DISCHARGE OF

INSOLVENT
PRESENTED BY:
SHEETAL
ROLL NO. 38
 Introduction
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• It is the last stage in the insolvency proceedings.
• From the date of the ‘order of adjudication’ to the date from which ‘order
of discharge’ operates, the insolvent debtor is an ‘undischarged insolvent’
and suffers from certain personal disqualifications i.e loses of civic rights.
• It is only after an ‘absolute discharge order’ is made by the court that the
insolvent gets a fresh start in life, and the insolvent and his after-acquired
property is freed from the burden of debts provable in his insolvency.
• After the ‘order of discharge’, the stigma of insolvency is removed from
the name of the insolvent debtor and he becomes a free man again like an
ordinary citizen.
 Procedure regarding discharge
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◈ Under the Presidency Towns Insolvency Act, the insolvent may apply
for discharge at any time after the order of adjudication, but the
application shall not be heard until his public examination is over
except where such an examination has been dispensed with.

◈ Under the Provincial Insolvency Act, the insolvent must apply for
discharge within the time specified by the court in the adjudication
order itself.
 Powers of the court
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◈ On receiving the application for discharge the court fixes a day for the
hearing of the application and asks the Official Assignee or Receiver
to submit his report regarding the insolvent’s conduct as to whether he
has aided to the utmost of his power in the realisation of his property
and distribution of the proceeds among his creditors.
◈ All the creditors are also duly notified about the date of hearing. On
the appointed date of hearing , the court hears the insolvent, the
creditors and the Official Assignee.
◈ After hearing to all the parties the court may:
(a) Grant an absolute order of discharge
(b) Grant a conditional discharge
(c) Refuse to grant an order of discharge
 Refusal of absolute discharge
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◈ An order of discharge which is to take effect immediately and to which no
conditions are attached is an absolute or unconditional order of discharge.
◈ The government may refuse to grant an ‘absolute order of discharge’ under
these circumstances:
 When the insolvent’s assets are not of such value as stated under the
Provincial Insolvency Act and the Presidency Towns Insolvency, but can
satisfy the court his innocence.
 When the insolvent has failed to keep and present such books of account as
are usual and proper in the business but discloses his business transactions
and financial position for 3 years immediately preceding his insolvency.
 When the insolvent has continued to trade after knowing himself to be
insolvent.
 When the insolvent has contracted any debt without any reasonable
expectation that he would be able to pay it.
 Contd…
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 When the insolvent has failed to account satisfactorily for any loss of
assets or for any deficiency of assets to meet his liabilities
 When the insolvency has been caused by his rash and hazardous
speculations , extravagant standard of living, gambling or gross neglect
of business affairs.
 When the insolvent has , within 3 months preceding the date of the
presentation of the insolvency petition, given an undue preference to
any presentation of the insolvency petition, given an undue preference
to any of his creditors knowing well that he was unable to pay his debts
in full as they become due.
 When the insolvent has been guilty of any fraud or fraudulent breach of
trust or misconduct in the course of insolvent proceedings.
 Contd…..
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 When the insolvent has already been adjudged on any previous
occasion
 When the insolvent has put any of his creditors to unnecessary
expense by a frivolous or vexatious defence to any suit properly
brought against him
 When the insolvent has, within 3 months preceding the date of
presentation of insolvency petition, incurred unjustifiable expense by
bringing a frivolous or vexations suit
 Effects of Order of Discharge
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1. An order of discharge shall release the insolvent from all ‘debts
provable in insolvency’, except for the following debts :
• Any debts due to the government
• Any debt or liability incurred by means of fraud or fraudulent breach of
trust to which he was a party
• Any debt or liability in respect of which he has obtained forbearance
by any fraud to which was a party; or
• Any liability under a ‘Maintenance Order’ made under the Code of
Criminal Procedure.
2. An order of discharge shall not release any person who, at the date of
presentation of the insolvency petition, was a co-debtor with the
insolvent or was surety for him.
 Contd…
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3. An order of discharge removes the personal disqualification from
which an undischarged insolvent suffers.
4. An order of discharge does not relieve the insolvent from debts
incurred by him after adjudication, though before discharge, because
these are ‘debts not provable in insolvency’
5. An order of discharge also does not exempt the insolvent from being
proceeded against for any criminal offence committed under Indian
Penal Code or the Insolvency Acts,
Thanks!

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