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within four months to vote at a composition meeting before the debtor is declared bankrupt do not arise now. 1 And the provisions of the former act are so different from the present that but little help will be got from decisions under it. But the decision that a corporation is subject to the provisions seems applicable at present. It is true that in the former law the word "person" is used, while here the phrase is "a bankrupt may;" but in definition 4 of § 1 a bankrupt is declared to be a person by or against whom a petition has been filed, etc., so that this difference is not significant, as "persons" includes corporations (§ 1, (19)). The present act does not expressly refuse a discharge to corporations, while the last one did, so that the argument is stronger for allowing a corporation the benefit of composition proceedings under this act than under the old law.3

A form of petition for a meeting of creditors to consider a composition has been provided by the Supreme Court.*

This does

The majority in number and amount is to be determined by the amount of claims which have been allowed. away with the provisions of the act of 1874 relating to the method of determining the value and amount of claims, and the right of secured creditors to vote at composition meetings. Secured creditors may file a claim for any deficiency over and above their security (§ 57 h), and may vote on this amount (§ 56 b-§ 57 e). In computing the number and amount of claims, only the deficiency over the security held is to be taken into account (§ 56 b).

The judge has the right to designate any place for the deposit of the money. The forms indicate that one of the designated depositaries (§ 61) will be chosen, but the judge will have the power to disregard this if he chooses.

The application for a confirmation of a composition should set up the facts mentioned in clause b as conditions precedent to the filing of the application. A form has been prescribed.

1 Re Scott, 15 N. B. R. 73, Fed Cas. No. 12,519.

2 Re Weber Furniture Co., 13 N.

B. R. 529, Fed. Cas. No. 17,330.

Re Weber Furniture Co., 13 N. B. R. 529, Fed. Cas. 17,330.

4 Form 60.

5 See Form 61.

6 Form 61.

Creditors must be given ten days' notice by mail of the hearing (§ 58 a, (2)). The court may order the bankrupt to appear and submit to examination (§ 7, (9)); but as a composition is not to be filed in court till after an examination of the bankrupt, it would seem the examination might be concluded at the first meeting of the creditors (§ 7, (1); § 55 b), though the court could undoubtedly order another examination if necessary.

The judge shall hear an application for the confirmation of a composition, but he may refer it or any issue arising out of it to the referee to ascertain the facts. Under the Act of 1867,2 the creditors of a bankrupt were required to appear at a day fixed and show cause against the granting of a discharge. Rule XXXII. evidently contemplates that a similar method of procedure will be adopted under this act with regard to both compositions and discharges. The proper practice under this rule would be to appoint a day when creditors should show cause and a later day for the hearing. The rule provides that the creditor shall appear on the day set for showing cause, and within ten days thereafter shall file a specification of the grounds of his opposition.3 No form is provided for the specification of the ground of opposition to the confirmation of a composition, but it would be the better practice to file a written specification, since the rule requires it.

The former statute contained a provision like clause 1 of paragraph d. It was held that it was not wholly a question whether the debtor might have offered a larger dividend, but whether the creditors were wise in taking what was offered.* In England the court will scrutinize a composition carefully, and will not confirm it unless satisfied that it will be advantageous to creditors.5 Where a partner offered terms of composition which were satisfactory to his separate creditors who alone were interested, it was confirmed though the joint creditors objected.

1 Rule XII. (3).

2 § 29, 14 Stats. 531, R. S. § 5109. 8 See infra, § 477.

4 Ex parte Jewett, 11 N. B. R. 443, Fed. Cas. No. 7303.

5 Re Burr, 9 Morrell, 133.

Re Ridgway, 8 Morrell, 289.

The acts which disqualify a bankrupt from receiving a discharge are concealment of property from his trustee, making a false oath, or fraudulently destroying, concealing, or failing to keep books of account (§ 14). If he has been guilty of any of these acts, the judge under the provisions of paragraph d (2) must refuse to confirm the composition..

Clause 3 of paragraph d is intended to guard against the danger of a creditor refusing to sign a composition unless he is given a greater proportion than the others. This is made a crime punishable by two years' imprisonment (§ 29 b (5)).

The terms of the order confirming a composition are stated in Form 62.

A composition when confirmed releases the debtor from all debts barred by a discharge except those which were contained in the composition (§ 14 c).

