The Travancore-Cochin Insolvency Act, 1956 (No.2 of 1956)

T1 ,- \c ~. \....' . • J '. . THE~¥A-NOOR-Ese0eHI~INSOLVENCY ACT, 1955 (IT of 1956) Preamble. Sections. CoNTENTS. 1. Short title, extent and commencement. 2. Definitions. PART I. CONSTITUTION AND POWERS OF COURT. 3. Insolvency jurisdiction. 4. Power of Court to decide all questions arising in insolvency. 5. General powers of Courts. PART IT. PROCEEDINGS FROM ACT OF INSOLVENCY TO DISCHARGE. ACT OF INSOLVENCY. 6. Acts of insolvency. Petition. 7. Petition and adjudication. 8. Exemption of corporation etc., from insolvency pro­ ceedings. 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 charge 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. 23. Release of debtors. 24. Procedure at hearing. 25. Dismissal of petitions. 26. Award of compensation. 14 ORDER OF ADJUDICATION. 27. Order of adjudication. 28. Effect of an order of adjudication. 29. Insolvent's property to comprise certain capacity. 30. Stay of pendmg proceedings. 31. PublicatiOn of order of adJudication. PROCEEDINGS CONSEQUENT ON ORDER OF ADJUDICATION. 32. Protection order. 33. Power to arrest after adjudication. 34. Schedule of creditors. 35. Debts provable under the Act. ANNULMENT OF ADJUDICATION. 36. Power to annul adjudication of insolvency. 37. Power to cancel one of concurrent orders of adjudi- v I cation. 38. Proceedings on annulment. COMPOSITIONS AND SCHEMES OF ARRANGEMENT. 39. Compositions and schemes of arrangement. 40. Order on approval. 41. Power to re-adjudge debtor insolvent. DISCHARGE. 42. Discharge. 43. Cases in which Court must refuse an absolute di!- charge. 44. Adjudication to be annulled discharge. on failure to apply for 45. Effect of order of discharge. PART ill. 'ft. ADMINISTRATION OF PROPERTY. METHOD OF PROOF OF DEBTS. 46. Debt payable at future time. 47. Mutual dealings and set off. 48. Secured creditors. 49. Interest. 50. Mode of proof. 51. Disallowance and reduction of entries in schedule. EFFECT OF INSOLVENCY ON ANTECEDENT TRANSACTIONS. 52. Restriction of rights of creditor under execution. 53. Duties of Court executing decree as to property taken in execution. 54. Avoidance of voluntary transfer. 55. A voidance of preference in certain cases. 56. By whom petitions for annulment may be made. 57. Protection of bonafide transactions. I ______ j t'J 58. 59. 60. 61. 62. 63. 64. 65. 66. 67. 68. 69. 70. 71. 72. I 5 REALISATION OF PROPERTY. Appointment of receiver. Power to appomt Official Receivers. Power of Court if no receiver appointed. Duties and powers of receiver. Power to require informatiOn regarding insolvent's property. Special provisions in regard to immovable property. DISTRIBUTION OF PROPERTY. Priority of debts. Calculation of dividends. Right of creditor who has not proved debt before declaration of a dividend. Fmal dividend. No suit for dividend. Management by and allowance to insolvent. Right of insolvent to surplus. Committee of inspection. APPEAL TO COURT AGAINST RECEIVER. Appeal to Court agamst receiver. PART IV. PENALTIES. 73. Offences by debtors. 7 4. Procedure on charge under Section 73. 75. Crimmal liability after discharge or composition. 76. Undischarged insolvent obtaining credit. 77. Disqualifications of insolvent. PART V. SUMMARY ADMINISTRATION. 78. Summary administration. 79. Appeals. 80. Costs. PART VI. APPEALS. PART VII. MISCELLANEOUS. 81. Courts to be auxiliary to each other. 82. Limitation. 83. Power to make rules. 84. Delegation of powers to Official Receivers. R5. Power of Government to bar application of certain provisions to certam Courts 86. Repeal. 34-781 Schedule I. Schedule IT. ~ dJ:~ t(~' ··~~"~-;r:._r-~·,~t:o't-6 ''rcr ~ t. t.. • ./.c f 3 . Sv,.hs tt. W ~ ~ fH._!r 1 ~ c~ I~ jJ w (' f .·!J Sv...brf....t"-"teJ b'1 J~f- I~ c!J lc;5). w ~ f ,, ' • I , - ( ) 'J I I. I ,. il-..t ftc I- eJ1VvV ~ &".M.t 16o "- r-1- ,q5} '-t vi~ (\}~-f;·<af·~ f\J()·H(c)Lf-2.~2-''1/5'1/H~ ,~1 '' I." • f< Q.!h.....b CN:. >vie ACT II OF 1956. No 'f L d.,J · • N'f' ~ o ~- . I THE~A:V ~~ORE-COCHIN )INSOLVENCY ACT, 1955. An Act to consolidate and amend the law relating to insolvency. Preamble. Whereas it is expedient to consolidate and amend the law relating to insolvency; Be it enacted in the Sixth Year of the Republic of India as follows:- 1 1. Short title, extent and cW1tmencement.-(1) This Act .,j(- may be called th ,.. _ _ _ -~ l!lSQlYenrv...r"---'--!~ - , -'· .111, w 1.' r ') f \ t1 c S: a I r:: of l'- e p\ :\1 ~- . ~ [L22_ lt c;.·\·~';'1' '"' u.':"' _ '_';.,._, ..:.::.1 L--- ~ ~-~~ (3) It shall come into force on ,such date as the Govern- ment may, by notification in the Gazette, appoint. ft. 2. Definitions.- ( 1) In this Act, unless the context other­ wise requires, (a) "Collector" means the Chief Officer in charge of the revenue administration of the district and includes an acting or officiating Collector and also any officer appointed by the Government to exercise the functions of the Collector; (b) "creditor" includes a decree-holder, "debt" includes a judgment-debt, and "debtor" includes a judgment-debtor; (c) "District Court" means the principal Civil Court of original jurisdiction; (d) "prescribed" means prescribed by rules made under this Act; (e) "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; (f) "secured creditor" means a person holding a mort­ gage, charge or hen on the property of the debtor or any part thereof as a security for a debt due to him from the debtor; / J~~~~~-·~~~~~-~~~::_:~·~-~~,r ,.~~'' ~10 \~d 00 --rransfer of property" inchides-a -transfer of any interest in property and the creation of any charge upon pro­ perty. r • Published m the Gazette dated 21st February 1956, Part I, Sertlo; 1ft. 11 (2) Words and expressions used in this Act and defined in the Code of Civil Procedure, 1908, and not hereinbefore defined shall have the same meanings as those respectively attributed to them by the said Code. _ PART I. CONSTITUTION AND POWERS 01<' COURT. 3. Insolvency JUTUJdictiort.-The District Courts shall be the Courts having jurisdiction under this Act: Provided that the Government may, by notification in the Gazette, mvest any Court subordinate to a District Co~rt with jurisdiction in any class of cases, and any Court so mvested shall withm the local hmits of its jurisdiction have concurrent jurisdiction with the District Court under this Act. 4. Power of Court to decide all questions aristng in insol­ vency.-{!) 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 insol­ vency 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 distri­ bution of property in any such case. (2) Subject to the provisions of this Act and notwith­ standing 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 deb­ tor'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 neces­ sary 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 Co,urt may without further inquiry sell such interest in such manner and subject to such conditions as it may think fit. 5. General powers of Courts.