOLVENCY ACT, 1920
(1) This Act may be called the Provincial Insolvency Act, 1920.
(2) It extends to 1[the whole of India except 2[the territories which, immediately before the 1st November, 1956, were comprised in Part B States] and] the Scheduled Districts.3
State Amendments
Andhra Pradesh.—In section 1, for sub-section (2), substitute the following sub-section:—
“(2) It extends to the whole State of Andhra Pradesh except the Scheduled Areas”.
[Vide Andhra Pradesh Act 23 of 1965, sec. 3 (w.e.f. 1-6-1966).]
Madhya Pradesh.—In section 1, in sub-section (2), after the words “Part B States” add the words “other than the Madhya Bharat and Sironj regions of the State of Ma
(1) In this Act, unless there is anything repugnant in the subject or context,—
(a) “creditor” includes a decree-holder, “debt” includes a 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-towns 1[***]
(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;
(e) “secured creditor” means a person holding a mortgage, charge or lien on the property of the debtor or any part thereof as
(1) The District Courts shall be the Courts having jurisdiction under this Act\:"
Provided that the State Government may, by notification in the Official Gazette, invest any Court subordinate to a District Court with jurisdiction in any 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.
State Amendment
Andhra Pradesh.—In section 3, after sub-section (2) add the following sub-section, namely:—
“(3) In the cities of Hyderabad and Secunderabad, the State Government may, by notif
(1) Subject to the provisions of this Act, the Court shall have full power to decide all questions whether of title or priority, or of any nature whatsoever, and whether involving matters of law or of fact, which may arise in any case of insolvency coming within the cognizance of the Court, or which the Court may deem it expedient or necessary to decide for the purpose of doing complete justice or making a complete distribution of property in any such case."
(2) Subject to the provisions of this Act and notwithstanding 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 th
(1) Subject to the provisions of this Act, the Court, in regard to proceedings under this Act, shall have the same powers and shall follow the same procedure 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.
State Amendment
Goa, Daman and Diu.—In the Act, for the words “High Court” (whether in singular or plural), wherever they occur, substitute the words “Judicial Commissioner”.
[Vide Goa, Daman and Diu Act 1 of 1968, sec. 3(2).]
1[(1)] A debtor commits an act of insolvency in each of the following cases, namely\:—"
(a) if, in 2[India] or elsewhere, he makes a transfer of all or substantially all his property to a third person for the benefit of his creditors generally;
(b) if, in 2[India] or elsewhere, he makes a transfer of his property or of any part thereof with intent to defeat or delay his creditors;
(c) if in 2[India] or elsewhere, he makes any transfer of his property, or of any part thereof, 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 creditors,—
(i) he departs or r
Subject to the conditions specified in this Act, 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 within the meaning of this section, and on such petition the Court may make an order of adjudication.
No insolvency petition shall be presented against any corporation or against any association or company registered under any enactment for the time being in force."
Section 8 of the Provincial Insolvency Act, 1920, provides specific exemptions from insolvency proceedings for certain entities, notably corporations and registered companies. It delineates the scope within which insolvency petitions can be filed, emphasizing that certain entities are immune from such proceedings, thereby shaping the jurisdiction and scope of insolvency law.
Section 8 states that no insolvency petition shall be presented against:- Any corporation or association or company registered under any enactment for the time being in force.- It explicitly exempts such entities from insolvency proceedings, thereby preventing their insolvency from being adjudicated under the Act.
Note: The analysis consolidates case law, legal principles, and statutory interpretation from the provided sources, emphasizing the scope, purpose, and legal implications of Section 8 of the Provincial Insolvency Act, 1920.
(1) A creditor shall not be entitled to present an insolvency petition against a debtor unless—"
(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 petition:
1[Provided that where the said period of 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.]
(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 to five hundred rupees; or
(b) he is under arrest or imprisonment in execution of the decree of any Court for the payment of money; or
(c) an order of attachment in execution of such a decree has been made, and is subsisting, against his property.
