Bankrupcy

Bankruptcy is a legal status of a person or organization that cannot repay the debts it owes to creditors. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debtor. The word “bankruptcy” is derived from Italian word banca rotta, meaning "broken bench", which may stem from a custom of breaking a moneychanger's bench or counter to signify his insolvency.

History of Bankruptcy

In ancient Greece, bankruptcy did not exist. If a man owed and he could not pay, he and his wife, children or servants were forced into debt slavery, until the creditor recouped losses through their physical labour.

According to Al-Maqrizi, the Yassa of Genghis Khan contained a provision that mandated the death penalty for anyone who became bankrupt three times.

The Statue of Bankrupts of 1542 was the first statute under English law dealing with bankruptcy or insolvency.

A failure of a nation to meet bond repayments has been seen on many occasions. Philip II of Spain had to declare four state bankruptcies in 1557, 1560, 1575 and 1596. According to Kenneth S. Rogoff, "Although the development of international capital markets was quite limited prior to 1800, we nevertheless catalog the numerous defaults of France, Portugal, Prussia, Spain, and the early Italian city-states. At the edge of Europe, Egypt, Russia, and Turkey have histories of chronic default as well."

Bankruptcy Laws in India

India does not have a clear law on corporate bankruptcy even though individual bankruptcy laws have been in existence since 1874. The current law in force was enacted in 1920 called Provincial Insolvency Act.

Legal meaning of the terms bankruptcy, insolvency, liquidation and dissolution are contested in the Indian legal system. There is no regulation or statute legislated upon bankruptcy which denotes a condition of inability to meet a demand of a creditor as is common in many other jurisdictions.

Winding up of companies is in the jurisdiction of the courts which...