-(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 proce­ dure as it has and follows in the exercise of original civil jurisdiction. (2) Subject as aforesaid, the High Court and the District Courts, in regard to proceedings under this Act in Courts sub­ ordinate to them, shall have the same powers and shall follow the same procedure as they respectively have and follow in regard to civil suits. ---- --- - --- .._-- 18 PART II. PROCEEDINGS FROM AcT OF INSOLVENCY TO DISCHARGE Act of Insolvency. 6. Acts of insolvency.-A debtor commits an act of insol­ vency in each of the following cases, namely;- (a) if he makes a transfer of all or substant!ally al~ his property to a third person for the benefit of his creditors generally; (b) if he makes a transfer of his property or of any part thereof with intent to defeat or delay his creditors; (c) if he makes any transfer of his property or of any part thereof, which would, under this or any other enactme~t for the time being in force, be void as fraudulent preference If he were adjudged an insolvent; (d) if, with intent to defeat or delay his creditors­ ( i) he departs or remains out of the State, ( 1i) he departs from his dwelling-house or usual place of busmess or otherwise absents h1mself, (ui) he secludes himself so as to deprive his creditors of the means of communicating with him; (e) if any of his property has been sold in executign of the decree of any Court for the payment 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 'h) 1f he is imprisoned in execution of the decree of any Court for the payment of money. Explanation.-For the purposes of this section the act of an agent may be the act of the principal. Petition. 7. Petttion and adjudicatwn.-SubJect to the conditions specified in this Act, If a debtor commits an act of insolvency, an msolvency 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 adjudlCation) adjudging him an msolvent. E~;planation.-The presentation of a petition by the debtor shall be deemed an act of Insolvency withm the meaning of this section, and on such petitiOn the Court may make an order of adjudication . . 8. Exe111:ptwn of corpo_r~twn1 etc.1 from insolvency proceed­ mgs.-N? msolven~y petition sh~ll .be presented against any corporation or agamst any associatiOn or company registered under any enactment for the time being in force. 19 9. Conditions on which creditor may petition.-~~) A cr~di~ tor shall not be entitled to present an insolvency petition agamst a debtor unless- (a) the debt owmg by the debtor to the creditor, or if two or more creditors join in the petltion, the aggregate amount of debts owing to such creditors, amounts to five hundred rupees, and (b) the debt is a liquidated sum payable either nnmedi­ ately or at some eertain future time, and (c) the act of insolvency on which the petition is grounded has occurred withm three months before the presen­ tation of the petition: Provided that where the said period of three months refer­ red 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 reopens. (2) If the petitioning creditor is a secured creditor 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 caRe, 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. Conditions on which debtor may petttion.-(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 n has been made, and is subsisting, against his property. ( 2) A debtor in respect of whom an order of adjudication made under this Act has been annulled, owing to his failure to apply, or to prosecute an application for Ms 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 satis­ fied either that the debtor was prevented by any reasonable cause from presenting or prosecuting his appli.cation, as the case may be or that the petition is founded on facts substan­ tially different from those contained in the petition on which the order of adjudication was made. 11. Court to which petition shall be presented.-Every in­ S?lv~ncy petition. shall ~ presented to a Court having juris­ diction under this Act m any local area in which the debtor ordina~ily re.sides or carries on business, or personally works ~or gam, or If he has been arrested or imprisoned, where he is m custody: io Provided that no objection as to the place of presentment shall be allowed by any Court m 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. Verification of petition.-Every insolvency petition shall be in writing and shall be signed and verified in the manner prescribed by the Code of Civil Procedure, 1908, for signing and verifymg plaints. 13. Contents of petition.-(1) Every insolvency petition presented by a debtor shall contam the following particulars namely:- (a) a statement that the debtor 1s 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 1s in custody; (c) the Court (lf 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 of reasonable care and diligence be ascertained by him; (e) the amount and particulars of all his property, together with- ( i) a specification of the value of all such property not consisting of money; ( ii) the place or places at which any such property is to be found; and (iii) a declaration of his willingness to place at the disposal of the Court all such property save in so far as it in­ cludes such particulars (not being his books of account) as are exempted by the Code of Civil Procedure, 1908, or by any other enactment for the time being in force 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 insolvent, con­ cise particulars of the insolvency, including a statement whe­ ther any previous adjudication has been annulled and, if so, the grounds therefor. ' ' )t i • "', Pl'~DMANAUHA r:·. /'.n:i':"~nt Ser'"et 11 · lei. ;-.!a. _,_ j (2) Every insolvency petition. presented by .a creditor or creditors shall set forth the particulars regardmg 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 (b) the amount and particulars of his or their pecuniary claim or claims against such debtor. 14. Withdrawal of petitwns.-No petition, whether pre­ sented by a debtor or by a creditor, shall be withdrawn without the leave of the Court. 15. Consol~dation of petitions.-Where two or more insol­ vency petitions are presented agamst the same debtor, or where separate 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. Power to charge carriage of proceedings.-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. 17. Continuance of proceedtngs on death of debtor.-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 relialisation and distribution of the property of the debtor. 18. Procedure for admission of petition.