PART VII. CHAP. XVI. A petition for liquidation has the same effect as a petition in bankruptcy in cases under sect. 87, which provides for the proceeds of sale of goods of a trader taken in execution on a judgment for a sum exceeding fifty pounds, where notice of a bankruptcy petition is given within fourteen days, although no trustee is appointed within that period (t). Regulations as to composition by creditors. § 3.-COMPOSITION WITH CREDITORS. The main distinctive features of liquidation by composition with creditors, as compared with liquidation by arrangement, have been already pointed out (see ante, pp. 371, 372). The procedure and precise effect of such composition have now to be considered. The Regulations" respecting COMPOSITION WITH CREDITORS comprise the seventh part of "The Bankruptcy Act, 1869,” and are contained in sect. 126 of that act. 66 Sect. 126. "The creditors of a debtor unable to pay his debts may, without any proceedings in bankruptcy, by an extraordinary resolution. resolve that a composition shall be accepted in satisfaction of the debts due to them from the debtor. "An extraordinary resolution of creditors shall be a resolution which has been passed by a majority in number and three-fourths in value of the creditors of the debtor, assembled at a general meeting to be held in the manner prescribed, of which notice has been given in the prescribed manner, and has been confirmed by a majority in number and value of the creditors assembled at a subsequent general meeting, of which notice has been given in the prescribed manner, and held at an interval of not less than seven days nor more than fourteen days from the date of the meeting at which such resolution was first passed. "In calculating a majority for the purposes of a composition under this section, creditors whose debts amount to sums not exceeding ten pounds shall be reckoned in the majority in value, but not in the majority in number, and the value of the debts of secured creditors shall, as nearly as circumstances admit, be estimated in the same way, and the same description of creditors shall be entitled to vote at such general meetings as in bankruptcy. "The debtor, unless prevented by sickness or other cause satisfactory to such meetings, shall be present at both the meetings at which the extraordinary resolution is passed, and shall answer any inquiries made of him, and he, or if he is so prevented from being at such meetings some one on his behalf, shall produce to the meetings a statement showing the whole of his assets and debts, and the names and addresses of the creditors to whom such debts respectively are due (u). "The extraordinary resolution, together with the statement of the debtor as to his assets and debts, shall be presented to the registrar, and it shall be his duty to inquire whether such resolution has been passed in manner directed by this section, and if satisfied that it has (t) Ex parte Keys, Re Skinner, 39 L. J. (N. S.) Bankr. 28. (u) Sec note to Rule 295, post. PART VII. been so passed he shall forthwith register the resolution and statement of assets and debts, but until such registration has taken place such CHAP. XVI. resolution shall be of no validity; and any creditor of the debtor may inspect such statement at prescribed times, and on payment of such fee, if any, as may be prescribed. "The creditors may, by an extraordinary resolution, add to or vary the provisions of any composition previously accepted by them, without prejudice to any persons taking interests under such provisions who do not assent to such addition or variation; and any such extraordinary resolution shall be presented to the registrar in the same manner and with the same consequences as the extraordinary resolution by which the composition was accepted in the first instance. "The provisions of a composition accepted by an extraordinary resolution in pursuance of this section shall be binding on all the creditors whose names and addresses, and the amount of the debts due to whom, are shown in the statement of the debtor, produced to the meetings at which the resolution has passed, but shall not affect or prejudice the rights of any other creditors. "Where a debt arises on a bill of exchange or promissory note, if the debtor is ignorant of the holder of any such bill of exchange or promissory note, he shall be required to state the amount of such bill or note, the date on which it falls due, the name of the acceptor or person to whom it is payable, and any other particulars within his knowledge respecting the same, and the insertion of such particulars shall be deemed a sufficient description of the creditor of the debtor in respect of such debt, and any mistake made inadvertently by a debtor in the statement of his debts may be corrected after the prescribed notice has been given, with the consent of a general meeting of his creditors. "The provisions of any composition made in pursuance of this section may be enforced by the court on a motion made in a summary manner by any person interested, and any disobedience of the order of the court made on such motion shall be deemed to be a contempt of court. "Rules of court may be made in relation to