 bill no  59 of  2016 the personal bankruptcy (declaration and rehabilitation) bill, 2016 byshri nishikant dubey, mp a billto provide for mechanism through which a person who is unable to pay off his debts shall be declared bankrupt and rehabilitated and for matters connected therewith chapter i preliminarybe  it enacted by parliament in the sixty-seventh year of the republic of india as follows:—(3) it shall come into force on such date, as the appropriate government may, by notification in the official gazette, appoint, and different dates may be appointed for coming into force of different provisions of this act, and any reference in any such provision to the commencement of this act shall be construed as a reference to the coming into force of that provision5definitions2 in this act, unless the context otherwise requires,—(a) "appropriate government" means in the case of a state, the government of that state, and in all other cases, the central government;10(b) "bankruptcy" means the legal status of an individual citizen who is unable to pay to his creditors;(c) "creditor" means an individual, a bank, a non-banking financial intermediary or any such registered or non-registered institution which does the banking function of accepting deposits and lending money;(d) "debt" means an amount owed to a creditor from debtor;15(e) "debtor" means an individual who owes money to a creditor; (f) "defaulter" means any debtor who does not repay the debt despite adequate liquidity;(g) "prescribed" means prescribed by the rules made under this act;20(h) "secured creditor" means any creditor who has the legal right to take a specific property of the debtor and sell it in case of default in payment;(i) "tribunal" means the special bankruptcy tribunal established under section3; and(j) "trustee" means an officer attached to a tribunal under section 5 chapter ii25 establishment of tribunalestablishment of the tribunal3 (1) the appropriate government shall, by notification in the official gazette, establish a special bankruptcy tribunal, in every district for exercising the jurisdiction, power and authority conferred on such tribunals under this act(2) the tribunal shall consist of—30(a) a chairperson, to be appointed by the appropriate government, who has been a judge of the high court for a period of not less than five years; and35(b) not less than three judicial members, to be appointed by the appropriate government, in such manner, as may be prescribed, from amongst the persons who have served as judicial officer for at least five years in a civil court or district court of any state 4 (1) the chairperson and the judicial members of the tribunal shall hold office for a term of five years and shall be eligible for re-appointment only onceterms, salaries and allowances of members(2) the salaries and allowances payable to and other terms and conditions of service of the chairperson and the judicial members shall be such as may be prescribed405 every tribunal shall have one trustee who shall take charge of the property of the debtor who has applied to be declared as bankrupt and who shall reduce every property of the debtor to cash, except the exempt properties under section 14 and distribute the cash to creditors within three months of such applicationtrustee to reduce property to cash and distribute among creditors6 the appropriate government shall provide such number of officers and staff to the tribunal, as may be prescribed, for carrying out the purposes of this actappointment of other officers to the tribunal7 the appropriate government may, in consultation with the chairpersons of the tribunals, make rules regulating the practices and procedures of the tribunalappropriate government to make rules5 chapter iii declaring  bankruptcy8 no debtor shall be eligible to file a petition for bankruptcy if he—declaration of bankruptcy by a debtor(i) transfers his property or any part thereof with the intent not to repay or delaypayment of his debt to his creditors;10(ii) transfers his property, or any part thereof, the transfer being void due tofraudulent transfer under this act or any other enactment for the time being in force for being adjudged an insolvent;15(iii) intends not to repay or delay payment of his debt to his creditors by departingor remaining out of the territories to which the act extends or departs from his dwelling house or usual place of business or otherwise absent himself or secludes himself so as to deprive his creditors of the means of communicating with him;(iv) gives notice to any of his creditors that he has suspended, or that he isabout to suspend payment of his debts; or(v) is sentenced to imprisonment by any court9 a debtor shall be entitled to file a bankruptcy petition if—20| (           | i   | ) he is a non-wilful defaulter;                               ||-------------|-----|---------------------------------------------------------------|| entitlement |     |                                                               || for filing  |     |                                                               || bankruptcy |     |                                                               || (           | ii  | ) his debt amount to rupees ten thousand or more; or          || (           | iii | ) he is under arrest or imprisonment for payment