Chapter V Chapter V

Procedure for settlement of debts

1. (1) A debtor or any of his creditors may make an application to the Board within such time as may be prescribed to effect a settlement between the debtor and his creditors.
2. (2) Every application made under sub-section (1) shall be in the prescribed form and shall be signed by the applicant and verified in the prescribed manner.
3. (3) Every application presented by a debtor to the Board shall contain the following particulars, namely:—
   • (a) the place where he resides or holds land;
   • (b) the particulars of all claims against him together with names and residences of his creditors;
   • (c) the particulars of all his property, together with specification of the value of such property and the place or places at which any such property is to be found;
   • (d) the particulars of his family income;
   • (e) a statement whether he has previously filed an application in respect of the same debt before the Board and, if so, with what result.
4. (4) Every application presented by a creditor shall contain the following particulars, namely:—
   • (a) the place where the debtor resides or holds land;
   • (b) the amount and particulars of his claim against such debtor;
   • (c) a statement containing the particulars of property if any, pledged or mortgaged with him by a debtor, the specification of its value and the place or places where the property is to be found.

No application shall lie under section 10 for the settlement of any debt due from a debtor to whom such debt has been transferred or assigned by any person who is not a debtor.

1. (a) Where two or more applications for settlement of debts under section 10 are presented by or against the same debtor; or
2. (b) where separate applications are presented by or against joint debtors under that section, all such applications shall be consolidated and heard together.

On the receipt of an application under section 10, the Board shall summon the defendant and the procedure for the service of summons will be the same as laid down from the sections 27 to 29 of the Civil Procedure Code, 1908 (Central Act 5 of 1908).

Every debt due from a debtor in respect of which no application has been made under section 10 within the time prescribed under the said section and every debt due from a debtor in respect of which no statement or reply is submitted to the Board by the creditor in compliance with the provisions of section 13, shall be deemed to be discharged.

The Board shall fix a date for the hearing of an application made under section 10 and on the date so fixed, shall call upon the applicant and all his creditors or debtors, as the case may be, to explain their respective cases regarding each debt and shall proceed to take accounts in the manner hereinafter provided.

1. (1) The Board shall inquire into an application made under section 10 and take account of all the transactions subsisting between the parties and the persons, if any, through whom they claim, out of which the claim has arisen and determine the amount due to each of the creditors on the date of the application according to the following norms, namely:—
   • (a) separate accounts of principal and interest (hereafter in this section referred to as

the principal account and interest account, respectively) shall be taken regarding each party;

1. (b) from the principal account,
   • (i) there shall be debited to the debtor only such money as may, from time to time, have been actually received by him or on his account from the creditor and the price of goods, if any, sold to him by the creditor;
   • (ii) there shall be credited to the debtor all such money already paid by the debtor towards the debt or towards the price of goods, if any, sold by him to the creditor; Explanation.— In case the debtor proves to the satisfaction of the Board, through documentary or oral evidence, that the debtor received an amount less than the one

indicated by the creditor towards principal, such amount actually received by the debtor shall be debited as principal amount due to the account of the debtor;

1. (c) from the interest account,
   • (i) there shall be debited to the debtor all the interest amounts due and claimed by

the creditor, from the date the principal amount was borrowed upto the date of the application, the revenue or taxes paid to the Government or to the local authority by the creditor on behalf of the debtor and such other amount lent by the creditor;

1. (ii) there shall be credited to the debtor, all the interest amounts paid to the creditor upto the date of the application, the revenue or taxes paid to the Government or to the local authority by the debtor on behalf of the creditor, the rent collected by the creditor through the utilisation of such income or rent on certain and specific immovable properties and such other amount paid to the creditor on account of the loan, provided that, for sufficient reasons to be recorded, such amount is acceptable to the Board as being so paid;
2. (iii) there shall be credited or debited, as the case may be, all the amounts paid as foro.

1. (2) All moneys paid by or on account of the debtor to the creditor or on his account and all profits, service or other advantages of every description received by the creditor in the course of the transaction (estimated, if necessary, at such money value as the Board may determine in the manner prescribed) shall be credited first in the interest account as provided in clause (c) of sub-section (1), and, when the amounts so credited are found to be in excess of the debit balance in the interest account, such excess amount shall be credited to the debtor in the principal account.
2. (3) The accounts of principal and interest shall be made upto the date of the application, and not withstanding anything contained in any other law custom, contract, award or decree of a civil court, the respective balance amounts, if any, appearing as due on both, the principal and interest accounts against the debtor, on that date, shall be deemed to be the amount due on that date.

1. (1) If, in the course of the hearing of an application made under section 10, the Board finds that the debtor has made an alienation of property or created an encumbrance thereon with intent to defeat or delay the payment to any of his creditors, the Board shall, by notice, summon the debtor and the person in whose favour the alienation or encumbrance is made or created, to appear before it on a day to be specified in the notice.
2. (2) On the day specified in the notice or on such other day to which the hearing may be adjourned, the Board shall hear the parties and record evidence as may be produced and, if it is satisfied that the alienation was made or the encumbrance was created with intent to defeat or delay the payment to any of the creditors of the debtor, the Board shall declare the alienation or encumbrance to be void.

1. (1) After taking account under section 16, the Board shall, in the manner provided in sub-section (2) determine the paying capacity of the debtor.
2. (2) The paying capacity of the debtor shall, for the purposes of this Act, be deemed to be—
   • (a) seven times of twenty per cent. of the gross value of—
     • (i) his annual family income in the case of agricultural labourer or a rural artisan, or
     • (ii) the annual agricultural produce of his land in the case of small farmer; or
   • (b) the amount equivalent to twice the principal amount, whichever is lower.

1. (1) If in the course of

taking accounts before the Board, it is found that any of the creditors has received from his debtor twice or more than twice the amount of the principal in cash or in kind, the Board shall pass an order that the debt shall be deemed to have been fully discharged and shall further declare that the debtor shall, from the date of the order, be in lawful possession of the property secured for the debt: Provided that if the creditor has received from his debtor more than twice the amount of the principal, the Board shall also pass an order directing the creditor to refund the amount received in excess of twice the amount of principal to the debtor.

1. (2) Subject to the provisions of sub-section (1), if, in the course of the proceeding before the Board, it is found that the debtor owes to the creditor any sum either as principal or as interest or on account of both, the Board shall pass an order that the debtor shall repay in annual instalments, not exceeding seven, an amount equivalent to—
   • (a) the amount determined as his paying capacity under section 18; or
   • (b) the amount actually found due to the creditor, whichever is less.
2. (3) If there are more than one creditors, the Board shall also pass an order directing

that the amount determined under sub-section (2) shall be distributed to all the creditors rateably.

1. (4) The order passed by the Board under sub-section (2) shall be in full satisfaction of the debt due from the debtor and the balance of the debt, if any, in excess of that amount shall be extinguished.

1. (1) Any person aggrieved by any order of the Board under this Act may, within thirty days from the date of the order, appeal to the Administrative Tribunal: Provided that if the Administrative Tribunal is satisfied that the appellant was prevented from sufficient cause from preferring the appeal within the said period of thirty days, it may entertain the appeal within a further period of thirty days but not thereafter.
2. (2) The order passed by the Administrative Tribunal shall be final.