-The procedure laid down in the Code of Civil Procedure, 1908, with respect to the admission of plaints, shall, so far as it is applicable, be followed in the case of insolvency petitions. ,19. Procedure on admission of petition.-(1) Where an in­ solvency petition is admitted, the Court shall make an order fixing a date 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. 20. Appointment of interim receiver.-The Court when mak­ ing 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, 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 this section shall apply accordingly. ' r '--- 22 21. Interim proceedings agatnst debtor.-At the time of making an order admittmg 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) orders 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 detain­ ed m 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 other enactment for the time being in force 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 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 (3) shall not be made unless the Court is 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) has failed to disclose or has concealed, destroyed, transferred or removed from such limits, or is about to con­ ceal, destroy, transfer or remove from such limits, any docu­ ments likely to be of use to his creditors in the course of the hearing, or any part of his property other than such particulars as aforesaid. 22. Duties of debtors.-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 exami­ nation in respect of his property or his creditors, attend at such times before the Court or receiver, execute such instru­ ments, 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. 23. Release of debtors.-(1) At the time of making an order admitting the petition or at any subsequent time before adjudi­ cation, the Court may, if the debtor is under arrest or impri­ sonment 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. ~ I ..l}, Ji ' 23 / The Court may at any time order any person who has ~een released under this section to be re-arrested and recommitted to the custody from which he was released. ( 3) At the time of making any order under this section, the Court shall record in writini its reasons therefor. 24. Procedure at hearing. (1) On the day fixed ~or the hearing of the petition, or on any subsequent d~y 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 SU{!h proof as to satitsfy 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 committed 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 any evidence which appears to it to be necessary for the proper disposal of the petition. ( 4) A memorandum of the substance of the examination 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. 25. Dismissal of petitions. (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. 26. Award of compensation. (1) Where a petition pre­ sented 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 34/781. 24 one thousand rupees, as it deems a reasonable compensation to the debtor for the expense or injury occasioned to them by the petition and the proceedings thereon, and such amount may be reahsed as 1f 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 Adjudwation. 27. Order of adjudication. (1) If the Court does not dis­ miss 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. 28. Effect of an order of adjudication. (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 purpose 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 disposition of the insolvent in his trade or business, by the consent and permis­ sion of the true owner, under such circumstances that he is the reputed owner thereof, shall be deemed to be the property ot the insolvent. ( 4) All property which is acquired by or devolves on the insolvent after the date of an order of adjudication 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 the time being in force from liability to attachment and sale in execution of a decree. I ! I I \ (6) Nothing in this section shall affect the power of any -v s~cured creditor to realise or otherwise deal with his security, - -- --------------- 25 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 pebtion on which it is made. 29. Insolveno's property to comprise certain capacity. The property of the msolvent 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 insol­ vency or before his discharge. 30. Stay of pending proceedings. 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 ouch terms as such Court may impose. 31. Publication of order of adJudication. 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 Gazette and in such other manner as may be prescribed. Proceedings Consequent on Order of Adjudication. 32. Protection order. (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 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. 33. Power to arrest after adJudication. 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 deHor has absconded or departed from the local limits of its jurisdiction with mtent to avoid any obligation ' \...__ 26 which has been, or might be, imposed on him by or under thio Act, order a warrant to issue for his arrest, and on his appear­ ing 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 penod which may extend to three months. 34. Schedule of creditors. (J.) When an order of adjudica­ tion has been made under this Act, all persons alleging them­ selves to be creditors of the insolvent in respect of debts pro­ vable 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, respec­ tively, 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 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 receiver and the other creditors who have proved their debts, and hearing their objec- tions, if any, shall comply with or reject the application. :Jt 35. Debts provable under the Act. (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. Annulment of Adjudication. 36. Power to annul adjudication of in8olvency. 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 27 full, the Court shall, on the application of the debtor, or of any other person interested, by order in writing, annul the adjudi· cation and the Court may, of its own motion or on application made by the receiver or any creditor, annul any adjudication made on the petition of a debtor who was, by reason of the pro­ visions of sub-section (2) of Section 10, not entitled to present such petition. 37. Power to 6ancel one of concurrent orders of adju.dioa­ tion. If, m 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 proceedmgs are pendmg 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. ~ 38. Proceedings on annulment. (1) Where an adjudication is annulled, all 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 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 Gazette and in such other manner as may be prescribed. Compositions and Schemes of Arrangement. 