The Law of Bankruptcy Bankruptcy court shall have both general as well as special power under the provision of Sec. 6 and 7 of Bankruptcy Act, 1997. Unde. the genetal: powers, of.the cout jeteen teil same i Original civil jurisdiction (Sec. 6). Under the special powers: where default is made by a debtor or any other person in obeying any order or direction issued by the court or the receiver or any, oth of receiver or on its own motion order the defaulting debtor or person to comply with the order { direction so given, or it may make an immediate order for the committal of such defaulting debtor or other person in civil prison on such terms and condition os may be determine by the court. Purpose / object of thé law of Bankruptcy : During Roman criminal. He was cut into pic jinprisoned or he was sold as a slave along with his wife and children andl al wnat belonged to (lim. The present-day laws of Bankruptcy are, however, calculated for the benefit ct trade and are founded on the principles of humanity. They confer some Privileges not only on the creditors but 2s on the ‘solvent himself. The law of Bankruptcy servestwo Cae Purposes : ‘riod an insolvent was considered a or was they enable a person to get rid of the burden of debis which his assets are no longer in a pusition to pay so that winch freed from his burden, he may & fresh start in life whatever has remained of his assets, they should be taken charge of by a third person and distributed equally among those who have claims against the insolvent. a Methodology : Bankruptcy proceeding is a legal proceeding by Court or the Receiver. Such property is realized ratably amongst his creditors have proved during such proceedings the debtor obtains protection obtains an order of absolute discharge from subject to certain excentions, Thus, the ba distribution of an Bankrupt'’s assets equitably ai under liability, and, upon this cessio bonrorum, to iability in respect of his debts and obligations. Scanned with CamScanner er officer of the court, the court may, either on application -What is an ‘act of Bankruptcy’ and what cor at he has done an act which shows that in all probabil Am act of a debtor that shows th: ; a be able to pay his debts would amount tan ‘act of Bankruptcy, nstitute an act of Bankruptcy : debtor commits an'act of Bankruptcy" in each of the following cases (See. 9): ‘Transfer of all or substantially all his property, in Bangladesh or else where, by benami to 1 third party for the benefit of creditors generally; 2) Transfer of property with intent to defeat or delay creditors; G) Transfer of property which would be void as fraudulent preference; 6 (4) If with intent to defeat or delay creditors, (i) he departs or remains out of Bangladesh; (ii) departs from the dwelling house or usual place of business; (ii) secludes himself so as to a deprive his creditors of the means of communicating with him; (5) __Ifany of the property has been sold in execution of a decree for money; (©) fhe petitions to be adjudged an bankrupt; @) he notifies his creditors that he has suspended or is about to suspend payment of debts; ® fhe is imprisoned in execution of decree for money; seca more creditor, having a valid and. matured debt against the debtor for an peed an Tk $,00,000/- has served on such debtor a formal demand under ing such debtor to pay the debt or to give security for it to the satisfaction Aa sare a oe SoS norco wire aaa eee the dma he See (i the debt owing by the debtor to the creditor, or, if two petition, the aggregate amount of debts owing to takas; (il) such creditors have a prima bankruptcy * (ii) the act of Bankruptey on which before the presentation of the Q) A secured creditor shall either state hi the creditors or give an estimate of ‘deemed to have opted to be treated as an Z Scanned with CamScannerPlease note : A creditor of debtor is entitled to present a petition if a tions i it Toot senwct. The day on WEEE Ot petition if all the three conditions in clause i, ii and ted should be exclu in computing if day be olay i should be exclude, Extension of tin wl not be goed eae so ee wrong Court but Court may excuse del. 8 y excuse dela need not be creditor o ication; is enough if he is so on date of petition. wed not be creditor on date of adjudication: it When debtor can appl 1. A debtor shall not present an Bankruptcy petition unless he is specifically mentioned in his plaint that he is unable to pay his debts, and- () his debts amount to taka twenty thousand; 0, (ii) he is under arrest or imprisonment in execution of the decree of any Court for the payment of money; or 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 under this Act has been annulled, 4 owing to his failure to apply, o to prosecute an application for his discharge. shall not be entitled é to present an Bankruptcy petition-without the leave of the Court by: which the adjudication order c was annulled (Sec. 13(2)]. 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 ec _ the case may be, or that the petit is founded on facts substar y nt ose petition, the burden of proving inabil continue at the time of making the application and it must be in execution of a decree forthe payment of money. Arrest after presentation of petition cannot form basis of adjudication. What Bankruptcy petitions should contain: A. Petition by debtor: Itshall contain the following particulars : (a) a statement that the debtor is unable to pay his debts; (b) the place where he ordinarily resides or carries on business or personally works for gain, or if he was been arrested or imprisoned, the place where heisincustody; (©) the court by whose order he has been arre made for the attachment of his property, which any such order has been made; residences ofhis creditors so far as | reasonable care and