(2) A debtor in respect of whom an order of adjudication 1[whether made under the Presidency-towns Insolvency Act, 1909 (3 of 1909), or under this Act has been annulled, owing to his failure to apply, or to prosecute 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
Every insolvency petition shall be presented to a Court having jurisdiction under this Act in any local area in which the debtor ordinarily resides or carries on business, or personally works for gain, or if he has been arrested or imprisoned, where he is in custody\:"
Provided that no objection as to the place of presentment 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.
Every insolvency petition shall be in writing and shall be signed and verified in the manner prescribed by the Code of Civil Procedure, 1908 (5 of 1908), for signing and verifying plaints."
(1) Every insolvency petition presented by a debtor shall contain the following particulars, namely\:—"
(a) a statement that the debtor is unable to pay his debts;
(b) the place where he ordinarily resides or carries on business or personally works for gain, or, if he has been arrested or imprisoned, 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 property, 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 and residences of his creditors so far as they are known to, or can by the exercise
No petition, whether presented by a debtor or by a creditor, shall be withdrawn without the leave of the Court."
Where two or more insolvency petitions are presented against the same debtor, or where separate petitions are presented against joint debtors, the Court may consolidate the proceedings of any of them, on such terms as the Court thinks fit."
Where the petitioner does not proceed with due diligence on his petition, the Court may substitute 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."
If a debtor by or against whom an insolvency petition has been presented dies, the proceedings in the matter shall, unless the Court otherwise orders, be continued so far as may be necessary for the realization and distribution of the property of the debtor."
The procedure laid down in the Code of Civil Procedure, 1908 (5 of 1908), with respect to the admission of plaints, shall, so far as it is applicable, be followed in the case of insolvency petitions."
(1) Where an insolvency petition is admitted, the Court shall make an order fixing a date for hearing the petition."
(2) Notice of the order under sub-section (1) shall be given to creditors in such manner as may be prescribed.
(3) Where the debtor is not the petitioner, notice of the order under sub-section (1) shall be served on him in the manner provided for the service of summons.
The Court when making an order admitting the petition may, and where the debtor is the petitioner 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 thereupon have such of the powers conferable on a receiver appointed under the Code of Civil Procedure, 1908 (5 of 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 provisions of 1[this section] shall apply accordingly."
State Amendment
Uttar Pradesh.—For section 20, substitute the following section namely:—
“20. The Court when making an order admitting the petition may, an
At the time of making an order admitting the 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 (5 of 1908), or by any other enactment for the time being in force from liability to attachment and sale in execution of a decree;
The debtor shall, on the making of an order admitting the petition, produce all books of account, and 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 such acts and things in relation to his property as may be required by the Court or receiver, or as may be prescribed.
(1) At the time of making an order admitting the petition or at any subsequent time before adjudication, 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.
(3) At the time of making any order under this section, the Court shall record in writing its reasons therefor.
The Provincial Insolvency Act, 1920, provides a legal framework for the adjudication of insolvency cases in India. Section 23 specifically addresses the release of a debtor who is under arrest or imprisonment due to a decree for the payment of money. This section is crucial as it aims to protect the rights of debtors during insolvency proceedings.
Section 23 of the Provincial Insolvency Act, 1920, states that the court may order the release of a debtor who is under arrest or imprisonment in execution of a decree for the payment of money. This provision is intended to provide relief to debtors who are facing imprisonment due to financial obligations.
The scope of Section 23 is limited to situations where a debtor is imprisoned due to a money decree. It does not extend to other forms of imprisonment or legal consequences arising from different types of judgments.
Section 23 does not prescribe any punishment; rather, it provides a remedy for debtors who are unjustly imprisoned due to financial obligations. The focus is on the court's power to release the debtor rather than penalizing any party.
(1) On the day fixed for 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
&n
(1) In the case of a petition presented by a creditor, where the Court is not satisfied with the proof 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.
(1) Where a petition presented by a creditor 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 reasonable compensation to the debtor for the expense or injury occasioned to him by the petition and the proceedings 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.
(1) If the Court does not dismiss the petition, it shall make an order of adjudication, and shall specify 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.
(1) On the making of an order of adjudication, the insolvent shall aid to the utmost of his power in the realisation of his property and the distribution of the proceeds among his creditors."