39. Composttwns and schemes of arrangement. (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 pre­ l!cribed. (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. r - 28 (5) If any facts are proved on proof of which the Court V would be required either to refuse, suspend or attach condi- ~ t10ns to the debtor's discharge, the Court shall refuse to approve · · thT Proposal unlEiss it provides reasonable security for payment Q· h..' 1 1 L~ -',(' L' 1 ,., ·r~)ln the rupee on all the unsecured ~ 'the debtor's estate. ~\' (6) No composi on or scheme shall be approved by the ~ Court which does not provide for the payment in priority to (jl"tl S: ) other debts of all debts directed to be so paid in the distribu­ l r 0() ') tion of the property of an insolvent. ...____ __ ( 7) In any other case the Court may either approve or refuse to approve the proposal. 40. Order on approval. If the Court approves the proposal, the terms shall be embodied in an order of the Court, and the order of adjudication shall be annulled, and the provisions o.f Section 38 shall apply, and the composition or scheme shall be ~ bindmg on all the creditors so far as relates to any debt due to em from the debtor and provable under this Act. 41. Power to re-adjudge debtor insolvent. If default is ade 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 un­ due delay, or that the approval of the Court was obtained by fraud the Court may, if it thinks fit, re-adjudge the debtor in­ solvent and annul the composition or scheme but without pre­ judice 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 pro­ vable in the insolvency. Discharge. Jr 42. Discharge. (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 afterwards become due to the insolvent, or with respect to his after­ acquired property . ~. c,N.( I I { 5'i) 29 43. Cases in which Court must refuse an absolute dischn.rge. (1) The Court shall refuse to grant an absolute order of dis- charge under Section 42 on proof of any of the following facts , namely:- Lti~ rw:(~ l":.l-4',~1~ ~. 'ji{t.. a~ that the insolvent's assets are not of a. valuo equal lfi.P{~P:: to ~ " ""J n the rupee on the amount of hiS unsecured ~., lia ities, unless he satisfies thegCourt that the fact that tl!e r...J... "jj,. assets are not of a value equal toOOgbt allA:~in the rupee on ....... 1 rlf....,.Pt the amount of his unsecured liabilities lias 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 continued to trade after knowing himself to be insolvent; (d) that the insolvent has contracted any debt provable under this Act without having at the time of contracting it any reasonable or probable ground of expectation (the burden of proving which shall lie on him) that he would be able to pay it; (e) that the insolvent has failed to account satisfac­ torily for any loss of assets or for any deficiency of assets to meet his liabilities; (f) that the insolvent has brought on, or contributed to, his insolvency by rash and hazardous speculations, or by unjustifiable extravagance in living or by gambling, or by culpable neglect of his business affairs; (g) that the insolvent has, within three months pre­ ceding the date of the presentation of the petition, when unable to pay his debts as they became due, given an undue prefe­ rence to any of his creditors; (h) that the insolvent has on any prevous occasion been adjudged an insolvent or made a composition or arrange­ ment with his creditors; (i) that the insolvent has concealed or removed his pro­ perty or any part thereof, or has been guilty of any other fraud or fraudulent breach of trust. (2) For the purposes of this section, the report of the receiver shall be deemed to be evidence; and the Court may presume the correctness of any statement contained therein. (3) The powers of suspending, and of attaching condi­ tions to, an insolvent's discharge may be exercised concurrently. 44. Adjudication to be annulled on failure to apply for dis­ charge. ( 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, (~I~ • ...r:)) 30 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 38 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, recommit the debtor to his former custody, and the officer m charge of the prison to whose custody such debtor is so recom­ mitted shall receive such debtor into his custody accordmg to such re-commitment, and thereupon all processes which were in force against the person of such debtor at the time of such release as aforesaid shall be deemed to be still in force against him as if no order of adjudication had been made. 45. Effect of order of discharge. (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. (2) Save as otherwise provided by sub-section (l), 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 the date of the presentation of the petition, was a partner or co-trustee with the insolvent, or was jointly bound or had made any joint contract with him or any person who was surety for him. PARTID. ADMINISTRATION OF PROPERTY. Method of proof of debt~. 46. Debt payable at a future time. A creditor may prove for a debt not payable when the debtor is adJudged an insol­ vent 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 com­ puted 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. 47. Mutual dealings and set off. 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 __________________________ __) v 31 !(. PADMAN~~fHt !--· lusstst:snt St~r~t Ted. Nr! ~- · _, shall be set off against any sum due from the other party, and the balance of the account, and no more, shall be claimed 01 paid on either side respectively. 48. Secured creditors. (1) Where a secured creditor rea­ lises his security he may prove for the balance due to him, aftet deducting the net amount realised. (2) Where a secured creditor relinqUishes his security for the general benefit of the creditors, he may prove for his whole debt. ( 3) Where a secured creditor does not either realise or relinquish his security, he shall, before being entitled to have his debt entered m the schedule, state m his proof the parti­ culars 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 deductmg the value so assessed. ~, ( 4) Where a secunty Is so valued, the Court may at any ~ "'-.t1me befot·e realisatiOn redeem it on payment to the creditor of t~ assessed value. "J.5) Where a creditor, after having valued his security subse~ently realises It, the net amount realised shall be substi­ tuted fo)l;;_ the amount of any valuatiOn previously made by the creditor, ':Yld shall be treated m all respects as an amended valuatiOn ~de by the creditor ( 6) Wh1~re a secured creditor does not comply with the provisions ofthis section, he shall be excluded from all share m any divide d 49. lntere ( 1) On any debt or sum certain whereon in- terest is not n~~erved