The composition must provide for the payment of a pro rata amount on all the debts of the bankrupt. This is not required by the act except by inference from the phraseology of paragraph b that there shall be deposited "the consideration to be paid by the bankrupt to his creditors," but it is a necessary part of a composition law, as otherwise the debts of some creditors would be discharged and others not. This is always the rule in composition proceedings.1

Under the Act of 1869 in England and the composition act in this country the debts of creditors whose names had been omitted from the list filed by a debtor were not discharged.2 This will be the law under the present act, since the confirmation of a composition does not release debts not affected by a discharge (§ 14 c). Creditors whose debts have not been scheduled are not affected by a discharge unless they had knowledge of the proceedings (§ 17 (3)).

The rule that when a composition is confirmed all debts are

1 Act of June 22, 1874, § 17, 18 Stats. 182; Re Trafton, 14 N. B. R. 507, Fed. Cas. No. 14,133; Drake v. McQuade, 66 N. H. 303.

2 Robson, Bankruptcy, 7th ed. 757; Re Trafton, 14 N. B. R. 507, Fed. Cas. No. 14,133; Re Becket, 2 Woods, 173, Fed. Cas. No. 1210. See Liebke v. Thomas, 116 U. S. 605.

released except those not affected by a discharge is a usual one in composition proceedings.1

The consideration is to be distributed as the judge directs if the composition is confirmed (§ 12 e). It is difficult to understand exactly what is meant by this provision. It cannot mean that the judge has any discretion as to the amount to be paid or as to the order of payment. It probably means that the judge shall direct by whom the payments shall be made. Some compositions may be offered before any trustee is appointed, so that in these cases the clerk or the referee or the judge himself will have to pay out the money which is on deposit. The judge can decide who shall do this. Form 63 contemplates that this should be done by the clerk but the judge might undoubtedly authorize some one else to do it. Possibly the court might appoint a person to distribute the funds.2

The cases which have arisen on the failure to carry out a composition will not be likely to be repeated under this act except in the exceptional case of a debtor's depositing an insufficient amount. If the composition is not confirmed, bankruptcy proceedings will be resumed (§ 12 e).3

§ 476. Act of 1898.-SEC. 13. COMPOSITIONS, WHEN SET ASIDE.a. The judge may, upon the application of parties in interest filed at any time within six months after a composition has been confirmed, set the same aside and reinstate the case if it shall be made to appear upon a trial that fraud was practised in the procuring of such composition, and that the knowledge thereof has come to the petitioners since the confirmation of such composition.

This is substantially the same as the proceedings to revoke a discharge, and similar questions will arise in regard to it.1

1 Wilmot v. Mudge, 103 U. S. 217; Bayly v. University, 106 U. S. 11; Re Croom (1891), 1 Ch. 695.

2 See Ex parte Hamlin, 16 N. B. R. 320, 323, Fed. Cas. No. 5993.

3 See Re Pinfold (1892), 1 Q. B. 73. 4 See infra, § 478.

The act does not require that notice should be given to creditors, but it would seem to be the better practice to give notice.1 If any creditor was a party to the alleged fraud he at any rate should be notified.

The act provides for a jury trial on the question of the revocation of a composition.2

A composition will not be set aside because a creditor was not notified.3

§ 477. Act of 1898. SEC. 14. DISCHARGES, WHEN GRANTED. a. Any person may, after the expiration. of one month and within the next twelve months subsequent to being adjudged a bankrupt, file an application for a discharge in the court of bankruptcy in which the proceedings are pending; if it shall be made to appear to the judge that the bankrupt was unavoidably prevented from filing it within such time, it may be filed within but not after the expiration of the next six months.

b. The judge shall hear the application for a discharge, and such proofs and pleas as may be made in opposition thereto by parties in interest, at such time as will give parties in interest a reasonable opportunity to be fully heard, and investigate the merits of the application and discharge the applicant unless he has (1) committed an offence punishable by imprisonment as herein provided; or (2) with fraudulent intent to conceal his true financial condition and in contempla. tion of bankruptcy, destroyed, concealed, or failed to keep books of account or records from which his true condition might be ascertained.

1 Ex parte Hamlin, 16 N. B. R. 320, Fed. Cas. No. 5993; Re Dunn, 53 Fed. Rep. 341.

2 See infra, § 482.

3 Re Rudnick, 1 N. B. N. 276.

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