Question

Received first instalment of ₹35000 from shabana who is declared insolvent.

Answer 1

A person is declared insolvent when his liabilities exceed his assets and he is not able to pay his debts.

On receiving first instalment of amount 35000 by Shabana who has been declared insolvent, the bill accepted by her will be considered dishonoured.

It is only after all her private assets being sold off by a liquidator appointed by court that the installment can be credited.

The credited sum will always be less than original amount due, in case of insolvency. The remaining amount is treated as bed debts.