or agreed for, and which Is overdue when the debtor is adjudged an insolvent, and which Is provable under this Act. the creditor may prove for interest at a rate not exceedmg six pel> 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) 1f the debt or sum Is payable otherwise, from the time when a demand m wnting has been made giving the deb­ tor notice that mterest w1ll be cla1med from the date of the demand until the time of payment to the date of such adjudi­ ration. (2) Where a debt wh1ch has been proved under th1s Act includes mterest or any pecumary consideration in lieu of m­ lerest, the mtcrest o1· comnderatwn shall, for the purposes of dividend, be calculated at a rate not exceeding six per centum per annum, without preJudice to the right of a creditor to receive out of the debtor's estate any higher rate of mterest to which he may be entitled after all the debts proved have been paid m full. 50. Mode of proof (1) A debt may be proved under this Act by dehvermg, or sendmg by post m a registerNi lettf·r, to the Court an affirlav1t verifymg the df'ht. ::!4-781 • 32 (2) The affidavit shall contain or refer to a statement of '? account showmg the particulars of the debt, and shall specify the vouchers (1f any) by which the same can be substantiated. The court may at any time call for the production of the vouchers. 51. Disallowance and reduction of entries in schedule. (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 thmks 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 _ cred1tor where no receiver has been appomted, or where the / I i I, receiver declines to mterfere m the matter or, in the case of a. / / composition or scheme, upon the apphcation of the debtor. /- , ~ Effect of insolvency on antecedent transactions. 1 52. Restriction of rights of creditor under execution. /(1) Where execution of a decree has issued against the ~ro R!rty of a debtor, no person shall be entitled to the benefit of he exe­ cution against the receiver except in respect of ass s realised in the course of the execution by sale or otherwis~ before the date of the admission of the petition. I (2) Nothing in this section shall affect th~ right of a secured creditor in respect of the property agairy.st which the decree is executed. 1 (3) A person who in good faith purchases the property of a debtor under a sale in execution shall in all, fcases acquire a good title to it against the receiver. 53. Duttes of Court executing decree as to property taken in execution. Where execution of a decree has issued against any property of a debtor whiCh is saleable in execution and ~J 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 ade· quate part thereof for the purpose of satisfying the charge. 54. Avoidance of voluntary transfer. Any transfer of nro­ perty not being a transfer made before and in consideration of marriage or made in favour of a purchaser or incumbrancer in good faith and for valuable consideration shall, if the trans­ ferer is adjudged insolvent 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. 55. Avoidance of preference in certain cases. (1) Every '{ transfer of property, every payment made, every obligation 33 incurred, and every JUdictal proceedmg taken or suffered by any person unable to pay h1s debts as they become due from h1s own money m favour of any cred1tor, with a view of givmg that cred1tor a preference over the other creditors, shall, 1f such person is adjudged insolvent on a pebtion presented wtthin three months after the date thereof, be deemed fraudulent and void as against the receiver and shall be annulled by the Court. (2) Th1s sect10n shall not affect the rights of any person who m good fatth and for valuable consideration has acquired a title through or under a creditor of the insolvent. 56. By whom petitions for annulment may be made. A petition for the annulment of any transfer under Section 54 or of any transfer, payment, obhgat10n or judicial proceedmg under Sect10n 55 may be made by the rece1ver or, wtth the leave of the Court, by any credttor who has proved h1s debt and who satisfies the Court that the rece1ver has been requested and has refused to make such pebtion. 57. Protectwn of bonafide transactwns. Subject to the foregomg provis10ns of th1s Act wtth respect to the effect of insolvency on an execut10n, and with respect to the avotdance of certain transfers and preferences, nothing in th1s Act shall invahdate m the case of an insolvency- (a) any payment by the msolvent to any of his cre­ ditors; (b) any payment or delivery to the insolvent; (c) any transfer by the insolvent for valuable considera­ tion; 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 adjud1cat10n, and that the person with whom such transaction takes place has not at the time, nobce of the presentation of any msolvency petition by or against the debtor. Realisation of property. 58. Appotntment of receiver. (1) The Court may, at the time of the order o~ adJudication, or at any time afterwards, appoint a recetver 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 15eneral or spec1al order, fix the amount to be paid as rem·~u.e:-:!tion for the services of the receiver out of the assets of the insolvent. r 34 (3) Where the Court appomts a receiver, It may remove the person m whose possessiOn or custody any such property as aforesaid IS from the possessiOn or custody thereof. Provided that nothmg m this sectiOn shall be deemed to authonse the Court to remove from the possessiOn or custody of property any person whom th~ msolvent has not a present 11ght so to remove. ( 4) Where a receiver appomted under this section- ( a) fails to subm1t his accounts at such periods and m such form as the Court d1rects; or (b) falls to pay the balance due from h1m thereon as the Court directs; or (c) occasiOns loss to the property by h1s wilful default ur gross negligence; ~ the Court may direct h1s property to be attached and sold, and 1nay apply the proceeds to make good any balance found to be due from him or any loss so occasioned by h1m. (5) The provisions of this sectiOn shall apply, so far a~ may be, to mtenm receivers appointed under SectiOn 20. 