Question

in regard to the law of insolvency,discuss compulsory sequestration

Answer 1

A person is said to be insolvent when his liabilities exceed his/her assets. In the law of Insolvency, the assets of the insolent may be sequestrated. Sequestration order is granted by the High Court. The insolvent voluntarily can surrender his assets for sequestration. Sometimes it will be compulsory sequestration when one or more of the creditors apply for compulsory sequestration.

The order of sequestration is to ensure orderly and equitable distribution of a debtor’s assets to meet the claims of all his creditors. The law of insolvency exists for the benefit of the creditors. No sequestration order will be granted unless it will be for the benefit of the creditors.

No sequestration order will be granted if there is only one small creditor for the claim. Sometimes the debtor’s assets may not be sufficient to meet the costs of sequestration. Then creditors have to seek individual relief against the debtor for nonpayment of debts.

As per law of insolvency a creditor may apply for compulsory sequestration though he possess security against the claim, and even if the security exceeds the of his claim amount.