(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 provable 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 purposes of sub-section (2), all goods b
1[The property of the insolvent shall comprise and shall always be deemed to have comprised also the capacity to exercise and to take proceedings for exercising all such powers in or over or in respect of property as might have been exercised by the insolvent 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 (25 of 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 i
Any Court in which a suit or other proceeding is pending against a debtor shall, on proof that an order of adjudication has been made against him under this Act, either stay the proceedings, or allow it to continue on such terms as such Court may impose."
Section 29 of the Provincial Insolvency Act, 1920, governs the stay of pending proceedings against a debtor once an order of adjudication has been made. It plays a crucial role in balancing insolvency proceedings with ongoing civil, criminal, or execution processes, ensuring that the debtor's estate is not subjected to conflicting claims or unnecessary harassment during insolvency.
Section 29 states:"Any Court in which a suit or other proceeding is pending against a debtor shall, on proof that an order of adjudication has been made against him under this Act, either stay the proceeding, or allow it to continue on such terms as such Court may impose."This provision empowers courts to stay proceedings or permit them to continue with conditions once insolvency adjudication is established.
In summary, Section 29 grants courts the power to stay or allow proceedings to continue after proof of adjudication, but its application to criminal cases is limited and depends on specific orders. The section emphasizes judicial discretion and procedural correctness, ensuring that insolvency proceedings do not conflict with ongoing legal processes.
Notice of an order of adjudication stating the name, address and description of the insolvent, the date of the adjudication, the period within which the debtor shall apply 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."
(1) Any insolvent in respect of whom an order of adjudication has been made may apply to the Court for protection and the Court may on such application make an order for the protection of the insolvent from arrest or detention.
(2) A protection order may apply either to all the debts 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 be 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 prejudice the rights of an
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 obligation 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 departed with such intent, order his release on such terms as to security as may be reasonable or necessary, or if such security is not furnished, direct that he shall be detained in the civil prison for a period which may extend to three months."
(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 particulars thereof, and the Court shall, by order, determine the persons who have proved themselves to 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 thereupon the debts shall not be included in the schedule.
(2) A copy of every such schedule shall be pasted in the Court-house.
(1) Debts which have been excluded from the schedule on the ground that their value is incapable 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 liabilities, 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 adjudication, shall be deemed to be debts provable under this Act.
Where, in the opinion of the Court, a debtor ought not to have been adjudged insolvent or where it is proved to the satisfaction of the Court that the debts 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 adjudication 1[and the Court may, of its own motion or on an application 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.]"
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1. Ins. by Act 11 of 1927, sec. 5.
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If, in any case in which an order of adjudication has been made, it shall be proved to the Court by which such order was made that insolvency proceedings 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 proceedings thereon."
(1) Where an adjudication is annulled, all sales and dispositions of property and payments duly made, and all acts therefore 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 such 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."
(2) Notice of every order annulling an adjudication shall be published in the Official Gazette and in such other manner as may be prescribed.
(1) Where a debtor, after the making of an order of adjudication, submits a proposal for a composition in satisfaction of his debts, or a proposal for a scheme of arrangement of his affairs, the Court shall fix a date for the consideration of the proposal, and shall issue a notice to all creditors in such manner as may be prescribed."
(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
If the Court approves the proposal, the terms shall be embodied in an order of the Court, and 1[***] 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 creditors 2[so far as relates to any debt due to them from the debtor and provable under this Act]."
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1. The words “the Court shall frame a schedule in accordance with the provisions of section 33” omitted by Act 10 of 1935, sec. 2.
2. Subs. by Act 10 of 1935, sec. 2, for “entered in the said schedule so far as relates to any debts entered therein.”
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If default is made in the payment of any instalment 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."