proceedings on the occasion of the acceptance of a composition by an extraordinary resolution of creditors in the same manner and to the same extent and of the same authority as in respect of proceedings in bankruptcy. "If it appear to the court on satisfactory evidence that a composition under this section cannot, in consequence of legal difficulties, or for any sufficient cause, proceed without injustice or undue delay to the creditors or to the debtor, the court may adjudge the debtor a bankrupt, and proceedings may be had accordingly." of creditors Sect. 127. "The registration by the registrar of a special resolution Registration of the creditors on the occasion of a liquidation by arrangement under of resolutions part six of this act, or of an extraordinary resolution of the creditors on conclusive in the occasion of a composition under the seventh part of this act, shall, certain cases. in the absence of fraud, be conclusive evidence that such resolutions respectively were duly passed and all the requisitions of this act in respect of such resolutions complied with." This section is part of the comprehensive provisions which include the general law relating to insolvent debtors and their creditors. The rules (see post, § 4) which relate equally to proceedings for liquidation by arrangement and composition, require CHAP. XVI. PART VII that the proceedings by the debtor shall be instituted by a petition which is entitled in bankruptcy (x); and until after the meetings have been held it cannot be ascertained what form the future proceedings shall assume, but it is certain that until the resolutions shall have been passed and registered, the proceedings are in bankruptcy. The meaning of the language at the commencement of the section that the creditors of a debtor may "without any proceedings in bankruptcy," resolve to accept a composition, mean, without any proceedings by them or on their behalf, and have not the effect of abrogating all that has been done before the resolution, and by reason of which alone the resolution could be passed and registered. On the contrary, the proceedings are subject to the general control and jurisdiction of the Courts of Bankruptcy conferred by sect. 72 (see ante, p. 203) and other sections, and such jurisdiction may be accordingly exercised in reference to sect. 126, for the purpose of deciding "all questions whatsoever whether of law or fact, arising in any case of bankruptcy coming within the cognizance of the court, or which the court may deem it expedient to decide for the purpose of doing complete justice" (y). For example, until at the meeting of the creditors it has been determined by their resolution whether the proceedings shall be under sect. 125 or sect. 126, it would be quite right that an injunetion should be granted restraining any creditor's process against the debtor's person or estate (z). Not only does this jurisdiction exist before the resolution is passed, but even after the resolution is registered. Thus, where goods were seized in execution by the sheriff, and the debtor filed a petition for liquidation, and the court granted an injunction restraining any dealing with the goods, and subsequently the creditors passed a resolution accepting a composition under sect. 126, and after the resolution was registered, the debtor, claiming the goods, brought an action against the sheriff, and, on the other hand, the execution creditor ruled the sheriff to proceed. It was held, that the sheriff being under this cross-fire was right in applying to the Bankruptcy Court, and the court accordingly stayed the debtor's proceedings against the sheriff, holding that the execution creditor was entitled to the execution of the writ. In the same case it was held that a resolution to accept a composition under sect. 126, has not the effect of revesting in the debtor the title to goods previously seized by the sheriff under an execution, but, on the contrary, restores the execution creditor to his position. It was urged, on behalf of the debtor, that the result of the resolution was that he was freed from all his debts except (x) See Rule 252, post, p. 381. L. J. (N. S.) Bankr. 65. (z) Ex parte The Birmingham Gas Light and Coke Company, Re Adams, 40 L. J. (N. S.) Bankr. 1. only as to the composition, and that he was restored to the same position and with the same rights as he was before he presented his petition. The court agreed with the latter proposition, but observed that before the presentation of the petition the goods in question had been seized. The debtor could not have then prevented the sheriff from selling except by the proceedings in bankruptcy, and that proceeding having terminated, the debtor and creditor were in exactly the same position as before the petition, (except that the creditor had been delayed), but it would be putting them in totally different positions if the creditor were to be deprived of the rights which he had acquired under his execution (a). The same view of the effect of a composition was taken in a previous case, where a creditor in exercise of a statutory power to distrain and sell a debtor's goods (b) seized them, and on the debtor's subsequently petitioning for liquidation by arrangement, a composition was accepted; it was held that the creditor was entitled to proceed and sell as before the petition (c). PART VII. CHAP. XVI. § 4. RULES RESPECTING LIQUIDATION BY ARRANGEMENT OR COMPOSITION. "The Bankruptcy Rules, 1870," contain the following rules relating to "proceedings for liquidation by arrangement or composition with creditors." Sections 125 and 126. Rule 252. "Proceedings under these sections shall be instituted by the debtor by petition and affidavit thereto annexed according to the forms given in the schedule." 