No account should be opened in the name of an un-discharged insolvent. An insolvent person is a person who is unable to pay his debts as they are due or his liabilities cannot be covered by his assets is insolvent person. Such a person who cannot pay his debts can have insolvency proceedings initiated against him. A creditor can also file an insolvency petition if an individual is under arrest or imprisonment in execution of a money decree and the debt is already due or at a future date.
When an insolvency petition has been filed in the Court, in respect of a customer of the bank, the bank shall immediately stop paying cheques drawn by the customer irrespective of cheque dated before or after the date of petition. Once the customer is adjudicated as insolvent by the Court, the relation between the bank and insolvent customer stands terminated. All assets of the insolvent person vests with Court Receiver/Official Assignee appointed by the Court ,who would distributes(administer ) the assets of the insolvent to the Creditors as per procedure laid down in the Presidency Towns Insolvency Act 1909/ Provisional Insolvency Act 1920.
It is important to note that minors, Lunatics cannot be declared as insolvent. Further, an individual can be insolvent without being bankrupt, but he can’t be declared as be bankrupt without being insolvent.