of money; or || (           | iv  | ) an order of attachment has been made against his property  |2510 a debtor, entitled to file a bankruptcy petition, shall do so before the specialbankruptcy tribunal of the district where he residespetition to befiled inappropriate jurisdiction contents ofthe petition11 (1) each bankruptcy petition shall be in writing, duly signed and verified in such manner as may be prescribed(2) without prejudice to the generality of foregoing provisions, each bankruptcy petition shall contain:30| (                                                                                   | i   | ) a statement that the debtor is unable to pay his debts;                      ||-------------------------------------------------------------------------------------|-----|--------------------------------------------------------------------------------|| (                                                                                   | ii  | ) the place where he ordinarily resides or carries on business or personally   || works, or, if he has been arrested or imprisoned, the place where he is in custody; |     |                                                                                || (                                                                                   | iii | ) the order of the court under which he has been arrested or imprisoned, or an || order which has been made for the attachment of his property;                       |     |                                                                                |35(iv) the amount and particulars of all pecuniary claims against him, together with the names and residences of his creditors;(v) the amount and particulars of his property, a specification of the value of all such property not consisting of money, the place or places at which any such property is located; and40(vi) a statement whether the debtor has on any previous occasion filed a petition to be adjudged an insolvent and in that case— (a) if such petition has been dismissed, the reasons for such dismissal, or5(b) if the debtor has been adjudged an insolvent, concise particulars of the insolvency, including a statement whether any previous adjudication has been annulled and, if so, the grounds therefor12 (1) a creditor shall file a bankruptcy petition against his debtor, only if he is of the opinion that the debtor is a wilful defaultercreditor to file bankruptcy petition10(2) every bankruptcy petition presented by a creditor shall set forth the full particulars of the debtor and shall also specify,—(i) the act of insolvency committed by such debtor, together with the date of its commission;(ii) the amount and particulars of his pecuniary claim against such debtor:15provided that no bankruptcy petition shall be filed against corporations, joint ventures, companies or partnerships under this act5 of 1908(3) the procedure laid down in the code of civil procedure, 1908 with respect to the admission of complaints, shall so far as it is applicable, be followed in the case of bankruptcy petitions(4) no petition, whether presented by a debtor or a creditor, shall be withdrawn without the leave of the tribunal20 chapter  iv procedure  at  the  tribunal2513 (1) subject to the conditions specified in this act, once a creditor or debtor files a petition of bankruptcy after following the procedures laid down in this act, the tribunal may issue an order adjudging bankruptcy of the debtorprocedure for adjudging bankruptcy of debtor(2)  the tribunal shall, by order, fix a date for hearing the petition after receiving a bankruptcy petition and the notice of such an order fixing the date of hearing shall be served to the debtor as well as the creditors30(3)  on the day fixed for the hearing of the petition or on any other day to which the hearing is postponed, the debtor or creditor, as the case may be, shall prove before the tribunal that he is entitled to file the petition:(a)  where the debtor is the petitioner, he shall furnish documents to prove that he is a non-wilful defaulter; and35(b) where the creditor is the petitioner, he shall furnish documents to prove that the debtor is a wilful defaulter (4) the tribunal shall, if deem necessary grant time to the debtor or creditor, as the case may be, to produce further evidence on the case(5) the tribunal shall dismiss the petition, after due examination of the documents and other evidences, if, in the case of a petition being filed by—40(a)  a debtor, the tribunal is not satisfied that he is not a non-wilful defaulter; and (b) a creditor, the tribunal is not satisfied that the debtor is not a wilful defaulter45(6) the tribunal shall order an enquiry to be conducted to establish that the current monthly income of the debtor is not higher than a desired limit as decided by the tribunal, given that such income is not above the median income of the state where the debtor resides;(7)  if the petition, after due examination of evidence, is accepted, then the tribunal shall issue an order of bankruptcy adjudging the debtor as bankrupt, and the copy of such an order shall be served both on the debtor and the creditor14 once the order is made, the tribunal shall entrust the properties, if any, of the debtor, with the trustee of the tribunal, except the following exempt