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Report No. 26

Clause 38

General.-1. This clause deals with the powers of the court to grant or refuse discharge. The corresponding provision in the Presidency Act is section 39, and in the Provincikl Act, section 42.

2. Under the Presidency Act, the court is bound to refuse discharge when the insolvent has committed any offence under the Insolvency Act or under sections 421 to 424 of the Indian Penal Code. Then follows the provision that on proof of certain facts the court may pass one of the four orders mentioned in section 39(1). [Section 39(2) of the Presidency Act sets out those facts.] Thus, under the Presidency Act, there is a distinction between cases where the Court has no option but to dismiss an application for discharge, and cases in which there is a discretion to pass one of the four orders mentioned in section 39(1).

Section 41(2) of the Provincial Act provides that the court may pass one of the three kinds of orders mentioned therein, and section 42(1) sets out the circumstances in which the court must refuse an absolute discharge. Under the scheme of the Provincial Act, the court is not bound in any case to dismiss an application for discharge. While it must refuse absolute discharge when the circumstances mentioned in section 42(1) are established, it has nevertheless power to pass other kinds of orders under section 41(2) in those cases.

3. Where, however, the court has a discretion, the manner of exercising the discretion is described more elaborately in the Presidency Act, which enumerates the various possible orders.

4. The question is whether the distinction made in section 39 of the Presidency Act between cases where discharge must be refused and cases in which the court may pass any one of the orders mentioned in the section should be maintained. In England, section 48 of the Bankruptcy Act, 1869, gave a discretion to the court to grant or refuse discharge. Then came section 28 of the Bankruptcy Act. 1883, and it provided that the court should refuse discharge in any case where the insolvent has committed certain offences.

Subsequent legislation in England has departed from the provision enacted in section 28 of the Bankruptcy Act, 1883. Section 8 of the Bankruptcy Act, 1890, provided that the court must refuse discharge in cases where the bankrupt has committed any felony or misdemeanour unless for special reasons, the court otherwise determines.

This was substantially reproduced in section 26 of the Bankruptcy Act, 1914, but it was amended in the year 1926, and the section as it now stands1 leaves it to the court to pass any one of the four kinds of orders mentioned therein even when the bankrupt has committed any misdemeanour or felony connected with his bankruptcy. Section 39 of the Presidency Act substantially reproduces the law as enacted in section 28 of the Bankruptcy Act, 1883, while section 42 of the Provincial Act is nearer to section 26 of the Bankruptcy Act, 1914, as it now stands. It is considered that in all cases, the court should have a discretion2 to pass any of the various orders enumerated in section 39(1), Presidency Act. Compare section 26(2), proviso. English Act. Necessary change has been made.

Sub-clause (1).-See points mentioned already3. In other respects, it follows the Presidency Act.

Sub-clause (2)-Grounds of refusal, etc.-A paragraph has been inserted corresponding to section 42(1)(h) of the Provincial Insolvency Act, there being nothing corresponding to it in the Presidency Act. Paragraphs have also been inserted which correspond to clauses (g), (h) and (o) in section 39 of the Presidency Act, there being nothing corresponding to them in section 42 of the Provincial Act.

In the paragraph relating to assets, the proportion of eight annas (50 nP.) has been adopted from the Provincial Act, in preference to four annas mentioned in section 39(2)(a) of the Presidency Act. The proposition of 50 nP., is more suitable in the Mofussil (which will constitute the larger part of the territories to which the Bill will extend).

It has been suggested that the paragraph relating to trading by the insolvent should be made subject to the provisions of section 66 of the Provincial Act, under which the court can appoint the insolvent to carry on his trade for the benefit of the creditors. No such clarification seems to be necessary, because the various Acts mentioned in this clause relate to a stage prior to the insolvency and not subsequent to the insolvency.

As to offences under I.P.C., section 39(1), P.T.A. bars discharge in such cases, but it is considered that4 the court should have a discretion in all cases.

Sub-clause (3)-Report to be evidence.-This provision (Report to be evidence) is relevant for the preceding clause also5. That has been made clear.

Section 39(4) of the Presidency Act says that the report shall be "prima facie" evidence. This has not been adopted, as it has been considered sufficient to provide that the report shall be evidence.

1. See Williams, p. 126.

2. Cf the suggestion made by Mulla, (1958), p. 370, para. 400.

3. See "General" above.

4. See "General" above.

5. Clause 37.



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