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).
Procedure of adjudication
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.
Conditions of a creditor’s petition:
The following conditions must be fulfilled before a creditor can present a petition for the adjudication of a person as insolvent:
1)1) The amount owned must be Tk 500,000 or more.
2)2) The debtor must have committed an act of insolvency within one year before the presentation of the petition.
3) A secured creditor is one who holds some movable or immovable property of the debtor out of which he can realize his claims.
A secured creditor can present an insolvency petition if the following conditions are satisfied:
a)He abandoned his security in favor of all the creditors, or
b)The security is insufficient to meet his claim of minimum Tk 500,000.
Conditions of a debtor’s petition:
1)His debt amount of Tk 500,000 or
2)He has been arrested and imprisoned in execution of the decree of any court for the payment of money, or
3)An order of attachment in execution of a money decree has been made and is subsisting against his property.
Who can not be declared insolvent?
Any person, man or women, who has attained majority can be declared insolvent if the conditions laid down in the insolvency act.
The following persons can be considered:
a)
a)(a) Companies: A company can not be declared insolvent. Because companies are directed by the Company Act-1994 approved by the govt.
b)(b) Govt. Body: Any govt. body can not be declared insolvent. If any creditor claim any due from the govt. organization, it is considered as the liability to the government. And government is bound to pay the amount at any time.
(c) Convict: A prisoner in the jail can be declared insolvent.
(d) Deceased Person: A dead man can not be declared insolvent. If a debtor dies after the presentation of the insolvency petition, his estate will be administered by the Official Assignee as upon insolvency, unless the court otherwise directs.
(f) Partner: Since every partner is responsible for his debts of the firm, the creditor of a firm can file an insolvency petition against any partner or all of the partners for any debt due and owned by the firm.
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