properties—5| (              | a   | ) the house of the debtor;           ||----------------|-----|--------------------------------------|| (              | b   | ) the area where the house is built; || power to       |     |                                      || entrust        |     |                                      || property with  |     |                                      || trustee and    |     |                                      || list of exempt |     |                                      || properties    |     |                                      |(c) such essential utilities and utensils required for the house, as may be prescribed; and10(d) the essential instruments required by debtor, who is a farmer, carpenter orsuch other professional, to continue his work15 the trustee shall be responsible to liquidate the properties to money in such manner, as may be prescribed, and distribute the money to the creditors in the following order of preference—responsibility of trustee to liquidate properties15(i) fully secured creditors; (ii) partly secured creditors to the extent they are secured; (iii) realization of expenses and remuneration of the trustee; (iv) preferential creditors; and (v) unsecured creditors:20provided that nothing in this section shall affect the power of any secured creditor to realise his security in the manner in which he is otherwise entitledcertificate of discharge16 (1) whether the tribunal, after distribution of money, is convinced that the default in payments by the debtor was not wilful and the conduct of the debtor has been satisfactory during the tribunal proceedings, it shall issue a discharge certificate to the debtor25(2)  on obtaining the certificate of discharge, the unpaid debts shall stand cancelled and the debtor not be liable to the demands of his creditors(3) the time taken from the filing of the petition to the issue of the certificate of discharge shall not be more than three months:30provided that if the tribunal has reasons to believe that the procedure of liquidating the properties of a debtor shall take more time, on the request of the trustee, the tribunal shall grant an additional time not exceeding one month for the completion of all procedures(4) the certificate of discharge shall not release the debtor from—(a) any debt due to the government;35(b) any debt or liability incurred by any means of fraud or fraudulent breach oftrust to which he is party;(c) any debt or liability in respect of which debtor was granted forbearance by fraud on his part; or2 of 1974(d) any liability under an order for maintenance made under section 125 of the code of criminal procedure, 1973 chapter v rehabilitationprotection to debtor and kin17 after the issue of the order of bankruptcy, the debtor, his immediate relatives and his properties shall be protected from all coercive methods, physical and emotional, of the creditors or any intermediary thereofb a n k r u p t c y rehabilitation fund18 the appropriate government shall consistute a bankruptcy rehabilitation fund to help and rehabilitate the declared bankrupts within a period of one year from the coming into force of this act, and ensure that—(i) every person who is declared bankrupt by the tribunal by order of bankruptcy is provided with minimum social benefits by the appropriate government; and5(ii) the debtor, if the tribunal feels necessary, shall be recommended to be given loan from the bankruptcy rehabilitation fund at such rate of interest, as may be prescribed by the tribunal1019 (1) a debtor, who is declared bankrupt with no properties, except his house to pay off debts, shall submit a proposal outlining his plan to pay off the debts(2) the plan to pay off debts shall be submitted to the tribunal within three months from the date of declaration of bankruptcyplan to pay off debt in case of no properties except exempt properties(3) the debtor shall pay off the debts in accordance with the plan within a period of three months:provided that the tribunal may, if satisfied, extend the time period to pay off the debts:15provided further that if the debtor is a farmer, an extension of at least two years shall be given to him to pay off his debts:20provided also that in case the default in payment of a debtor is caused by natural calamities, the tribunal shall impose a moratorium for the payments of the debt for such period if may deems appropriate chapter vi civil record and penalty2520 after issue of the order of bankruptcy by the tribunal, the record of bankruptcy shall remain on the debtors credit record and civil record till the next seven years along with the certificate of dischargerecord of bankruptcy in civil and credit record21 (1) whoever make any mis-representation in the statement of bankruptcy in the credit or civil record shall be punished with imprisonment for one month and also with fine which may extend to ten lakh rupees30(2) all sums realised by way of fines shall be credited in the bankruptcy rehablitation fundmisrepresentation of statement of bankruptcy of other records as a punishable offence chapter vii miscellaneousrepeal and saving3 of 1909 5 of 192022 (1) the presidency towns insolvency act, 1909 and the provincial insolvency act, 1920 are hereby repealed35(2) the repeal by this act of any enactment shall not affect any act in which such