The Insolvency Act-1997

The Insolvency Act-1997

 

When can a person be declared insolvent?

 

Two conditions must be satisfied before a person can be adjudicated insolvent:

 (i) he must be a debtor, i.e., he must owe money to others and his assets must be insufficient to meet all claim upon them;

 (ii) the debtor has committed an ‘ act of insolvency’. 

 

Act of Insolvency

 

An act of insolvency is some act of the debtor which shows that he is financially embarrassed.

Only those acts which are listed as such by the act are considered to be acts of insolvency.

Each of the following acts committed by the debtor is an act of insolvency:

 (1). If he makes a transfer of all or substantially all his property to a third person for the benefit of his creditors generally. 

 (2). If he makes a transfer of his property or any part thereof, with the intend to defraud or to delay his creditors.

 (3). If he makes a transfer of his property or any part thereof it would under this act or any other enactment for the time being in force, be void as a fraudulent preference if he were adjudged as insolvent. 

(4). If, with intent to defeat or delay his creditors-

    i) he departs from or remain out of Bangladesh

  ii) he departs from his dwelling house or usual place of business or otherwise absent himself

 iii) he secluded (to keep oneself away  from contract with other people) himself so as to deprive his creditors of the means of communicating with him. 

(5). If any of his property has been sold or attached for a period of not less than 21 days in execution of the decree of any court for the payment of money.

 (6). If he petitions to be adjudged an insolvent

 (7). If he gives notice to any of his creditors that he has suspended, or that he is about to suspend, payment of his debt. 

(8). If he is imprisoned in execution of the decree of any court for the payment of money.

 (9). If a creditor has served an “insolvency notice” in respect of any decree or order for payment of money, and if the debtor has not paid the money within the period specified in notice. 

 

The rules regarding notice are stated below:

  (a) The notice must be given according to the prescribed form and prescribed manner

 (b) It must specify the amount due.

 (c) It must specify the period for its compliance, i.e., not less than 01 month.

 (d) It must specify the consequences of non-compliance ( the practice of obeying rules). 

 

What is the order of adjudication?

The order of court by which a person is declared to be insolvent is called the Order of adjudication.

Before the court can pass an order of adjudication there must be a petition presented to it either by a creditor or by the debtor. The petitioning creditor or debtor must fulfill certain conditions.