Free for one month and pay only if you like it. Short title and extent. State Amendments Andhra Pradesh. The trust property held by an insolvent is not his property; Banarsi Das v.
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Free for one month and pay only if you like it. This subject was referred by the Government to the Law Commission and was taken up by the previous Law Commission for consideration. A draft Bill with notes on Clauses was prepared by Mr. Venkatarama Aiyar, Chairman of that Commission.
It was circulated in April, to State Governments, High Courts and other interested persons and bodies for their comments. The Commission held meetings to consider the draft Report with the comments received. The first meeting was held on the 2nd to 5th August, and the subsequent meetings were held on the 29th to 31st August, , 16th to rgth September, , 26th September to 1st October, I and 21st and 22nd October, I In the light of the discussions held at those meetings, the Bill and notes were revised and a dra.
Bakshi, our Joint Secretary and Draftsman, in the preparation of this Report. Yours sincerely, l]. I 2, 3 Historical Background. I 4 Consolidation of the two Insolvency Act s into one. Claims arising in bankruptcy. I2 14, 15 Discharge. I4 18 Reputed ownership. I 5 19 Burden of proof regarding voluntary transfers. I7 20, 21 Fraudulent preference. I8 22 " Void " and " voidable ". The law of insolvency in this country, like most Historical other laws, owes its origin to English law.
The common law in England did not deal with the subject of bankruptcy. The Bankruptcy Law was purely a creature of Statute The earlier Sta- tutes passed in the. The important statutes on the subject are the Bankruptcy Acts4 passed by the British Parliament in , , and The earliest rudiments of insolvency legislation can be traced to sections 23 and 24 of the Government of India Act, 39 and 40 Geo.
III c. The next step was taken in when Statute 9 Geo. Under this Act, the first insolvency courts for relief of insolvent debtors were established in the Presidency-towns.
Although the insolvency court was presided over by a Judge of the Supreme Court, it had a distinct and separate existence. The insolvency court was to sit and dispose of insolvency matters as often as Was necessary. But the court at Calcutta was to sit at least once a month. The Act of was originally intended to remain in force for a period of four years. Jowitt, Dictionary of English Law Vol. XI, pages and Vol. VIII, pages The Act preserved the distinction between traders and non-traders in certain respects on the lines of the corresponding Bankruptcy statutes then in force in England.
It continued the courts for the relief of insolvent debtors established by the Act of in the Presidency-towns. The insolvency jurisdiction in the Presidency-towns was thus transferred from the Supreme Court to the High Court. The provisions of the Indian Insolvency Act, , were, however, found to be inadequate to meet the changing -conditions. But this proposal was dropped, as the conditions in the mofus- sil were not favourable for a comprehensive legislation on the subject.
The Act of was in force in the Presi- dency--towns until the enactment in of the present Presidency-towns Insolvency Act , While there Was special insolvency legislation for the Presidency-towns, there was no insolvency law in the mofussil.
In the mofussil for a considerable period the ordinary principle of distributing the sale proceeds pro- rata; among decree-holders after satisfaction in full of the amount due to the attaching decree-holder seems to have prevailed. See the Civil Procedure Code of The first attempt to introduce insolvency law in the mofussil was made in Some rules were incorporated in Chap- ter 20 of the Code of Civil Procedure, , which confer- red jurisdiction on the district courts to entertain insol- vency petitions and grant orders of discharge.
The provi- sions in the Civil Procedure Code of were described" as the "germ and nothing more than a germ of an insol- vency law" and this criticism was regarded as applicable3 to the subsequent codes also. They could be made use of" by those debtors only who were arrested or imprisoned in the execution of a decree for money or against whose pro- perty an order of attachment was passed in execution of such a decree.
Creditors of a debtor were not entitl- ed to file an insolvency petition. These defects were re- moved by the Provincial Insolvency Act , 3 of This Act created a special insolvency jurisdiction laying down the conditions under which a debtor could be adjudi- cated on his own petition or on a petition by a creditor.
The Act of was repealed by the Provincial Insolvency Act , 5 of which is the Act now in force in the mofussil. The difference in the conditions between the Presidency- towns and the mofussil which led to the enactment of two separate insolvency Acts has now largely disappeared. India is being rapidly industrialised and with the imple- mentation of the Five Year Plans, trade and commerce has spread into many other towns besides the Presidency- towns of Bombay, Calcutta and Madras.
Time is, there- fore, ripe for consolidating the two insolvency Acts and having one uniform law of insolvency for the Whole of India, including the territories comprised in the former Part B States to which neither the Presidency nor the Provincial Act at present applies.
Broadly speaking, the existing insolvency law contained in the Presidency-towns Insolvency Act , and the Pro- vincial Insolvency Act , is sound in principle and has worked satisfactorily in practice. Apart from combining the two Acts, there is, therefore, little scope for any sub- stantial change in the law.
