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Section 6 – The Provincial Insolvency Act,1920

The Provincial Insolvency Act,1920

Section 6. Acts of insolvency

1[(1) A debtor commits an act of insolvency in each of the following cases, namely:

(a) It in India or elsewhere, he makes a transfer of all or substantially all his property to a third person for the benefit of his creditors generally;

(b) It, in India or elsewhere, he makes a transfer of his property or of any part thereof with intent to defeat or delay his creditors;

(c) If in India or elsewhere, he makes any transfer of his property, or of any part thereof, which would, under this or any other enactment for the time being in force, be void as a fraudulent preference if he were adjudged an insolvent;

(d) If with intent to defeat or delay his creditors, _

(i) He departs or remains out of the territories to which this Act extends;

(ii) He departs from his dwelling-house or usual place of business or otherwise absents himself;

(iii) He secludes himself so as to deprive his creditors of the means of communicating with him;

(e) If any of his property has been sold in execution of the decree of any Court for the payment of money,

(f) If he petitions to be adjudged an insolvent under the provisions of this Act;

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

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

Explanation. For the purposes of this section the act of an agent may be the act of the principal.

2[(2) Without prejudice to the provisions of Sub-section (1), a debtor commits an act of insolvency if a creditor, who has obtained a decree or order against him for the payment of money (being a decree or order which has become final and the execution whereof has not been stayed), has served on him a notice (hereafter in this section referred to as the insolvency notice) as provided in subsection (3) and the debtor does not comply with that notice within the period specified therein:

Provided that where a debtor makes an application under sub-section (5) for setting aside an insolvency notice-

(a) In a case where such application is allowed by the District Court, he shall not be deemed to have committed an act of insolvency under this sub-section and

(b) In a case where such application is rejected by the District Court, he shall be deemed to have committed an act of insolvency under this sub-section on the date of rejection of the application or the expiry of the period specified in the insolvency notice for its compliance, whichever is later:

Provided further that no insolvency notice shall be served on a debtor residing, whether permanently or temporarily, outside India, unless the creditor obtained the leave of the District Court therefor

(3) An insolvency notice under sub-section (2) shall-

(a) Be in the prescribed form;

(b) Be served in the prescribed mariner;

(c) Specify the amount due under the decree or order and require the debtor to pay the same or to furnish security for the payment of such amount to the satisfaction of the creditor or his agent;

(d) Specify for its compliance a period of not less than one month after its service on the debtor or, if it is to be served on a debtor residing, whether permanently or temporarily, outside India, such period (being not less than one month) as may be specified by the order of the District Court granting leave for the service of such notice;

(e) State the consequences of noncompliance with the notice.

(4) No insolvency notice shall be deemed to by invalid be reason only that the sum specified therein as the amount due under the decree or order exceeds the amount actually due, unless the deb
tor, within the period s
pecified in the insolvency notice for its compliance, gives notice to the creditor that the sum specified in the insolvency notice does not correctly represent the amount due under the decree or order:

Provided that if the debtor does not give any such notice as aforesaid, he shall be deemed to have complied with the insolvency notice if within the period specified therein for its compliance, he takes such steps as would have constituted a compliance with the insolvency notice had the actual amount due been correctly specified therein.

(5) Any person served with an insolvency notice may, within the period specified therein for its compliance, apply to the District Court to set aside the insolvency notice on any of the following grounds, namely, –

(a) That he has a counter-claim or set-off against the creditor which is equal to or is in excess of the amount due under the decree or order and which he could not, under any law for the time being in force, prefer in the suit or proceeding in which the decree or order was passed;

(b) That he is entitled to have the decree or order set aside under any law providing, for the relief of indebtedness and that-

(i) He has made an application before the competent authority under Such law for the setting aside of the decree or order; or

(ii) The time allowed for the making of such application has not expired;

(c) That the decree or order is not executable under the provisions of any law referred to in clause (b) on the date of application.]

——————–

1. Renumbered as sub-section (1) by Act No. 28 of 1978.

2. Ins. By Act No.28 of l978

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The Provincial Insolvency Act,1920

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