The Presidency- Towns Insolvency Act, 1909

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The Presidency- Towns Insolvency Act, 1909 was enacted on 12th March, 1909 and was enforced on 1st January, 1910. Before Independence the Britishers had divided India into Presidency towns for better administration. The Act laid down provisions relating to insolvency in Presidency Towns.

Jurisdiction over matters relating to insolvency was given to the High Court of Madras, Calcutta and Bombay and the matters concerned therewith shall be discharged by a single judge appointed by the Chief Justice of the High Court. Restriction over jurisdiction of the court is laid under section 11 of the Act. These High Court under section 7 of the Act have been granted enormous powers to decide matters relating to insolvency and shall decide on all questions pertaining to insolvency. The Chief Justice of the Courts also has enormous powers with respect to delegation of powers on the officers of the court in matters relating to hearing of insolvency petitions, hold public examinations, decide ex-parte applications, make orders and examine persons summoned. The Act also gives power to court to review, rescind or vary an order passed by it as per provisions of section 8 of the Act. The order passed by the Court shall be appealable as per provisions of the Act.

The Act lays down numerous instances as per which the debtor shall commit an act of insolvency, few of situations are namely, when the debtor transfers his property elsewhere inorder to cheat his creditors; he transfers his property outside the premises of the State, he absents himself from the place of his business or his house; if he is adjudged insolvent; incase he is imprisoned upon execution of a decree for payment of money.

The Act provides for furnishing of notice to the debtor in prescribed form which shall be served in a prescribed manner and shall also contain the details as to the amount due along with the consequences that which shall arise in the event of  non compliance of the notice. The debtor on receipt of the notice under section 9 sub clause (3) shall apply to set aside the insolvency notice incase he has a counter claim against the creditor, he has made an application before competent authority or when the decree or order passed against him is not executable.

Section 12 and 13 of the Act lays provisions when the creditor can petition against the debtor. Also the creditor shall not be able to petition in case the total debt amount is not more than rupees five hundred. The court shall adjudge the petition of the creditor in light of relevant evidence and shall properly scrutinize the matter before passing any decision.

The Act also lays certain situations in which the debtor can petition under section 14 of the Act only if the debtor proves his entitlement to present the petition and once the petition is presented he shall not withdraw it without permission of the court. The court wherever deems necessary shall appoint receiver who shall take care of the property till the pendency of the insolvency petition. Once the insolvency petition is decided the property shall be divided amongst the creditors. The Court shall have power to appoint special manager in connection to estate or business. Where the court is of opinion that the debtor shall not be adjudged insolvent, the court shall annul all such proceedings pending in the court.

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Where a matter is adjudicated against an insolvent, he shall prepare and submit a schedule as mandated under section 24 which shall be submitted in the court for protection of insolvent against an order of arrest.

Incase a decree favouring creditor is passed by the court and the debtor pleads insufficiency of property, the creditor upon finding of property vested in name of the debtor shall produce the documents before court of law.  The court shall properly adjudge the documents and incase the property is found to be in possession of debtor it shall be passed by the court to official assignee.

A person shall be discharged insolvent upon the orders of the court after hearing an application filed by the debtor. Sections 39 to section 45 deals with discharge of insolvent, incase a person is discharged insolvent he shall not be discharged from debt due to government, debt incurred by fraudulent breach of trust etc. Once a person is discharged insolvent it shall be conclusive evidence. Part III of the Act deals with the administration of property as proof of debts.

While the debts are settled priority shall be given to government, or local authority and thereafter all other debts shall be settled. The insolvent shall have right against surplus remaining after payment of debt. Part IV of the Act empowers court to appoint official assignee with respect to insolvent’s estate.

The Act provides provisions with respect to settlement of debts and adjudging a person as insolvent. The Act aimed at settlement of debts to creditors pending with debtors.

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by Vibhuti Nakta.