(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 discharge, 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
(b) suspend the operation of the order for a specified time; or
(c) grant an order of discharge subject to any conditions with respect to any earnings or income which may afterwa
(1) The Court shall refuse to grant an absolute order of discharge under section 41 on proof of any of the following facts, namely\:—"
(a) that the insolvent’s assets are not of a value equal to eight annas in the rupee on the amount of his unsecured liabilities, 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 sufficiently disclose his business transactions and financial position within the three years immediately preceding his insolvency;
(c) that the insolvent has continue
(1) If the debtor does not appear on the day fixed for hearing his application for discharge or on such subsequent day as the Court may direct, or if the debtor does not apply for an order of discharge within the period specified by the Court, 1[the Court may annul the order of adjudication or make such other order as it may think fit, and if the adjudication is so annulled, the provisions of section 37 shall apply]."
(2) Where a debtor has been released from custody under the provisions of this Act and the order of adjudication is annulled under sub-section (1), the Court may, if it thinks fit, re-commit the debtor to his former custody, and the officer-in-charge of the prison to whose custody such debtor is so re-committed, shall receive such debtor into his custody according to such re-commitment, and thereupon all processes which were in force against the person of such debtor
(1) An order of discharge shall not release the insolvent from—"
(a) any debt due to the Government;
(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 (5 of 1898).1
(2) Save as otherwise provided by sub-section (1), an order of discharge shall release the insolvent from all debts provable under this Act.
(3) An order of discharge shall not release any person who, at
A creditor may prove for a debt not payable when the debtor is adjudged an insolvent as if it were 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 dividend to the time when the debt would have become payable, according to the terms on which it was contracted."
Where there have been mutual dealings between an insolvent and a creditor proving or claiming 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 account, and no more, shall be claimed or paid on either side respectively.
(1) Where a secured creditor realizes his security, he may prove for the balance due to him, after deducting the net amount realized."
(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 realize 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.
&
(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 pray 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 payable to the date of such adjudication; or
(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 the 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 consideration in lieu of inter
(1) A debt may be proved under this Act by 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 statement 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 call for the production of the vouchers.
(1) Where the receiver thinks that a debt has been improperly entered in the schedule, the Court may, on the application of the receiver and after notice 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, expunge 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.
(1) Where execution of a decree has been issued against the property of a debtor, no person shall be entitled to the benefit of the execution against the receiver except in respect of assets realised in the course of the execution by sale or otherwise before the date of the admission of the petition."
(2) Nothing in this section shall affect the rights of a secured creditor in respect of the property against which the decree is executed.
(3) A person who in good faith purchases the property of a debtor under a sale in execution shall in all cases acquire a good title to it against the receiver.
Where execution of a decree has been issued against any property of a debtor which is saleable in execution and before the sale thereof notice is given to the Court executing the decree 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 on the property so delivered, and the receiver may sell the property or an adequate part thereof for the purpose of satisfying the charge."
Any transfer of property not being a transfer made before and in consideration of marriage or made in favour of a purchaser or encumbrancer in good faith and for valuable consideration shall, if the transferor is adjudged insolvent 1[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."
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1. Ins. by Act 10 of 1930, sec. 6.
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(1) Every transfer of property, every payment made, every obligation incurred, and every 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 creditors, 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."
(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[A petition for the annulment of any transfer under section 53, or of any transfer, payment, obligation or judicial proceeding under section 54, may be made by the receiver or, with the leave of the Court, by any creditor who has proved his debt and who satisfies the Court that the receiver has been requested and has refused to make such petition.]"
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1. Ins. by Act 39 of 1926, sec. 3.
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Subject to the foregoing provisions of this Act with respect to the effect of insolvency on an execution, 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 insolvent 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 insolvent for valuable consideration:
Provided that any such transaction takes place before the date of the order of adjudication, and that such person with whom such transaction takes place has not at the time notice of the presentation of any
(1) The Court may, at the time of the order of adjudication, or at any time afterwards, appoint a receiver for the property of the insolvent, and such property shall thereupon vest in such receiver."
(2) Subject to such conditions as may be prescribed, 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 insolvent.
(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 :
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(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."
(2) Where any Official Receiver has been so appointed 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 remuneration out of the said fund or otherwise as the State G
Where no receiver is appointed, the Court shall have all the rights of, and may exercise all the powers conferred on, a receiver under this Act.
