HOW TO DECLARE YOURSELF A BANKRUPT/INSOLVENT?
The provincial Insolvency Act, 1920, deals with the matters pertaining to insolvency in areas outside the presidency towns. As per this Act, the District courts have jurisdiction in matters pertaining to insolvency.
A debtor is said to have committed an act of insolvency in the following cases:
a. If he makes a transfer of all or substantially all his property to a third person, for the benefit of his creditors generally;
b. If he makes a transfer of his property to defeat or delay his creditors.
c. If he makes any transfer of his property, which would be void as fraudulent if he were adjudged as an insolvent.
d. If he departs or remains out of India with an intent to defeat or delay his creditors.
e. If he departs from his dwelling house or usual place of business or otherwise absents himself with intent to defeat or delay his creditors.
f. If he secludes himself so as to deprive his creditors of the means of communicating with him with intent to defeat or delay his creditors.
g. If any of his property has been sold in execution of the decree of any court for the payment of money.
h. If he petitions to be adjudged as an insolvent.
i. If he gives notice to any of his creditors that he has suspended payment of his debts.
j. If he is imprisoned in execution of the decree of any court for the payment of money.
k) If a creditor who has obtained a decree or order against a debtor for the payment of money, has served on him a notice, and the debtor has not complied with that notice within the period specified therein.
If a debtor commits an act of insolvency, an insolvency petition may be presented either by the creditor or by the debtor and the court may adjudge the debtor to be an insolvent.
A debtor is entitled to present an insolvency petition only if he satisfies the following conditions:
a. He should be unable to pay his debts and
b. His debts amounts to minimum five hundred rupees or
c. He is under arrest or imprisonment in execution of the decree of any court for the payment of any money or
d. an order of attachment in execution of such a decree has been made and is subsisting against his property.
After filing and admission of an insolvency petition, the court will issue notice to the respondents. The court while admitting an insolvency petition has the power to appoint an interim receiver for the property of the debtor or any part thereof and the interim receiver may take immediate possession of the property or part of the same.
The Court has the power to make interim proceedings against a debtor at the time of admitting an insolvency petition. These include:-
1) Ordering the debtor to give security for this appearance.
2) Order attachment of property in possession or under control of debtor.
3) Order a warrant for the arrest of debtor.
The debtor shall on the admission of petition produce all books of accounts, inventories of his property, list of creditors and debtors as may be required by the court.
In case of an insolvency petition presented either by the Creditor or the debtor, the court may dismiss the petition, if it finds suitable grounds for the same.If the court does not dismiss the petition, it shall make an order of adjudication and also shall specify in such order, the period within which the debtor shall apply for his discharge.
On the making of order of adjudication, the insolvent shall help in the realization of his property & distribution of proceeds among his creditors. The whole of the property of insolvent shall become divisible among creditors. An order of adjudication will be effective from the date of presentation of petition on which it is made.
DISADVANTAGES OF INSOLVENCY:
a.Social stigma to an insolvent.
b.Cannot become partner of a firm or director of a company.
c.Cannot enter into legal contracts.
d.The insolvent may not get credit until he is discharged.
e.Cannot contest elections or hold public offices.