Indian Law: Acts of Insolvency
Sun, 08/08/2010 - 05:51 — LIG Reporter
Generally, a person who is unable to meet his debts or obligations is known as insolvent. Insolvency pertaining to a company refers to a company’s inability to pay off its debts. Further, when one of the creditors files a lawsuit in court and stops the individual actions by creditors, this is known as insolvency proceedings. In a petition involving insolvency, it is important to mention all the acts of insolvency, commissioned by the borrower. Until the act of insolvency is clearly mentioned in the petition, no order of adjudication can be passed. Further, a statement in affidavit is not adequate. It cannot be considered as part of the application.
Indian law: Types of Insolvency
The following are the main types of insolvency under Indian law:
- Administrative receivership: Administrative receivers are appointed by a bank under the terms of a debenture agreement, when a company violates the borrowing terms.
- Bankruptcy of individuals.
- Bankruptcy and winding up of partnerships.
- Company liquidation includes voluntary or compulsory winding up of the company.
The acts of insolvency are either voluntary or involuntary acts. However, Section 6, of the Provincial Insolvency Act, does not clearly provide for the acts of debtors, which may be considered as acts of insolvency. Nonetheless, the transfer of a portion of debtor’s property, on its own, is not considered as an act of insolvency. Further, the use of the sales proceeds of a transfer, by a borrower, to pay the lenders, does not amount to an act of insolvency.
In consonance with the stipulations of the Transfer of Property Act, the execution of contact of sale cannot be held to be adequate to attract the provisions of section 6 of the Provincial Insolvency Act. However, if a borrower transfers his rights pertaining to a property to another person, with an intention to not pay off his credits, it will amount to an act of insolvency.
Final Legal Take Away Tip: As per Indian law, a notice by the borrower for suspension of payment, for a temporary or permanent time period, amounts to an act of insolvency. However, if the debtor files an application for settlement of the amount with the Debt Settlement Board, under the provisions of the Debt Conciliation Act, it is not considered as an act of insolvency.
Comments
I have no Current Asset or Fixed Asset. I earn only Rs. 3500 per month. Can I apply for Insolvancy ?
Hi,
I have some debt which i cannot repay.
I already given promisory note along with cheque for almost all of them. some of them have date and many are blank cheques and promisory notes.
coming to my properties i already have sold all of them and cleared some debt. but due to more interests, the debts are growing again and they now become uncontrollable. so i cannot clear the debts now.
my job is gives me less money.
first to construst house i got debt. then to pay interest i got another loan again. like this the debt become more now. in middle i sold my property also and cleard some debts.
i dont want to cheat anybody but now itis eating me .
will i get jail? what will it going to happened?
so anyone can help me ? how can it b solvd?
thats good u dont want to cheat anybody of thems .but they cant understand ur feelings u have only one option meet some good advocates n start the prcsr of dclrng insolvency n n u not go to the jail if u nt cheat any bdy of them
so what can be the difference bw insolvency and bankruptcy?
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