diligence, be ascer (©) the amount and particulars of all his prope all such property not consisting of mone} not be found; and iii) a declaration of his willings such property. Scanned with CamScanner1) a statement whether the debtor has on any previous occasion filed a petition to be adjudged 0 minsolvent.andl where such a petition has been filed () if such petition has been vismissed, the reasons for such dismissal, or concise particulars of the bankruptcy, (i) if the debtor has been adjudged an insolvent, concise part tretoing statement whether any previous adjudication has been annulled and, if so, the grounds therefore. B. Petition by creditors : te chal! set forth the parti use (b) of sub-se shall also specified above : (@) the act of insolvency committed by such debtor together with the date of its commission; and (b) the amount and particulars of his or their pecuniary claim or claims against such debtor. Please note : Every bankruptcy petition shall be in writing and shall be signed and verified in the manner Eererotayeh ihe Code of Cel Procedure, 1908. n case of secured ereditor he must state the particulars in Section 9@)A minor cannorbe declared insolvent or made a party 0 a petition for bankruptcy. Procedure of admission of Plaint, Hearing of Insolvency Petitions (Provisions & Procedure): On the admission of an insolvency petition (Provisions of Oxder 7 of *ovisions of Order 7 of Coe of Cit Proc sede et shal apply) the Cour shall mate an order fixing day for aceon ter shall be given to creditors and where terpeeinge ee ges : him (Sec. 21). At this stage the Court may appoint it and eset bs given to and where the debtor is the ms of Sec. 64(1). A i ee) (1). A receiver roa hearing, the Court shall require proof (a) that the creditor or debior is entitled to present 1€ Purpose of proving his i the petition. Provided that for th inability to pay, the’debtor shall be Tequired to furnish only proof of prima facie grounds for believing the same; (b) that the debtor, ‘he does not appear on a petition presented by a creditor, has been served with a notice admitting, the petition, and (c) that the debtor has committed the act of insolvency alleged against him. Ifthe debtor is present, the Court shall also examine him as to his conduct, dealings and property and the creditors shall have the right to question the debtor thereon (Sec. 27). ‘The petition of a creditor shall be dismissed, where the court is not satisfied with the proof of his tight to petition or of service of notice on debtor, or of the alleged act of insolvency, or is satisfied by the debtor that he is able to pay his debts or he is not a willful defaulter, or that for any other sufficient reason no order sought lo be made. The petition of debtor shall be dismissed if the court is not satisfied of his right to petition (Sec.28), Please note: At the time of adjudication, the only question for consideration, is whether an act of bankruptcy is committed as mentioned under Sec. 9, and ifan act of bankruptcy is committed and the other of the Act are taken care of an order of adjudication can be made. Ifa petition by creditor is dismissed under Sec. 2, the Court may award compensation (under Sec. 29) to the debtor not exceeding Tk.1,00,000/- if the petition was frivolous or vexatious, 36 Scanned with CamScannerOrder of adjudication : If the Court does not dismiss the creditor's of the debtor's petition, as the case may be, it shall make an order of adjudication declaring the debtor insolvent, and shall in such order specify the period within which the debtor shall apply for his discharge (Sec. 30). The notice of an order of adjudication shall be published in the official gazette (Sec. 34). Effect / legal consequence of order of adjudication : On the making of an order of adjudication (a) The bankrupt shall aid to the utmost of his power in the realization of his property and the distribution of the proceeds among his creditors (Sec. 31(1). (b) The whole of the property of the bankrupt vests in the Court or in a receiver, and become divisible among his creditors (Sec. 31(2). () During the pendency of the bankruptcy proceedings, the bankrupt's creditors cannot commence any suit or other legal proceedings or have any remedy against the insolvent's property without the leave of the Court. If is to be noted, however, that the right of a secured creditor to realize or otherwise to deal with his security is not affected in any way by an order of adjudication [Sec. 31(3) & (4)]. @) ‘An order of adjudication relates back to and takes effect from the date of the of the petition on which itis made, It means that the title of ‘ihe date of the presentation of the petition, eae (©) Solong as the bankrupt remains undischarged, he is disqualified from (i) being appointed or acting as a Magistrate, (ii) being elected to any office of a local authority, and (jii) being, elected or sitting or voting as member of any local authority (9) Any Court in which a suit or other proceeding is pending against a debtor shall, on proof that an order of adjudication has centinue on such term as it may impose. Which properties are available for creditors : Exempted Property: Notwithstanding anything contained in any other provisions of this Act the following property of an individual debtor shall not be liable to be taken over, or vested under Section 23 or 31 respectively, and such property shall be known as exempted property, namely (@) the tools, if any, used by the debtor himself; Es (b) wearing appeal and household furnishing moHiBE children; ‘ (Jf debtor's un-mortgaged dwelling place or square feet of land or plinth in one or mo 5000 square feet of land or plinth in one or mo Provided that the total value of the articles sp 3,00,000 (three lac). Scanned with CamScanner(©) Where