Report No. 26

13. Acts of Insolvency.-We propose that a new Act of insolvency on the lines of section 1(1)(g) of the English Bankruptcy Act, 1914 should find a place in the revised law. Under the English Act it is open to a person who has obtained a decree or order for the payment of money to give notice to the debtor, calling upon him to pay up the amount due under the decree or order and failure to do so amounts to an act of insolvency. It may be urged against such a provision, that it is liable to be abused by scheming creditors and may be used for ulterior purposes. But in Bombay a provision based on section 1(1)(g) of the English Act has already been enacted both in the Presidency Act and in the Provincial Act1. The Bombay amendment seems to have worked satisfactorily for about a quarter of a century and does not seem to have led to any abuse. In this connection reference may usefully be made to the recommendation made in an earlier report2 of the Law Commission in the following terms:

"the most effective way of instilling a healthy fear in the minds of dishonest judgment-debtors would be to enable the Court to adjudicate him an insolvent if he does not pay the decretal amount after notice by the decree-holder, by specifying a period within which it should be paid, on the lines of the Bombay amendment to the Presidency Towns Insolvency Act."

We, therefore, recommend that the Bombay Amendment should form part of the general insolvency law in India.3

1. See the Bombay Insolvency Amendment Act, 1939 (15 of 1939).

2. Third Report (Limitation Act), para. 171.

3. See App I, clause 3(2).