Report No. 26
5. Conditions on which creditor may petition.-(1) A creditor shall not be entitled to present an insolvency petition against a debtor unless-
(a) the debt owing by the debtor to the creditor, or, if two or more creditors join in the petition, the aggregate amount of debts owing to such creditors, amounts to five hundred rupees, and
(b) the debt is a liquidated sum payable either immediately or at some certain future time, and
(c) the act of insolvency on which the petition is grounded has occurred within three months before the presentation of the petition:
Provided that where the said period of three months referred to in clause (c) expires on a day when the court is closed, the insolvency petition may be presented on the day on which the court re-opens.
[Section 9(1), P.A.] [Cf. section 12(1), P.T.A.]
Explanation.-For the purposes of clause (c), where the act of insolvency is constituted by a transaction which is required to be made by a registered instrument under any law for the time being in force, and the transaction is made by such registered instrument, the date of registration of the instrument shall be deemed to be the date on which the act of insolvency has occurred.
(2) If the petitioning creditor is a secured creditor, he shall in his petition either state that he is willing to relinquish his security for the benefit of the creditors in the event of the debtor being adjudged insolvent, or give an estimate of the value of the security; in the latter case, he may be admitted as a petitioning creditor to the extent of the balance of the debt due to him after deducting the value so estimated in the same way as if he were an unsecured creditor.
[Section 9(2), P.A.] [Cf. section 12(2), P.T.A.]
(3) In computing the period of three months referred to in clause (c) of sub-section (1), the time during which the petitioner has been prosecuting with due diligence another insolvency proceeding, whether in a court of first instance or of appeal or revision, against the debtor shall be excluded, where the proceeding is based on the same act of insolvency and is prosecuted in good faith in a court which, from defect of jurisdiction, is unable to entertain it.
[Cf. section 14, Limitation Act, 1963 (36 of 1963)]
Explanation.-For the purposes of sub-section (3)
(a) in excluding the time during which a former insolvency proceeding was pending, the day on which that proceeding was instituted and the day on which it ended shall both be counted;
(b) a petitioner resisting an appeal shall be deemed to be prosecuting a proceeding;
(c) "petitioner" includes any person from or through whom the petitioner derives his right to present the petition;
[Cf. section 2(a), Limitation Act, 1963]
(d) nothing shall be deemed to be done in good faith which is not done with due care and attention.
[Cf. section 2(h), Limitation Act, 1963]