The Provincial Insolvency Act, 1920
The Provincial Insolvency Act, 1920 (Act No. 5 of 1920) is a Central law that consolidates and amends the law on insolvency as administered by Courts having jurisdiction outside the Presidency towns. It sets out which courts can hear insolvency matters, what counts as an act of insolvency, and the process from filing an insolvency petition through adjudication, administration of property, and discharge. The source text also shows that the Act has been adapted and amended in places, including later insertions and substitutions noted in the footnotes.
What this document is
The Provincial Insolvency Act, 1920 (Act No. 5 of 1920) is a Central Act to consolidate and amend the law relating to insolvency as administered by Courts having jurisdiction outside the Presidency towns. It lays down the court structure, the triggers for insolvency proceedings, and the steps from petition to discharge, including how an insolvent debtor’s property is handled.
Who it affects in Tamil Nadu
- Debtors who may be unable to pay debts and may be proceeded against under insolvency law.
- Creditors (including decree holders) who want to start insolvency proceedings.
- Secured creditors (mortgage, charge, or lien holders) and other claimants against a debtor’s estate.
- Property owners and buyers dealing with property connected to a person who has been adjudged insolvent, because the Act deals with the insolvent’s “property” and the administration and realisation of that property.
Where it applies and which courts deal with it
- The Act extends to the whole of India except the territories which, immediately before the 1st November, 1956, were comprised in Part B States, and the Scheduled Districts.
- District Courts are the courts having jurisdiction under the Act.
- The State Government may, by notification in the Official Gazette, invest a court subordinate to a District Court with jurisdiction in any class of cases, giving it concurrent jurisdiction within its local limits.
- A Court of Small Causes is deemed to be subordinate to the District Court for the purposes of the Act.
Key concepts and powers that matter in practice
- Definitions include:
- “Creditor” includes a decree holder, and “debt” includes a judgment debt.
- “Property” includes any property over which a person has a disposing power which he may exercise for his own benefit.
- “Secured creditor” means a person holding a mortgage, charge or lien on the debtor’s property as security for a debt.
- The Court has full power to decide questions of title, priority, law, and fact arising in insolvency, and its decision is final and binding as between the debtor and estate and claimants.
- If the Court believes the debtor has a saleable interest in property, it may sell such interest without further inquiry, in a manner and on conditions it thinks fit.
What counts as an act of insolvency (examples)
A debtor commits an act of insolvency in several situations, including:
- Transferring all or substantially all property for the benefit of creditors generally.
- Transferring property with intent to defeat or delay creditors.
- Property being sold in execution of a money decree.
- Petitioning to be adjudged an insolvent.
- Giving notice of suspension, or intended suspension, of payment of debts.
- Imprisonment in execution of a money decree.
- Non compliance with an insolvency notice served after a final money decree or order, subject to the conditions and safeguards stated in the Act.
This summary is generated from the source document to help you find what is relevant. The PDF above is authoritative. For advice on your own property, use LandLens One or speak to a qualified professional.
Common questions
Which court will handle an insolvency case under the Provincial Insolvency Act, 1920?
District Courts have jurisdiction under the Act. The State Government may also invest a court subordinate to a District Court with jurisdiction in any class of cases, giving it concurrent jurisdiction within its local limits.
Does the Act define who is a creditor and what property can be covered?
Yes. “Creditor” includes a decree holder, “debt” includes a judgment debt, and “property” includes any property over which a person has a disposing power which he may exercise for his own benefit.
What is an insolvency notice and why does it matter?
If a creditor has a final money decree or order and serves an insolvency notice as provided, the debtor’s failure to comply within the specified period can be treated as an act of insolvency, subject to the Act’s conditions, including the debtor’s ability to apply to set aside the notice.
Can the insolvency court decide disputes about title or priority over property?
Yes. Subject to the Act, the Court has full power to decide questions of title or priority and other questions of law or fact arising in insolvency, and the decision is final and binding between the debtor and estate and claimants.
