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Power for creditors to accept and court to approve composition or arrangement

Bankruptcy Act

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—(1) The creditors may, by special resolution at the first meeting or any adjournment thereof, resolve to entertain a proposal for a composition in satisfaction of the debts due to them from the debtor, or a proposal for a scheme of arrangement of the debtor’s affairs.(2) The composition or scheme shall not be binding on the creditors unless it is confirmed at a subsequent meeting of the creditors by a resolution passed by a majority in number, representing three-fourths in value of all the creditors who have proved, and is approved by the court.(3) Any creditor who has proved his debt may assent to or dissent from the composition or scheme by a letter addressed to the Official Assignee in the prescribed form, and attested by a witness, and sent or posted so as to be received by the Official Assignee not later than the day preceding such subsequent meeting, and a creditor so assenting or dissenting shall be taken as being present and voting at that meeting.(4) The subsequent meeting shall be summoned by the Official Assignee by not less than 7 days’ notice, and shall not be held until after the public examination of the debtor is concluded.(5) The notice shall state generally the terms of the proposal and shall be accompanied by a report of the Official Assignee thereon.(6) The debtor or the Official Assignee may, after the composition or scheme is accepted by the creditors, apply to the court to approve it, and notice of the time appointed for hearing the application shall be given as prescribed.(7) The application referred to in subsection (6) shall be made and heard in open court.(8) The court before approving a composition or scheme, shall hear a report of the Official Assignee as to the terms of the composition or scheme and as to the conduct of the debtor, and shall hear any objections which may be made by or on behalf of any creditor.(9) If the court is of opinion that the terms of the composition or scheme are not reasonable or are not calculated to benefit the general body of creditors, and in any case in which the court is required under this Act to refuse a bankrupt his discharge, the court shall, or if any such facts are proved as would under this Act justify the court in refusing, qualifying or suspending the discharge, the court may, in its discretion, refuse to approve the composition or scheme.(10) If the court approves the composition or scheme the approval may be testified by the seal of the court being attached to the instrument containing the terms of the composition or scheme, or by the terms being embodied in an order of the court.(11) A composition or scheme accepted and approved in pursuance of this section shall be binding on all the creditors so far as relates to any debts due to them from the debtor and provable in bankruptcy.(12) A certificate of the Official Assignee that a composition or scheme has been duly accepted and approved shall, in the absence of fraud, be conclusive as to its validity.(13) The provisions of a composition or scheme under this section may be enforced by the court on application by any person interested, and any disobedience of an order of the court made on the application shall be deemed a contempt of court.(14) If default is made in payment of any instalment due in pursuance of the composition or scheme, or if it appears to the court on satisfactory evidence that the composition or scheme cannot, in consequence of legal difficulties or for any sufficient cause, proceed without injustice or undue delay to the creditors or to the debtor, or that the approval of the court was obtained by fraud, the court may, if it thinks fit, on application by any creditor, adjudge the debtor bankrupt and annul the composition or scheme, but without prejudice to the validity of any sale, disposition or payment duly made or thing duly done under or in pursuance of the composition or scheme.(15) Where a debtor is adjudged bankrupt under subsection (14), any debt provable in other respects, which has been contracted before the date of the adjudication, shall be provable in the bankruptcy.(16) If under or in pursuance of a composition or scheme a trustee or assignee is appointed to administer the debtor’s property or manage his business or distribute a composition, sections 74, 78, 79, 80, 81, 82, 84, 85, 86 and 87 shall apply mutatis mutandis to such trustee or assignee as if he were an assignee in a bankruptcy, and as if “bankruptcy,” “bankrupt” and “order of adjudication” included respectively a composition or scheme of arrangement, a compounding or arranging debtor and an order approving the composition or scheme.(17) Part III shall, so far as the nature of the case and the terms of the composition or scheme admit, apply thereto, the same interpretation being given to “assignee,” “bankruptcy,” “bankrupt” and “order of adjudication” as in subsection (16).(18) No composition or scheme shall be approved by the court which does not provide for the payment in priority to other debts of all debts directed to be so paid in the distribution of the property of a bankrupt.(19) The acceptance by a creditor of a composition or scheme shall not release any person who under this Act would not be released by an order of discharge if the debtor had been adjudged bankrupt.

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