LexThe Provincial Insolvency Act, 1920
Chhattisgarh · state statute
Open in Lexace · Ask the AI about this actAct 5 of 1920.] PROVINCIAL INSOLVENCY
THE PROVINCIAL INSOLVENCY ACT, 1920
(ACT 5 OF 192'0)
ARRANGEMENT OF SECTIONS
SECTIONS
~
1. Short title and extent.
2. Definitions.
PART I
CONSTITUTION AND POWERS OF COURT
3. Insolvency jurisdiction.
71
4. Power of Court to decide all questions arising in insolvency.
5. General powers of Courts.
PART II
PROCEEDINGS FROM ACT OF INSOLVENCY TO DISCHARGE
Acts of insolvency
':. Acts of insolvency.
Petition
7. Petition and adjudication.
8. Exemption of corporation, etc., from insolvency proceed~ ings.
9. Conditions on which creditor may petition.
10. Conditions on which debtor may petition.
11. Court to which petition shall be presented.
12'. Verification of petition.
13. Contents of petition.
14. Withdrawal of petitions.
15. Consolidation of petitions.
16. Power to change carriage of proceedings.
17. Continuance of proceedings on death of debtor.
18. Procedure for admission of petition.
19. Procedure on admission of petition.
20. Appointment of interim receiver.
21. Interim proceedings against debtor.
22. Duties of debtors.
7'). PROVINCIAL INSOLVENCY [Act 5 of 1920.
SECTIONS
23. Release of debtor.
24. Procedure at hearing.
25. Dismissal of petition.
26. Award of compensation.
Order of adjudication
27. Order of adjudication. I
28. Effect of an order of adjudication.
28A. Insolvent's property to comprise certain capacity.
29. Stay of pending proceeding.
30. Publication of order of adjudication.
Proceedings consequent on ord'er of adjudication
31. Protection order.
32. Power to arrest after adjudication.
33. Schedule of creditors.
34. Debts provable under the Act.
Annulment of adjudication
35. Power to annul adjudication of insolvency.
36. Power to cancel one of concurrent orders of adjudica
tion.
37. Proceedings on annulment.
Compositions and schemes of arrangement.
38. Compositions and schemes of arrangement.
39. Order on approval. I
40. Power to re-adjudge debtor insolvent.
41.
42.
43.
44.
Discharge
Discharge. I
Cases in which Court must refuse an absolute discharge.
Adjudication to be annulled on failure to apply for diS-
charge.
Effect of order of discharge.
•
Act 5 of 1920.] PROVINCIAL INSOLVENCY
SECTIONS 73
PART III
ADMIN1STRATION OF PROPERTY
Method of proof of ctebts
45. Debt payable at a future time.
46. Mutual dealings and set-off.
47. Secured creditors.
48. Interest.
49. Mode of proof.
50. Disallowance and reduction of entries in schedule.
Effect of insolvency on anteced•ent transactions
51. Restriction of rights of creditor under execution. 52.
Duties of Court executing decree as to property: taken in execution.
53. Avoidance of voluntary transfer. 54. Avoidance of preference in certain cases. 54A.
By whom petitions for annulment may be made.
...
55. Protection of bona fide transactions.
Realisation of property
56. Appointment of receiver.
57. Power to appoint Official Receivers. 58. Powers of Court if no receiver appointed. 59. Duties and powers of receiver. 59A.
Power to require information regarding insolvent's pro-perty.
60.
Special provisions in regard to immoveable property.
Distribution of property
61. Priority of debts.
~ 62. Calculation of dividends.
63.
Right of creditor who has not proved debt before dee-laration of a dividend.
64. Final dividend.
65. No suit for dividend.
66.
Management by and allowance to insolvent. 67. Right of insolvent to surplus. 67A. Committee of inspection.
• 74
PROVINCIAL INSOLVENCY [Act 5 of 1920.
SECTIONS Appeal to Court against receivtt
68. Appeal to Court against receiver.
PART IV
PENALTIF.S
69. Offences by debtors.
70. Procedure on charge under section 69.
71. Criminal liability after discharge or composition.
72. Undischarged insolvent obtaining credit.
73. Disqualifications of insolvent.
PART V
SUMMARY .ADMINISTRATION
74. summary administration. I
75. Appeals.
PART .VI
APPEALS
PART VII
MISCELLANEOUS
76. Costs.
77. Courts to be auxiliary to each 9ther.
78. Limitation.
79. Power to make rules.
80. Delegation of powers to Official Receivers.
81. Power of State Government to bar application of certain
provisions to certain Courts.
82. Savings.
1
.
83. Repeals. . ~
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].
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.
1For 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.
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 . ..
•
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 insolvency
2
* * *, 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 to
4
[the whole of India except
5
[the
territories which, immediately before the 1st Novem
ber, 1956, were comprised in Part B States] and] the
Scheduled Districts.
6
1This 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".
4Subs. by the A. 0. 1950 for "all the Provinces of India except".
5Subs. by the Adaptation of Laws (No. 3) Order, 1956, for "Part
B States".
6This Act has been extended by notification under s. 5 of the
Scheduled Districts Act, 1874 (14 of 1874), to
Coorg-See Gazette of India, 1920, Pt. II, p1• 1333 ;
District of Darjeeling-See Calcutta Gazette, 1928, Pt. I, p. 288 ;
Districts of Cachar (excluding the North Cachar Hills), Goalpara,
Kamrup, Darrang, Nowgong, (excluding the Nowgong Mikir Hills
Tract), Sibsagar (excluding the Sibsagar Mikir Hills Tract) and
Lakhimpur (excluding the Lakhimpur Frontier" Tract). See Assam
Gazette, 1920, Pt. II., p. 2511.
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.
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-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; 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
1The words "the town of Rangoon and the limits of the ordinary
original civil jurisdiction of the Court of the Judicial Commissioner
of Sind as defined in section 2 o'f the Presidency-towns Insolvency
Act, 1909" were t,ubs. ~ the Act 9 of 1926, s. 11, for "and of the town
of Rangoon". The words in italics rep. by the A. 0. 1937 and the re
mainder by the A. 0. 1948.
..
'
•
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.
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 in
1
[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, in
1
[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, in
1
[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 of
2
[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".
•
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),
2In the application of the Act to Bomoay, a new section 6A has
s. 3.
been fins. here by s. 3, ibid.
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 to
2
five 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
judication
4
[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.
4Subs. by Act 11 of 1927, s. 4, !or "made under this Act".
'
•
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
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.
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 powers 1 conferrable 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 of
1
[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
1Subs. hy Act 34 of 1939. s. 2 rmd Sch. 1, for "this sub-section''.
'
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.
',~
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.
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 pe
1
ion.
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.
--------~
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.
•
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.
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
'
•
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 the
1
[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.
1s -proved to the sahsf~ct10n of the Court th.i_t the debts
Snf_,,._ IJv Act 39 of J 926, s :2. ;·or '•insolvn1t".
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.
•
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, and 1 * * * 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 creditors
2
[so far
--- ------- --------------· -·- ----
1The words "the Court shall frame a schedule in accordance with
the provisions of section 33" omitted by Act 10 of 1936, s. 2.
2Subs. by s. 2, ibid., for "entered in the said schedule so far as
relates to any debts entered therein".
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 Excerpt shown. Open the full act in Lexace.