What is an insolvency petition?
As stated in section-10 of The Provincial Insolvency Act, 1920
Conditions on which debtor may petition.—
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 has been made, and is subsisting, against his property.
2. A debtor in respect of whom an order of adjudication 1[whether made under the Presidency-towns Insolvency Act, 1909 (3 of 1909), or under this Act has been annulled, owing to his failure to apply, or to prosecute an application for his 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 satisfied either that the debtor was prevented by any reasonable cause from presenting or prosecuting his application, as the case may be, or that the petition is founded on facts substantially different from those contained in the petition on which the order of adjudication was made.]
State Amendments Himachal Pradesh.—Same as in Punjab. [Vide Himachal Pradesh Act 31 of 1976, sec. 3 (w.e.f. 1-4-1979).]
Madhya Pradesh— In section 10, in sub-section (1), in clause (a), for the words “five hundred rupees”, substitute the words “two hundred rupees”. [Vide C.P. Act 2 of 1936, sec. 2 read with M.P. Act 23 of 1958, sec. 3(1).] Punjab: Haryana: Chandigarh.—In section 10, in sub-section (1), insert after clause (a) the following clause namely:—
“(aa) his debts amount to two hundred and fifty rupees, and he satisfies the Court that he is entitled to summary administration of his estate under section 74 of this Act; or” [Vide Punjab Act 7 of 1934, sec. 3 (w.e.f. 19-4-1935) read with 30 of 1958, sec. 4(1); Act 31 of 1966, sec. 88.]
Adjudication as an issue of right. If every one of the requirements of the section are fulfilled, at that point the indebted person is qualified for the order of the adjudication as an issue of right and the same cannot be refused by the Court; K.R.K. Krishnappa Chettiar vs. V.V.R. Kasiviswanathan, AIR 1966 Mad 331. The burden to prove that all the conditions of section 10 are satisfied is on the debtor; Siya Ram vs. BohraKishoriLal, AIR 1933 All 841.
Debt: Meaning under section 10, there is no need for more than one debt. The word “debt” means and includes a ‘single debt’; S. Damodaran Pillai vs. K. NantheduBava, AIR 1992 Ker 212.
Res Judicata: If the first petition is dismissed because the evidence could not be produced, the principle of res judicata will not apply to it; Hasan Din vs. Kirpa Ram, AIR 1928 Lah374.
Second order, If a man has been proclaimed as an insolvent, he can't have any significant bearing for a second order of arbitration until the point that he has been released from the primary order or the order has been repealed or anulled; Ram Das vs. Sultan Husain Khan, AIR 1929 Oudh 149.
An individual can record an insolvency petition in the event that he/she can't pay his/her debts and necessities insurance from creditors. Documenting of bankruptcy is represented by the Provisional Insolvency Act of 1920 and in this article, we take a sight at the procedure for recording insolvency petition of in India.
When Insolvency Petition can be Filed by an Individual
An individual can document an insolvency petition of in the event that he/she can't pay his/her loans on satisfaction of any of the accompanying three conditions:
•Debts add up to more than Rs.500
•Individual will be taken into custody for further judgment or detainment in execution of a cash decree
•There is a subsisting order of connection against his/her property in execution of such pronouncement
When the Insolvency Petition can be Filed by Creditor
A lender can record an insolvency petition under the accompanying conditions:
•Total measure of credit amount because of the lender is more than Rs.500
•The loan is now due or at a future date
•insolvency petition has been recorded within three months of the commission of act of insolvency.
Where an Insolvency Petition can be Filed
Insolvency petition can be documented at a region court having jurisdiction in which the account holder lives or carries on business. On the off chance that the indebted person has just been arrested or detained, at that point the indebtedness petition can be recorded where he/she is in custody. Once a bankruptcy petition is recorded, the Court can name a break beneficiary after introduction of the indebtedness appeal to or before a request is made. On making a request of arbitration, the property of an insolvent individual would vest with the official trustee or the collector and winds up distinguishable among the creditors.
Distribution of Assets
The conveyance of assets of an insolvent individual are executed according to the need of debt given by the Provincial Insolvency Act of 1920. Under the Act, the accompanying duty has most elevated need to every single other obligation:
•Debts because of the local government or any neighborhood authority;
•Salary or wages, not surpassing Rs.20, of any agent, hireling or worker, for administrations rendered to the insolvent individual within four months going before the date of introduction of insolvency petition.
•Rent because of the landowner, for a sum not surpassing a month's lease.
Once the above payments are made, all obligations exhibited in the obligation appeal must be paid ratably according to the measure of commitments, with no tendency among the creditors. After the order of adjudication and contemplating the report from the official trustee or beneficiary, the court may give a flat out request of release. The request of release discharges the borrower from all obligation payable, with the exception of any debt because of the Government and any loan acquired because of misrepresentation or fraudulent breach of trust.