Subject to the provisions of this Act, the receiver shall, with all convenient speed, realize the property of the debtor and distribute dividends among the creditors entitled thereto, and for that purpose may—"
(a) sell 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 winding up of the same;
(d) institute, defend or continue any suit or other legal proceeding relating to the property of the insolvent;
(e) employ a pleader or other agent to take any proceedings or do any busine
(1) The Court, if specially empowered in this behalf by an order of the State Government, or any officer of the Court so empowered by a like order, 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 insolvent, or any person whom the Court or such officer, as the case may be, may deem capable of giving information respecting the insolvent or his dealings or property, and the Court or such officer may require any such person to produce any documents in his custody or power relating to the insolvent or to his dealings or property."
(2) If any person so summoned, after having been tendered a reasonable sum, refuses to come before
(1) In any local area in which a declaration has been made under section 68 of the Code of Civil Procedure, 1908 (5 of 1908), and is in force, no sale of immovable 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 monies already received;
(b) the immovable property of the insolvent remaining unsold; and
(c) the encumbrances (if any) existing thereon;
and shall forward a statement to the Collector containing the particulars aforesaid; and thereupon the Collector shall proceed to raise the amount so req
(1) In the distribution of the property of the insolvent, there shall be paid in priority to all other debts—"
(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.
(3) Subject to the retention of such sums as may be necessary for the expenses of administration or otherwise,
(1) In the calculation of dividends, the receiver shall retain in his hands sufficient assets to 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 proof 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.
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 entitled to disturb the distribution of any dividend declared before his debt was proved by reason that he has not participated therein."
When the receiver has realized all the property 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 a 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 claim 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 establishing 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.
No suit for a dividend shall lie against the receiver; 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."
(1) The Court may appoint the insolvent himself to superintend the management of the 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 in administering 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 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 allowance may, at any time, be varied or determined by the Court.
State Amendment
Andhra Pradesh.—In section 66, in sub-section (2), for the words “in consideration of his services if he is engaged in winding up h
The insolvent shall be entitled to any surplus remaining after payment in full of his creditors with interest as provided by this Act and of the expenses of the proceedings taken thereunder."
1[(1) The Court may, if it thinks fit, authorise the creditors who have proved their debts to appoint a committee of inspection for the purpose of superintending the administration of the insolvent’s property by the receiver."
(2) The persons appointed to a committee of inspection 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.]
---------------------------------
1. Ins. by Act 39 of 1926, sec. 5.
---------------------------------
If the insolvent or any of the creditors or any other person is aggrieved by any act or decision of the 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 the expiration of twenty-one days from the date of the act or decision complained of.
If a debtor, whether before or after the making of an order of adjudication,—"
(a) wilfully fails to perform the duties imposed on him by section 22 or to deliver up 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 authorized by the Court to take possession of it, or
(b) fraudulently with intent to conceal the state of his affairs or to defeat the objects of this Act,—
(i) has destroyed or otherwise wilfully prevented or purposely withheld the production of any document relating to such of his affairs as are subject to investigation under this Act, or
(ii) has kept or caused to be kept false bo
1[Where the Court is satisfied, after such preliminary inquiry, if any, as it thinks necessary, that there is ground for inquiring into any offence referred 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 jurisdiction, and such Magistrate shall deal with such complaint in the manner laid down in the Code of Criminal Procedure, 1898 (5 of 1898)2.]
---------------------------------
1. Subs. by Act 9 of 1926, sec. 11, amended by the Repealing and Amending Act, 1927 (10 of 1927), sec. 3 and Sch. II, for the original section.
2. See now the Code of Criminal Procedure, 1973 (2 of 1974).
-------
Where an insolvent has been guilty of any of the offences specified in section 69, he shall not be exempt from being proceeded against therefor by reason that he has obtained his discharge or that a composition or scheme of arrangement has been accepted or approved."
(1) An undischarged insolvent obtaining credit to the extent of fifty rupees or upward from any person without informing such person that he is an undischarged insolvent shall, on conviction by a Magistrate, 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.
(1) Where a debtor is adjudged or re-adjudged insolvent under this Act, he shall, subject to the provisions of this section, be disqualified from—"
(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.