59 Power to appomt 0 fficw,Z Recewers. ( 1) The Govern­ ment may appomt such persons as they thmk fit (to be called 'Official Receivers') to be receivers under this Act within such local limits as they may prescribe. (2) Where any Offic1al Receiver has been so appointed for the local limits of the JUnsdiCtiOn of any Court havmg JUris­ dictiOn under this Act, he shall be the receiver for the purpose of every order appomtmg a receiver or an mterim rece1ver 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 58 in respect of the serv1ces of an Official Receiver shall be credited to such fund as the Government may direct. ( 4) Every Official Receiver shall receive such remunera­ t wn out of the said fund or otherwise as the Government may f1x m th1s behalf, and no remuneratwn whatever beyond that so fixed shall be received by the Official Receiver as such. 60. Power of Court tf no recewer a'ppomted. Where no 1 ece1ver IS appomted •the court shall have all the rights of and may exerc1se all the powers conferred on, a receiver under this Act. 61. Duttes and tpawers of receiver. Subject to the provi­ sions of this Act, and such other provisions as may be prescribed the receiver shall, with all convenient speed, reahse the pro­ perty of the debtor and d1stnbute dividends among the creditors entitled thereto and for that purpose may- (a) sell all or any part of the property of the msolvent; 35 (b) give receipts for any money received by him and may, by leave of the Court, do all or any of the followmg thmgs, namely.- (c) carry on the busmess of the msolvent so far as may be necessary for the beneficial wmdmg up of the same; (d) mstitute, defend or contmue any smts or other legal proceedmgs relatmg to the property of the insolvent; (e) employ a pleader or other agent to take any pro­ ceedmgs or do any busmess which may be sanctiOned by the Court; (f) accept as the consideratiOn for the sale of any pro­ perty of the msolvent a sum of money payable at a future time subJect to such stipulatiOns as to security and otherwise as the Court thmks fit; (g) mortgage or pledge any part of the property of the msolvent for the purpose of raismg money for the payment of h1s debts; (h) refer any dispute to arbitratiOn, and compromise all debts, claims and liabilities, on such terms as may be agreed upon; and (I) divide in Its existmg form amongst the creditors, accordmg to Its estimated value, any property which, from its peculiar nature or other special circumstances, cannot readily or advantageously be sold. 62 Power to requtre tnforrnatwn regardwg tnsolvent's pro­ perty. ( 1) The Court, If specially empowered in this behalf by an order of the Government, or any office>r of the Court so empowered by a hke 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 m the prescnbed manner any person known or suspected to have in his possessiOn any property belonging to the msolvent or supposed to be mdebted to the insolvent, or any person whom the Court or such officer, as the case may be, may deem capable of giving mformatwn respectmg the msolvent 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 relat­ mg to the insolvent or to his dealmgs or property. (2) If any person so summoned, after having been ten­ dered a reasonable sum, refuses to come before the Court or such officer at the time appointed, or refuses to produce any such document, havmg no lawful impediment made known to :;> nd allowed by the Court or such officer, the Court or such officer may, by warrant, cause him to be apprehended and brought up for exammation. (3) The Court or such officer may examme any person so brought before it or him concernmg the insolvent, his dealings or propertv. and such person may be represented by a legal practitiOner. r 63. Special promsions in regard to tmmovable property. ( 1) In any local area m wh1ch a declaratiOn has been made under SectiOn 68 of the Code of C1vil Procedure, 1908, and 1s m force no sale of Immovable property paymg revenue to the Govern­ ment 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 ascertam- (a) the amount required to satisfy the debts proved under this Act after deducting the moneys already received; (b) the immovable property of the msolvent remaining unsold; and (c) the incumbrances (If any) existmg thereon; and shall forward a statement to the Collector containmg the particulars aforesaid; and thereupon the Collector shall proceed to raise the amount so required by the exercise of such of the powers conferred on him by paragraphs 2 to 10 of the Third Schedule to the said Code as he thinks fit, and subject to the provisions of those paragraphs so far as they are applicable, and shall hold at the disposal of the Court all sums that may come to his hands, by the exercise of such powers. (2) Nothing m this Act shall be deemed to affect any pro­ visions of any enactment for the time being in force prohibit­ ing or restricting the execution of decrees or orders agamst immovable property; and any such provisions shall be deemed to apply to the enforcement of an order of adjudication made under th1s Act as if it were such a decree or order. Distribution of Property. 64. Prionty of debts. (1) In the distribution of the pro­ perty 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 forty five rupees in all, of any clerk, servant, or labourer m respect of services rendered to the insolvent durmg four months before the elate of the presentation of the petition. ( 2) The debts specified m 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 them­ selves. (3) Subject to the retention of such sums as may be necessary for the expenses of administration or otherwise, the debts specified in sub-section (1) shall be discharged forth­ with in so far as the property of the insolvent is sufficient to meet them. 37 ( 4) In the case of partners, the partnership property shall be applicable in the first mstance m the payment of the part­ nership debts and the separate property of each pa:tner shall be applicable m the first mstance m payment of his separate debts. Where there is a surplus of the separate property of the partners, It shall be dealt with as part of the partnership property; and where there is a surplus of the partnership pro­ perty, it shall be dealt w1th as part of the respective separate property m proport10n to the rights and interests of each part­ ner in the partnership property. (5) Subject to the provisions of this Act, all debts entered in the schedule shall be paid rateably accordmg to the amounts of such debts respectively and without any preference. ( 6) Where there 1s any surplus after payment of the fore­ going debts, it shall be applied m payment of interer- t from the date on wh1ch the debtor is adjudged an msolvent at the rate of six per centum per annum on all debts entered in the schedule. 65. Calculation of dwidends. ( 1) In the calculat10n of dividends, the receiver shall retam 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 m places so distant that m the ordmary course of communicatiOn they have not had sufficient time to tender their proofs; (b) debts provable under this Act, the subject of claims not yet determined; (c) disputed proofs or claims; and (d) the expenses necessary for the administration of the estate or otherwise. (2) SubJect to the provisions of sub-section (1), all money • in hand shall be distributed as dividends. 66. Rtght of credttor who has not .proved debt before decla­ ration of a dividend. 