Under the Proviso to section 3 1 in the Provincial Act , the State Government is empowered to authorise sub- ordinate courts to exercise insolvency jurisdiction. Where a subordinate court exercises such jurisdiction, an appeal lies under section 75 of that Act to the District Court.
Objects of Insolvency Law. Insolvency jurisdiction 0 f subordi- nate courts and appeals. The idea of limiting the jurisdiction is that at least in large in- solvencies an appeal should lie to the High Court.
A ques- tion accordingly arises, what is a large insolvency? In such a case the stakes are not high. The creditors will at the most get a dividend of two naye paise in the rupee and no complicated questions of title, etc.
Apart from this basic objection, there are also some practical difficulties. The debt due to the petitioning creditor was alleged to consist of two itemvs-- 1 Rs. It, however, appeared from the petition that on the date of the petition a mortgage suit in respect of the second item was pending. In these circumstances the district judge refrained from taking further steps in the proceedings until the result of the mortgage suit Was known.
The district judge, accordingly, transferred the proceedings to the Assistant District Court. Chettyar Firm V. Dutt I , I. I4 Rangoon, ;. AIR Rangoon Subsequently, it appeared that the total debts of which proof was submitted in the insolvency amounted to Rs. An application, however, was made by the Receiver in insolvency that certain debts alleged to be due by the insolvent to the petitioning creditor might not be admitted.
The application of the Receiver was dismissed by the Assistant District Court. Against the order dismiss- ing the application the Receiver appealed to the district court. On appeal, the District Judge reduced the amount of the debts which ought to be admitted by Rs.
The Assis- tant District Court had further held that it had no jurisdic- tion in the matter inasmuch as the debts of the insolvent exceeded Rs.
On appeal from the order, the District Court, in the events that happened, namely, that the debts of which proof was admitted amounted to less than Rs. Page C. Dunkley J. But then the creditors could debts choose their forum and the debtor will have no voice in the matter. Apart from the difficulty pointed out by the Rangoon High Court there is a further difficulty.
A petitioning creditor will, for the purpose of jurisdiction of the court, have to state in his petition the aggregate amount of debts due from the debtor. Will he be in a position to do so? The debts which are due from a debtor will be known only to the debtor himself.
In a vast country like India, the cre- ditors of a debtor may be spread over a number of places, and it will not, therefore, be possible for the petitioning creditor to know who are the other creditors of the deb- tor and much less the amount of their debts. Application of the first test, therefore, gives rise to several complica- tions. The second test relating to the value of the property of the insolvent distributable among his creditors has been adopted in relation to summary administration of small insolvencies.
But in the case of summary adminis- tration of an insolvency no question of jurisdic- tion arises. Yadavrao, 60 Bom. It will be difficult for him to ascertain the value of the property of the insolvent at the time of the presentation of the petition. For these reasons, it appears to us that the second course, though desirable in some respects, is not practicable. We, therefore, recommend-9 the adoption of the first course, that is to say, that an appeal should lie direct to the High Court from certain decisions and orders of a subordinate court exercising insolvency jurisdiction.
In this connection, we may refer to s. Under section 47 of that Act, when a case is decided by a subordinate court in exercise of its delegated jurisdic- tion, an appeal lies to the High Court.
We appreciate that our recommendation has the drawback, that even in a small matter an appeal will lie to the High Court. We, therefore, propose that an appeal to the High Court should lie in important matters only, e.
Old individual insolvency norms still valid
Short title and extent. Part I Constitution and Powers of Court 3. Insolvency Jurisdiction. Power of Court to decide all questions arising in insolvency. General powers of Courts. Acts of insolvency. Petition 7.
Provincial Insolvency Act, 1920
Free for one month and pay only if you like it. This subject was referred by the Government to the Law Commission and was taken up by the previous Law Commission for consideration. A draft Bill with notes on Clauses was prepared by Mr. Venkatarama Aiyar, Chairman of that Commission. It was circulated in April, to State Governments, High Courts and other interested persons and bodies for their comments.
The Provincial Insolvency Act, 1920
The Act came into force on the 1st January, , and since then with the exception of a few unimportant amendments made in , it has not been amended. Numerous suggestions for the amendment of the Act on various points have also been received from time to time from the commercial communities and members of the legal profession. The chief indictment of the Act is that it lends itself to the protection of fraudulent debtors, that it subjects an undischarged insolvent to little or no practical inconvenience, and that its provisions for the punishment of fraudulent insolvents are not effective in practice. One of the principal defects in the existing law arises from the fact that the conduct of debtor in many cases never comes under the scrutiny of the Court. The stage at which the misconduct of the debtor should come before the Court and at which most of the provisions affecting a fraudulent insolvent would operate, is when he applies for his discharge.