enactment has been applied, incorporated or referred to and this act shall not affect the validity, invalidity, effect or consequences of anything already done or suffered, or any right, title, obligation or liability already acquired, accrued or incurred, or any remedy or proceeding in respect thereof, or any relase or discharge of or from any debt, penalty, obligation, liability, claim or demand, or any indemnity already granted, or the proof of any past act or thing4023 the central government shall, from time to time, after due appropriation made by parliament by law in this behalf, provide requisite funds for carrying out the purposes of this actcentral government to provide funds45power to remove difficulty24 if any difficulty arises in giving effect to the provisions of this act, the appropriategovernment may make such order or give such direction, not inconsistent with the provisions of this act, as appears to it to be necessary or expedient for the removal of any difficulty:provided that no such order or direction shall be made after the expiration of two years from the commencement of this actpower to make rules25 (1) the central government may, by notification in the official gazette, make rules for carrying out the purposes of this act510(2) every rule made under this section shall be laid, as soon as may be after it is made,before each house of parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both houses agree in making any modification in the rule or both the houses agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that tule statement of objects and reasonsaccording to the world bank report, india's ranking fell from 109 to 132 among 185economies in 2012 when it comes to ease or resolving insolvency issues personal bankruptcy laws help people who are no longer in a position to pay off their debts and are distressed due to coercive methods used by creditors, thus unable to make a fresh start the personal bankruptcy framework in india is weak and barely has provisions in any law to deal with the matter effectively, apart from a few passed almost over a century ago, during the british regime, namely, the provincial insolvency act, 1920 and the presidency towns insolvency act, 1909 the present bill also seeks to repeal the two archaic lawsin the context of massive growth of different types of loans, credit card usage and the like, the law should also be progressive and effective bankruptcy and insolvency is specified in the entry 9 of the concurrent list of the seventh schedule to the consitution the centre as well as the state governments have the power to legislate on the same and both share responsibility to take necessary action in the matter the bill is an attempt to make a comprehensive legislation regarding personal bankruptcy it vests upon the appropriate government to establish special tribunals to admit petitions of bankruptcy and issue notices to hear cases of personal bankruptcythe bill lays down the guidelines for functioning of the tribunal as well as safeguards to rehabilitate debtors and make for a transparent, expeditious and just procedure for settling debt there are separate provisions for farmers who are debtors, in which case, the legislation is comparatively liberal with regard to the allocation of time the record of bankruptcy will be present in the civil and credit record of the person for a period of seven years from the date of issue of the order of bankruptcy by the tribunal along with the certificate of dischargethe bill also provides for a bankruptcy rehabilitation fund for the revival of those declared bankrupt along with imposing penalty in the form of fine or imprisonment, or both in the event of misrepresentation of the statement of bankruptcy in the civil and credit record of any person the remuneration earned thereof would be deposited in the bankruptcy rehabilitation fundhence this billnew delhi;nishikant dubeyfebruary 8, 2016 financial memorandumby virtue of clause 3 of this bill the central government shall set up special tribunals in union territories to hear cases of personal bankruptcy clause 4 provides for term, salaries and allowances of chairperson and members of the tribunal clause 18 provides for constitution of bankruptcy rehabilitation fund clause 23 provides that the central government shall provide requisite funds for carrying out the purposes of the bill the bill, therefore, if enacted, will involve expenditure from the consolidated fund of india it is estimated that a sum of rupees one hundred crore will be involved as a recurring expenditure per annum from the consolidated fund of indiaa non-recurring expenditure of rupees one hundred crore is also likely to be involved memorandum  regarding  delegated  legislationclause 7 of the bill empowers the appropriate government to make rules to regulate the practices and procedures of the tribunal clause 25 empowers to the central government to make rules for carrying out the purposes of the bill as the rules will relate to matters of detail only, the delegation of legislative power is of a normal character———— a billto provide for mechanism through which a person who is unable to pay off his debts shall be declared bankrupt and rehabilitated and for matters connected therewith————(shri nishikant dubey, mp)gmgipmrnd—4264ls(s3)—03-03-2016