BANKRUPTCY OFFENCES

BANKRUPTCY OFFENCES


Generally while the fact that a person has been adjudicated bankrupt does not in itself give rise to any criminal liability , the bankrupt may be guilty of one or more of the offences specified in the BA if he has misconducted himself with regard to his affairs either before or during the currency of the Bankruptcy.

There are various categories of offences the most elaborate ones are in the first category

1.         Miscellaneous offences;

There are 20 such offences under section 138 (1)- any person who has been adjudged bankrupt or in respect of whose estate a receiving order has been made shall be guilty of an offence unless he proves that he had no intent to defraud

(a)          If he does not to the best of his knowledge and belief fully and truly disclose to the trustee of his property and how and to whom and for what consideration and when he disposed of any part thereof except such part as has been disposed off in the ordinary way of his trade or laid out in the ordinary expense of his family; non-disclosure

(b)          If he does not deliver up to the trustee or as he directs all or such part of his property which is in his custody or under his control and which he is required by law to deliver up , and this constitutes the offence of non-delivery of property

(c)          If he does not deliver up to the trustee or as he directs all books documents papers and writings relating to his property or affairs this constitutes the offence of non-delivery of books or documents

(d)          If after the presentation of a bankruptcy petition or within 2 years next before presentation he conceals any part of his property to the value of 200/- or more or conceals any debts due to or from him this constitutes the offence of concealment of property

(e)          If after presentation of a bankruptcy petition or within 2 years next before presentation he fraudulently removes any part of his property to the value of 200/- or more this constitutes offence of removal of property;

(f)           If he makes any material omission in any statement relating to his affairs , this constitutes omission in statement of affairs;

(g)          If knowing or believing that a false debt has been proved by any person under the Bankruptcy he fails within 1 month to inform the trustee this constitutes not informing trustees of false claims;

(h)          If after presentation of a petition he prevents the production of any book , document , paper or writing affecting or relating to his property or affairs unless he proves that he had no intent to conceal the state of his affairs or to defeat the law this is the offence of preventing production of books or documents;

(i)            If after presentation of a petition or within 2 years next before presentation he conceals , destroys mutilates or falsifies or is privy to the concealment , destruction , mutilation or falsification of any book or document affecting or relating to his property or affairs unless he proves that he had no intent to conceal the state of his affairs or to defeat the law , this constitutes destruction of books or documents;

(j)            If after presentation of a bankruptcy petition or within 2 years next before presentation he makes or is privy to the making or any false entry in any book or document affecting or relating to his property or affairs unless he proves that he had no intent to conceal the state of his affairs or to defeat the law this constitutes the offence of false entry in books or documents;

(k)          If after presentation of a bankruptcy petition or within 2 years next before presentation he fraudulently parts with , alters or makes any omission in or is privy to fraudulently parting with , altering or making any omission in any document affecting or relating to his property or affairs , this constitutes the offence of parting with or altering of documents;

(l)            If after presentation of a bankruptcy petition or at any meeting of his creditors within 2 years next before presentation he attempts to account for any part of his property by fictitious losses or expenses this constitutes accounting for property by fictitious losses;

(m)        If within 2 years next before the presentation of a petition or after presentation but before the making of a receiving order he by any false representation or other fraud has obtained any property on credit and not paid for it , that is termed obtaining property on credit by fraud;

(n)          If within 2 years next before presentation of a petition or after presentation but before the making of a receiving order he obtains under the false pretence of carrying on business and if a trader or dealing with the ordinary way of his trade any property on credit and does not pay for it this constitutes obtaining property on credit on pretence of carrying on business;

(o)          If within 2 years next before presentation of a petition or after the presentation but before the making of a receiving order he pawns , pledges or disposed of any property which he has obtained on credit and not paid for it unless in the case of a trader the pawning pledging or disposing is in the ordinary way of his trade and unless in any case he proves that he had no intent to defraud that offence is termed pawning property obtained on credit;

(p)          If he is guilty of any false representation or other fraud for the purpose of obtaining the consent of his creditors or any of them to an agreement with reference to his affairs or his bankruptcy this constitutes obtaining consent of creditors by fraud;