(2) The disqualifications which an insolvent is subject to, under this section shall be removed, and shall cease if—
(a) the order of adjudication is annulled under section 35, or
(b) he obtains from th
When a petition is presented by or against a debtor, if the Court is satisfied by affidavit or otherwise that the property of the debtor is not likely to exceed in value of five hundred rupees, the Court may make an order that the debtor’s estate be administered in a summary manner, and thereupon the provisions 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 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 t
(1) The debtor, any creditor, the receiver or any other person aggrieved by a decision come to or an order made in the exercise of insolvency jurisdiction 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 purposes 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 fit:
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 mentioned in sub-section (1) of section 100 of the Code of Civil Procedure, 1908 (5 of 1908).
&
The costs of any proceedings 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 held."
All Courts having jurisdiction in insolvency and the Officers of such Courts, respectively, shall severally act in aid of and be auxiliary to each other 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."
(1) The provisions of sections 5 and 12 of the Indian Limitation Act, 1908 (9 of 1908)1, 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 or (other than a suit or application 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 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 resp
1[(1) The High Court may, with the previous sanction of the State Government, make rules for 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—
2[(a) the form of the insolvency notice under clause (a), and the manner in which such notice may be served under clause (b), of sub-section (3) of section 6;]
3[(aa)] 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,
(b) for meetings of creditors,
(c) for the procedure to be followed where the debtor is a firm, 4[***]
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(1) The High Court, with the like sanction, may from time to time direct that, in any matters in respect of which jurisdiction is given to the Court by this Act, the Official Receiver shall, subject to the directions of the Court, have all or any of the following powers, namely\:—"
1[***]
(b) to frame Schedules and to admit or reject proofs of creditors;
2[***]
(e) to make interim orders in any case of urgency; and
(f) to hear and determine any unopposed or ex-parte application.
(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 or
Any State Government 3[***] may, by notification in the Official Gazette, declare that any of the provisions of this Act specified in Schedule II shall not apply to insolvency proceedings, in any Court or Courts having jurisdiction under this Act in any part of the territories administered by such State Government."
-------------------------------
1. The words “with the previous sanction of the G.G. in C.” omitted by Act 38 of 1920, sec. 2 and Sch. 1, Pt. I.
-------------------------------
Nothing in this Act shall—"
(a) affect the Presidency-towns Insolvency Act, 1909 (3 of 1909) 1[***] or
(b) apply to cases to which Chapter IV of the Dekkhan Agriculturists Relief Act, 1879 (7 of 1879), is applicable.
State Amendment
Andhra Pradesh.—For section 82, substitute the following section, namely:—
“82. Savings.—Nothing in this Act shall apply to cases to which the Andhra Pradesh (Telangana Area) Agricultural Debtors’ Relief Act, 1956 (16 of 1956), is applicable.”
[Vide Andhra Pradesh Act 23 of 1965, sec. 11 (w.e.f. 1-6-1966).]
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(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 Judgement-Debtors) of the Code of Civil Procedure, 1877 (10 of 1877), or of the Code of Civil Procedure, 1882 (14 of 1882), or to any section of either of those Chapters, such reference shall, so far as may be practicable, be construed as applying to this Act or to the corresponding section thereof.
State Amendment
Goa, Daman and Diu.—Omit section 83.
[Vide Goa, Daman and Diu Act 1 of 1968, sec. 3.]
-------------------------------
1. Sub-section (1) rep. by Act 12 of 1927, sec. 2 and Sch.
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SCHEDULE I
[See section 75(2)]
Section Nature of decision or order
24 Decision of questions of title, priority, etc., arising in insolvency.
25 Order of dismissing a petition.
26 Order awarding compensation.
27 Order of adjudication.
33 Orders regarding entries in the Schedule.
35
Provision of the Act Subject
Section
26 Award of compensation.
28, sub-section (3) Reputed Property of an insolvent.
34 Debts provable under the Act.
38
39 Compositions and schemes of arrangements.
40
42, sub-section (1) and (2)
[Rep. by the Repealing Act, 1927 (12 of 1927), sec. 2 and Sch].
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