Report No. 26

4. Consolidation of the two Insolvency Acts into one.-The Hon'ble Sir H. Erle Richards while moving the Bill in the Council which led to the enactment of the Presidency-towns Insolvency Act, 1909, stated:

"The difference in the conditions between the Presidency-towns and the mofussil makes it inexpedient to have one uniform Act for the whole of India at the present time but there will be little difficulty in bringing the two Acts into complete agreement if it be thought wise to do so in the future."

This view was expressed more than half a century ago. The difference in the conditions between the Presidency-towns and the mofussil which led to the enactment of two separate insolvency Acts has now largely disappeared. India is being rapidly industrialised and with the implementation of the Five Year Plans, trade and commerce has spread into many other towns besides the Presidency-towns of Bombay, Calcutta and Madras. Time is, therefore, ripe for consolidating the two insolvency Acts and having one uniform law of insolvency for the whole of India, including the territories comprised in the former Part B States to which neither the Presidency nor the Provincial Act at present applies.

5. Objects of Insolvency Law.-Insolvency law has a two-fold purpose-(i) to give relief to the debtor from the harassment of his creditors whose claims he is unable to meet, and (ii) to provide a machinery by which creditors who are not secured in the payment of their debts are to be satisfied. It is based on the Roman principle cessio bonorum, that is to say, surrender by the debtor of all his goods for the benefit of his creditors in return for immunity from court process. Broadly speaking, the existing insolvency law contained in the Presidency-towns Insolvency Act, 1909 and the Provincial Insolvency Act, 1920 is sound in principle and has worked satisfactorily in practice. Apart from combining the two Acts, there is, therefore, little scope for any substantial change in the law.