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 hand~ of the receiver, any dividend or dividends which he may haw 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 partici­ pated therein. 67. Final dividend. When the receiver has realised 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 the manner perscribed to the persons whose claims to be creditors have been notified but not proved that if they do not prove their claims within the time limited 38 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 tim" for establishing his claim, then on the expiration of such further time, the property of the msolvent shall be divided among the creditors entered m the schedule without regard to the claim!': of any other persons. 68. No su'tt for dwzdend. No sUit for a dividend shall lie agamst the receiver, but wher<? the receiver refuses to pay any dividend, the Court may, on thP application of any creditor who is entered m the schedule, ,,rder him to pay it, and also to pay out of his own money intet est thereon for the time that It is withheld, and the costs of the application. 69. Management by and allowance to insolvent. (1) The Court may appomt the insolvent himself to superintend the management of the property of the msolvt>nt 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 admmistering the property in such manner 3111'~ on such terms as the Court may direct. (2) The Court may, from time to time, make such allow­ ance 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 engaged in winding up his estate; but any such allowance may, at any time, be varied or determined by the Court. // 70. Right of insolvent to surplus. The insolvent shall be L/ 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. 71. Committee of 1,nspection. (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 superin­ tending the administration of the insolvent's property by the receiver. (2) The persons appomted to a committee of inspection shall be creditors who have proved their debts or persons holdmg 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 pres­ cribed. Appeal to Court aq~inst Recewer. 72. Appeal to Court against receiver. If the insolvent or any of the creditors or any other person js 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 complamed of, and make such order as it thinks just: 39 Provided that no apphcatwn under this section shall be entertamed after the expiration of twentyone days from the date of the act or decision complamed of. PART IV. PENALTIES. 73. Offences by debtors. If a debtor, whether before or after the makmg of an order of adjudiCatwn,- (a) wilfully falls to perform the duties Imposed on him by Sectwn 22 or to deliver up possesswn of any part of his property which is divisible among his creditors under this Act, and which is for the time bemg m his possesswn or under his control to the Court or to any person authonsed by the Court to take possession of It, or (b) fraudulently with mtent to conceal the state of his affairs or to defeat the obJects of this Act,- ( I) has destroyed or otherwise Wilfully prevented or purposely "Ithheld the productwn of any document relating to 3Uch of his affairs as arc subJect to investigatwn under this Act, or (ii) has kept or caused to be kept false books, or (iii) has made false entnes m or withheld entnes from or Wilfully altered or falsified any document relating to such of his affairs as are subJect to investigation under this Act, or (c) fraudulently with mtent to diminish the sum to be divided among his creditors or to givP 'ln undue preference to any of his creditors,- ( i) has discharged or concealed any debt due to or fr0m him, or ( ii) has made away With, charged, mortgaged or con­ realed any part of his property of any kind whatsoever, he shall be punishable on conviCtiOn with Imprisonment which may extend to one year 74. Procedure on charge under Sectwn 73. Where the Court is satisfied, after such prehmmary mquiry, If any, as it thinks necessary, that there Is ground for mqmring mto any offence referrPd to m Section 73 and appearmg to have been committed by the msolvent, the Court may record a finding to that effect and make a complaint of the offence m wnting to a Magistrate of the First Class havmg jurisdiction, and such Magistrate shall deal with such complaint m the manner laid down in the Code of Criminal Procedure 1898. 75. Crtmtnal l~ab1lity after d1scharqc or composttwn. Where an im:olvePl has been guilty of any of the offences specified m s~ction 73, he shall not be exempt from ">eing proceeded against therefor by reason that he haH obtamed his discharge or that a composition or scheme of arra.r,gement has been accepted or approved. 34·781 \ 40 76. Und1scharged insolvent obtatning credit. (1) An undts- ) 1 charged insolvent obtammg credit to the extent of fifty rupee~ or upwards from any person wtthout mformmg such person that he is an undischarged msolvent shall, on convictiOn by a Magistrate, be pumshable with impnsonment for a term which may extend to stx months, or wtth fine or With both. (2) Where the Court has reason to believe that an undis­ charged insolvent has commttted the offence referred to in sub-sectwn ( 1), the Court, after makmg any preliminary mquiry that may be necessary, may send the case for trial to the nearest Magistrate of the First Class, and may send thf' accused in custody or take sufficient security for his appearancE' before such Magistrate; and may bind over any person to appear and gtve evidence on such tnal. 77. Disquahficatwns of msolvent. ( 1) Where a debtor is adjudged or re-adjudged msolvent under this Act, he shall, h I subject to the provisiOns of this sectwn, be disqualified from being appomted or acting as a judicial officer. (2) The disqualification which an msolvent ts subject to under this sectiOn shall be removed, and shall ~ease, if- 36, or (a) the order of adjudicatiOn IS annulled under Section (b) he obtams from the Court an order of discharge whether absolute or conditional, with a certificate that his insolvency was caused by misfortune without any misconduct on his part. ( 3) The Court may grant or refuse such certificate as it thinks fit, but any order of refusal shall be subject to appeal. PART V SUMMARY ADMINISTRATION 78. Summary a.dmtmstratwn When a petitwn is presented by or agamst a debtor, if the Court is satisfied by affidavit or otherwise that the property of the debtor is not likely to ex~eed m value 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 followmg modtficatwns namely:- ( i) unless the Court otherwise directs, no notice reqmred under this Act shall be published m the Gazette; ( 1i) on the admissiOn of a petitiOn by a debtor, the property of the debtor shall vest m the Court as a receiver· ' (iii) at the hearing of the petitiOn, the Court