an bankrupt submits a composition or scheme which is approved by the Court. Proceeding after adjudication: Protection Order of a Bankrupt: fon order tothe insolvent on his application at any time after the order Iy to all the debis of the insolvent or only 19 some ‘of them as the Court My aesace for such time as the Court may direct. It may be revoked or varewed at the discretion of the Court. The effect of order is © protect the insolvent from arrest or terion in prison for any debi. Ifthe insolvent is already in jail, he shall be entitled to be released on the grant of a protection order. Court may grant a protecti of adjudication. It may appl may think fit and shall be ‘Annulment of Adjudication Order & its effect (Sec. 40): ‘An order of adjudication may be annulled by the Court in the following cases : (2) Where in the opinion of the Court a debtor ought not to have been adjudged insolvent, 8 where a minor has been adjudged insolvent. ) Where it x proved tothe satisfaction of the Court that the debts of the bankruupt have been paid in ful (@) Where an order of adjudication has been mace on a debtor's petition presented without leave of the Court where such leave was necessary. (Whom oor of eh SR oe i his ten dt oe a Se ta ent ant ap Seep rae cee ee ae Coa Court may annul its order of adjudication. a ty SS Core aaa duly mad ‘subject as aforesaid, the property of ‘as the Court may appoint, or, in default of any such apy to the extent of his right or interests therein on such condi in writing, declare. Composition and Scheme of Arrangement: “ settlement between the insolvent and his thing less than the amount actually due to ‘A ‘composition’ or ‘a ‘scheme of arrangement’ is a creditors whereby the creditors agree to accept som: them, in full settlement of their claims After the order of adjudication is made, the debtor may. submit to th 4 proposal for ‘composition’ or ‘arrangement’ of his debis in ‘Assignee or Receiver sends a copy of the proposal to each c creditors, If in the consideration of the proposal, 2/3 (two | sir {who's debts are proved), accept the proposal, the same is debtor may then apply to the Court for its approval. Ifthe the scheme becomes binding on all the creditors. The debtor estate as if he had not been adjudged in insolvent [Sec. 43(1)]. Ifthe debtor defaults in fulfilling any term of the scheme, he composition or scheme shall stand annulled. 38 Scanned with CamScanner} pischarge (Sec. 47): (1) A debtor may, at any time after the order of adjudication and shall, within the period specified by the Coury, apply to the Court for an order of discharge, and the Coutt shall fix a day, notice whereof shall be given in such manner as may be prescribed, for hearing such application, and any objections which may be made thereto. (2) Subject to the above provisions the Court may, after considering the objections of any creditor and, where a receiver has been appointed, the report of the receiver - = grant or retuse an ausouute urder vi discharge; or - suspend the operation of the order for a specified time; or + grant an order of discharge subject to any conditions with respect to any earning or income which may afterwards become due to the insolvent or with respect of his after- acquired property. Effect of order of discharge: An order of discharge shall not release the Bankrupt from, ~ any debt or liability in respect of which he has obtained forbearance by any fraud to Appeals: Section 96 of the Bankruptcy Act, 1997, provides for appeals. 1. Subject to the other provisions of this Act, the debtor, any creditor, the Receiver or any other person aggrieved by a decision or an order made in the exercise of bankruptcy jurisdiction by tn Additonal District Judge or District Judge may prefers appeal before the Division of the Supreme Court. whose function shall be to exclusively deal with the + Review: 1 96 can be preferred, any person the date of making such order or may be, who made the order or namely Scanned with CamScannera) b) there is a clear mistake or error in the order or decision. which resulted in miscarriage of justice to the applicant; or the applicant, after due diligence and care, could not produce a material — evidence, which was not within his knowledge or control and which would have substantially benefited him had it been produced at the time of making the order or decision. Scanned with CamScannerBUSINESS LAW //BANKRUPTCY ACT.1997 BANKRUPTCY ACT, 1997 01. What do you understand by Bankruptey’? Ranknuptey is also referred to as the insolvency. Ii means one unable vo pay his debts. It has two conditions; L.A person is to be debtor who does not have sulficient assets to pay ofThis debts. 2. He will do any act of insolvency 02. What are the purposes of the law of bankruptcy” The purposes of the kny are as under: Distribution of assets of the insolent rationally, Settlement ofall liabilities oF the insolvent to make him liability free, + To save the interest of creditors. ‘New life starting of the insolvent (Or - Which inst Who deckred insolvenvbankrupt As perSection Hof the Bankruptcy Act. 199° 5 ‘¢ maintains his principal business off on who: or is domiciled in Gangtndesh, + ordinary resided. hat dwelling house. or place of business in Bangladesh at any time within a year immediately betore filing ofthe plaint. + generally carvies on business in Bangladesh by’ agent. Who may not be dee! lured insolvent/bankrupt: © Any Govt. omanization ot judicial body. © Any charitable or religious bods. whose principal objective i © Any autonomous body © Such stamtory bodi (04. What are the considerations foe filing pa ‘A debtor shall not be entitled 1 Fike a ph pay his debts and: ‘ Further mention in the paint © He is under anest or On onder of attachment hus heer Scanned with CamScanner