(q)          If he makes default in payment for the benefit of creditors of any portion of her salary or other income in respect of the payment of which the court is authorised to make an order this constitutes default in payment;

(r)           If within 1 year immediately preceding the date of the making of the receiving order he has continued to trade or carry on business after knowing himself to be insolvent this constitutes trading when insolvent;

(s)          If within 6 months before the making of a receiving order he sells goods at a price lower than cost unless he proves that he had no intention to defraud his creditors this constitutes selling goods below cost price;

(t)            If he has contracted any debt provable in the bankruptcy without having at the time of contracting it any reasonable or probable ground or expectation or being able to pay it this constitutes improper contracting of debts.

Sec. 138(2) BA – any one guilty of offences under (1) shall be liable to imprisonment not exceeding 3 years except the cases mentioned specifically in paragraphs (m) and (n) and (o) thereof when he shall be to imprisonment for a term not exceeding 5 years.

2.  Obtaining Credit:

An undischarged bankrupt is guilty of an offence under Section 139(b) in the following two cases:
a)    If either alone or jointly with any other person obtains credit of over a 100/- or more from any person without disclosing that he is an undischarged bankrupt; or
b)    If he engages in any trade or business under a name other than that under which he was adjudicated without disclosing to all persons with whom he enters into any business transactions the name under which he was adjudicated bankrupt.


3. Fraud by the Bankrupt;

Section 140 sub section 1 states that any person who has been adjudged bankrupt or in respect of whose estate a receiving order has been made is guilty of an offence in the following 3 cases;
(a)          If in incurring any debt or liability he has obtained credit under any false pretences or by means of any other fraud;
(b)          If with intent to defraud any of his creditor he has made or caused to be made any gift or transfer or charge on his property;
(c)          If with intent to defraud his creditors he has concealed or removed any part of his property since or within two months before the date of any unsatisfied judgment or order for payment of money obtained against him.

4.         Gambling:
Section 141(1) provides that any person who has been adjudged bankrupt or in respect of whose Estate a receiving order has been made shall be guilty of an offence if having been engaged in any trade or business and having outstanding at the date of the receiving order any debts contracted in the course and for the purposes of that trade or business:
(a)          He has within 2 years prior to the presentation of the petition materially contributed to or increased the extent of his insolvency by gambling or by rush and hazardous speculation and the gambling or speculations are connected with his trade or business or;
(b)          He has between the date of presentation of the petition and the date of the receiving order lost any part of his estate by gambling or rush and hazardous speculation or
(c)          On being required by the official receiver at any time or in the cause of his public examination by the court to account for the loss of any substantial part of his Estate incurred within a period of a year next preceding the date of the presentation of the petition or between that date and the date of the receiving order he fails to give a satisfactory explanation of the manner in which the loss was incurred.
In determining whether speculations were rash and hazardous the financial position of the debtor while they were entered into must be taken into consideration. No prosecution may be instituted except by order of the court.

5.            Failure to keep proper books:

Section 142 (1) BA provides that any person  who has been adjudged bankrupt or in respect of whose estate a receiving order has been made shall be guilty of an offence if having been engaged in any trade or business during any period in the 3 years immediately preceding the date of presentation of the petition he has not kept proper books of account throughout that period and throughout any further period in which he was so engaged between the date of the presentation of the petition and the date of the receiving order or has not reserved all books of accounts so kept.

6.         Bankrupt Absconding with Property:

Section 143 BA provides that if any person who is adjudged bankrupt or in respect of whose estate a receiving order has been made after the presentation of a petition or within 6 months before presentation quits Kenya or attempts or makes preparation to quit Kenya , he shall unless he proves that he had no intent to defraud be guilty of an offence.
NB. Under Sec. 144 BA , if any creditors or any person claiming to be a creditor in any bankruptcy proceeding makes any false claim or any proof , declaration or statement of account which is untrue in any material particulars , he shall be guilty of an offence unless he has proved he has no intention to defraud.

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