253. "The court having jurisdiction in such proceedings shall be the court to which a bankruptcy petition against the debtor could be presented." 254. "The first general meeting shall be summoned, to be held at the place mentioned in the affidavit filed with the petition (subject to such place being changed by order of the court, as hereinafter provided), and the time of meeting shall be at a stated hour between 10 a.m. and 5 p.m on a day within one calendar month from the presentation of the petition, unless the court in any particular case shall otherwise order." 255. "The first general meeting of creditors shall be summoned by notice according to the form in the schedule." 256. "All first general meetings shall be summoned as follows:"A sufficient number of forms of such notice, duly signed, addressed, and stamped for post, shall be delivered to the registrar, together with (a) In re England, Ex parte The Sheriff of Middlesex, 40 L. J. (N. S.) Bankr. 65. (b) See sect. 34, ante, p. 329. (c) Ex parte The Birmingham Gas Light and Coke Company, Re Adams, 40 L. J. (N. S.) Bankr. 1. PART VII. a request and list of creditors according to the form in the schedule, CHAP. XVI. and such list may be added to, or additional requests and lists be filed, as circumstances may require. Every request shall bear a stamp calculated at the rate of threepence for each notice required to be sent. The registrar shall cause the notices to be checked with the list or lists delivered to him, and to be sealed with the seal of the court and to be posted to the creditors, and the person posting the same shall forthwith make and file an affidavit, exhibiting a form of notice, and stating that he had posted similar notices to the persons mentioned in the lists delivered to the registrar, and stating also the date and place of posting." 257. "The debtor shall also deliver to the registrar a notice according to the form in the schedule to be gazetted seven days at least before the meeting is to be held." 258. 66 Notices summoning any first general meeting shall be posted at least 14 days before the day on which the meeting is to be held.” 259. "Upon sufficient cause proved to the satisfaction of the court by the debtor or by any creditor, either ex parte or otherwise, the court may order and direct the place of any general meeting to be changed, provided application be made in such time as will allow notice of the change to be given to the creditors, as hereinafter directed. Any order so made by the court shall be according to the form in the schedule, and a copy thereof shall be gazetted forthwith, and notice thereof shall be given by the registrar by sending by post, on or before the eighth day prior to the meeting, a sealed office copy of the order of the court addressed to the several creditors, and to the debtor. The expense of .and incident to such order and despatching copies thereof to the creditors as aforesaid shall be borne and paid in such manner as the court shall direct, and in case of non-compliance the copies of the order shall not be sent, but the meeting shall be held as originally summoned." 260. "The court may at any time after the presentation of a petition restrain further proceedings in any action, suit, execution, bankruptcy petition or other legal process against the debtor or his estate in respect of any debt proveable; or it may allow such proceedings, whether in progress at the filing of the petition or subsequently commenced, to proceed upon such terms as the court may think just. The court may also at any time after presentation of the petition appoint a receiver or manager of the property or business of the debtor, or of any part thereof, and may direct immediate possession to be taken of such property or business or any part thereof" (d). 261. "Any receiver or manager so appointed shall enter upon and act in the performance of his office at such time and in such manner and to such extent as the court may from time to time direct." 262. "A trader shall state in his petition the estimated amount of the debts owing by him to his creditors, and where no receiver or manager has been appointed by the court, a majority in value of such creditors may at any time prior to the passing of the special or extraordinary resolution, as the case may be, nominate and appoint a receiver or manager of the trade effects or business of the debtor, or any part (d) Rule 260 is a repetition of sect. 13(ante, p. 249), only applied to liquidation. Semble, sect. 13 would have applied to liquidation by arrangement, and the rule seems inapplicable to composition, so the force of the rule may be doubted. |