The
term “Insolvent”, in common parlance is referred as Pauper or Bankrupt. An
insolvent is not considered a legal person for the purpose of enforcement of any obligation committed by him either during the pendency
of insolvency proceedings or after he is adjudged as insolvent.
Adjudication of an Insolvent
In
India, jurisdiction of the courts to adjudicate a person as an insolvent has
been conferred by two Acts, namely, the Presidency towns Insolvency Act, 1909,
which is applicable in the Presidency towns in India and the Provincial
Insolvency Act, 1920, applicable in the muffusil areas.
To
adjudicate a person as an Insolvent, such a person has to be a “Debtor” and
should have committed an act of insolvency.A debtor, under these Acts,
includes only those who are subjected to
Indian laws, either by birth or by domicile including a temporary residence.Thus,a foreigner cannot
be adjudged insolvent by a court in India unless the alleged act of insolvency
was committed or suffered by that person during his personal residence in
India.
Minor cannot be adjudged insolvent
Under
Indian Laws, as a minor is not competent
to enter into a contract he cannot be adjudged Insolvent even on his own
petition.In the case of a minor being a
partner in a firm consisting of adult and minor partners and if adjudication
order is sought against the firm, the same shall be binding on the firm/partners except the minor.
Property of an insolvent
The
expression “Property of an Insolvent”, has been defined as only the property of
the insolvent which is divisible amongst the creditors and not otherwise.It includes any property over which or over the profits of which any person has
the power of alienation which can be
exercised for his own benefit.
The
word 'property' includes the right in the property or things of a person.
However, to constitute the property, an insolvent should have an interest in
praesenti to dispose of the same and not such an interest which may depend upon
the fulfillment of certain conditions or contingencies.
Appointment of Official Assignee or
Receiver
Under
section 17 of the Presidency Town Insolvency Act or section 28(2) of Provincial
Insolvency Act, 1920, after the order of adjudication, the property of an
insolvent vests in the Official Assignee and becomes divisible amongst the
creditors, irrespective of its situation.
However, when an order of adjudication has been passed under the Presidency
Town Insolvency Act,1909, any order of adjudication passed against the
same insolvent by the District Court of
another place, at a later date under Provincial Insolvency Act will not operate
since the said property is already vested in the Official Assignee under the
Presidency Town Insolvency Act.
Movable and Immovable property
The
order of adjudication operates as a statutory transfer to the Official Assignee
of all the property of the insolvent person in India, whether movable or
immovable. Similarly, the movable
property of an insolvent situated in
foreign country shall vest with the Official Assignee or Receiver. But, the
immovable property of an insolvent situated in a foreign country, shall
be governed by the law of the country
within whose jurisdiction such property is situated.
Divisible and indivisible Properties
The
property which is divisible amongst the creditors of the insolvent can only
vest with the Official Assignee or the Receiver, which may be:
- Property belonging to an insolvent at the time of commencement of insolvency proceedings.
- Property which may be acquired by or devolve on the insolvent after the order of adjudication and before his discharge.
- Goods in possession, or disposition of the insolvent.
The
properties which are not divisible amongst the creditors of the insolvent falls
into two classes
a)
Property held by the insolvent in trust for
any other person and
b)
Tools of trade, apparel and other similar
property.
Vesting of property in the Official
Receiver or Assignee
Immediately
upon an order of adjudication by the
Court, the property of the insolvent wherever situated vests in the official
assignee/receiver. Till an Official Receiver is appointed by the Court, all the rights and powers
exercisable by the Receiver can be
exercised by the Court itself.
Intervention of Official Assignee is
must
The
right and interest of an insolvent over the property do not automatically
get transferred in favor of the
Official Receiver upon passing of an adjudication order by the court unless the
Official Assignee intervenes on behalf of the insolvent. Where the official
assignee does not intervene and the insolvent transfers the said property to
another person who takes it in good faith and for value, the transferee
acquires a good title to the property.
Powers of the Official Receiver or
Assignee
With
the order of adjudication, the property of the insolvent vests in the Official
Assignee or the receiver and it is the duty of the assignee to realize such
properties of the insolvent expeditiously and to distribute dividends to the
creditors entitled thereto.However, before exercising the power of realization
of properties of an insolvent, abundant caution has to be exercised by the assignee to avoid unnecessary litigation.
Under the aforesaid Acts, certain
powers have been vested with the assignee:
Power
to sell: The Receiver is empowered to sell the insolvent's property without the
consent of the Court. But the aforesaid
Acts do not empower the receiver or the official assignee to sell anything more
than the property of the insolvent which vests in him by reason of the
adjudication.
Power
in case of mortgaged property: Where a Receiver is appointed by consent of the
parties after passing of a decree in a mortgage suit for sale of such mortgaged
property and it is agreed that the receiver shall recover the rents of the
property for a period of one year to hand over the same to the mortgagee, the mortgagee's right to receive the rents will not be affected by insolvency of
the mortgagor at any time during this period and neither the official assignee
nor other decree-holders will be entitled to a rate able distribution of such
rents.
Bonafide Sale
Section
53 of the Provincial Insolvency Act provides that a transfer of property not
being a transfer in favour of a purchaser in good faith and for valuable
consideration shall, if the transferor is adjudged insolvent within two years
after the date of transfer, be voidable
as against the Receiver. Further, where the debtor transfers all or substantially
all the properties in consideration of the past debts, such a transfer
constitutes an act of insolvency since it has the effect of with drawing all the property from the legal process, which his creditors have a right to enforce
against the insolvent.
Thus,
an order of adjudication of insolvency will deprive the insolvent from dealing
with his properties which shall be dealt with
by the Official Assignee or Receiver when once such a person is
appointed by the Court.
More,
No comments:
Post a Comment