shall inqmre mto the debts and assets of the debtor and determine the same by order m wnting, and It shall not be necessary to frame a ~chedule under the provisiOns of Section 34; I _ _) 41 (iv) the property of the debtor shall be re~hsed wi.th all reasonable despatch and thereafter, when practicable, dis­ tributed m a smgle dividend; (v) the debtor shall apply for lus discharge w1thm six months from the date of adjudication; and (vi) such other modifications as may be prescribed with the view of saving expense and simphfymg procedure: Provided that the Court may at any time direct that the ordinary procedure provided for m this Act shall be followed m regard to the debtor's estate, and thereafter the Act, shall have effect accordingly. PART VI APPEALS 79. Appeals. (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 msolvency JUrisdiCtiOn by a Court subordmate 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 1mrposes of satisfymg itstelf that an order made m 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 thmks fit: Provided, further, that any such person aggrieved by a decision of the District Court on appeal from a decision of a subordmate Court under Section 4 may appeal to the High Court on any of the grounds mentioned m sub-section (1) of Section 100 of the Code of C1vil Procedure, 1908. (2) Any such person aggrieved by any such decision or order of a District Court as Is specified in Schedule I, come to or made otherwise than in appeal from an order made by a subordinate Court, may appeal to the High Court. (3) Any such person aggrieved by any other order made by a District Court otherwise than in appeal from an order made by a subordinate Court may appeal to the High Court by leave of the District Court or of the High Court. (4) The periods of limitation for appeals to the District Court and to the High Court under this section shall be thirty days and ninety days, respectively. PART VII MISCELLANEOUS 80. Costs. The costs of any proceeding under this Act including the costs of maintaining a debtor in the civil prison: r 4 2 shall subject to any rules made under thi.s Act, be in the discretion of the Court m which the proceedmg IS had. 81. Courts to be auxtltary to each other. All Courts havmg JUrisdiction m msolvency and officers of such Courts, respecti­ vely, shall severally act in aid of and be auxiliary to each other m all matters of msolvency, and an order of a Court seekmg aid with a request to another of the said Courts shall be deemed sufficient to enable the latter Court to exercise, m regard to the matters directed by the order, such junsdiction as either of such Courts could exercise in regard to similar matters w1thm their respective jurisdictions. 82. Li:rm,tatwn. ( 1) The provisiOns of Sections 5 and 12 of the Indian LimitatiOn Act, 1908, shall apply to appeals and applications under this Act, and for the purpose of the said Section 12, a decision under SectiOn 4 shall be deemed to be a ~ decree. (2) Where an order of adJudication has been annulled under this Act, m computmg the period of limitation prescnbed for any suit or applicatiOn for the executiOn of a decree other than a smt or applicatiOn m respect of which the leave of the Court was obta111ed under sub-section (2) of Section 28 which might have been brought or made but for the mak111g 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 annul­ ment shall be excluded: Provided that nothing m this section shall apply to a smt or application in respect of a debt provable but not proved under this Act. 83. Po'IJJer to make rules. ( 1) The High Court may with the previous sanction of the Government, make rules for ~arry­ ing mto effect the provisions of this Act. ( 2) In particular and without prejudice to the generality of the forego111g power, such rules may provide- (a) for the appointment and remuneration of receivers ( ot~er 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; (d) for the procedure to be followed in the case of estates to be administered in a s'll:mmary manner; and (e) for any matter which is to be or may be prescribed. . ( 3) All rules made under this section shall be published 111 the G.azett~ and shall, on such publicatiOn have effect as if enacted 111 this Ad. ' 43 T(. P.J\nl'vfANAGf!.~ r·· Arsf!t~nt Secret::-, ~·d. No. 3~ i J 84. Delegatwn of powers to Officwl Receivers. (1) The High Court, with the like sanctiOn, may from tlme to time dll'ect that, m any matters m respect of which Jurisdiction is g1ven to the Court by this Act, the Official Receiver shall, subJect to the directiOns of the Court, have all or any of the followmg powers, namely:- (a) to frame schedules and to admit or reJect proofs of creditors; (b) to make mterim orders m any case of urgency; and (c) to hear and determme any unopposed or ex parte applicatiOn. (2) Subject to the appeal to the Court provided for by SectiOn 72, any order made or act done by the Official Rece1ver m the exercise of the said powers shall be deemed the order or act of the Court. ' ,. ( , • II • _'1 d I 85. Power of Government to bar applwatwn of certain provtswns to certatn Courts. The Government may, by notifica­ tion m the Gazette, declare that any of the provisions of this Act specified m Schedule II shall not apply to insolvency proceedmgs m any Court or Courts havmg jurisdiction under __ th1s Act. ._ - 7.9 L"· 4 4 SCHEDULE I [See Sectwn 79(2)] DECISION AND ORDERS FROl\1 WHICH AN APPEAL LIES TO THE HIGH COURT UNDER SECTION 79(2) Sectwn Nature of deet.Swn or order. 24 25 26 27 34 36 38 DecisiOn of questiOns of t1tle, pnonty, etc., ansmg m msolvency. Order d!Sm1ssmg a pet1t10n Order awardmg compensatiOn Order of adJUdiCatiOn Orders regardmg entnes m the schedule. Order annulling adJUdiCatiOn. Order declarmg the conditiOns on wh1ch the debtor's property shall revert to h1m on annulment of adJUdicatiOn 42 Order on applicatiOn for discharge. 51 Order d1sallowmg or reducmg entnes m the schedule. 54 Order annulling a voluntary transfer. 55 DeciSIOn that a transfer of property IS a preference m favour of a creditor. lT \ I -45 SCHEDULE l I. (See Sectwn 8~) PROVISIONS OF THE AcT AFPLIC1\TION OF WHICH MAY BE BARRED BY GovERNMENT. Provisions of the Act. Section 26 28 Sub-section (3) 35 39 40 41 43 Sub-sections (1) and (2) 46 47 48 4!) 50 51 52 53 54 55 56 57 64 [(except clause (a) of sub-section (1) and sub­ sectiOn ( 4) ] 65 66 67 68 69 76 Sub.ject Award of compen,ation. Reputed property of An msol­ vent. De~· s provable under the Act i Compos.tJOns anq schemes of r arrangement J I I Obb15a1wn to refuse absolute d1~chargt>. ~Method of proof of debts I ) I I [Effect of insolvency on antece-l dent transactiOns. J I I Priority of debts. ~ Dividend<> J Management by and allowance tJ Insolvent. Pencllty for obtammg of credit . , nd1~charged insolvent.