Q.

Explain Fraudulent Transfer – Sec 53 with decided cases of property Act

Introduction : The main object of the Fraudulent Transfer is to protect the creditor from
enjoying his legal right. In Fraudulent Transfer, the debtor transfer the immovable property with
an intention to defeat or delay the transfer to the creditor.

Explanation of Fraudulent Transfer: Every transfer of immovable property made with intent
to defeat or delay the creditors of the transferor are the Fraudulent Transfer. Such transfer are
voidable at the opinion of any creditor who has been defeated or experience delay.

Case :

Twyne’s Case :
Debtor D, secretly transferred the whole of his property, but retained only possession with him.
This was done after C, a creditor had sued him.

Held, secrecy is a badge of fraud. The transfer was fraudulent. The creditors should bring a rep-
resentative suit against the transferor.

Musahar Sahu V.Hakim Lai

C1 was the creditor and D was the debtor. C1 filed a suit against D and applied for "attachment before
judgment" of some properties belonging to B. But, B filed an affidavit stating that he had no intention,
to sale his properties. On the basis of this affidavit C1's application for attachment was dismissed.

A few months later D sold his properties to C2, another creditor. Held, fraudulent transfer was not ap-
plicable. It was held that 'C' was a genuine creditor and this was a case of debtor preferring one creditor
over the other.

Scope:
1. The section applies only to immovable properties.
2. The intention of the transferor must be to defeat or delay the creditors. Hence, it does not ap-
ply when the debtor prefers one creditor over the other.
Give example of A debtor and B & C creditor. Here the unpaid creditor can file a suit with
the court to declare the debtor an insolvent.

Exceptions:
1. This will not affect the bonafide transferee for consideration.
2. This shall not affect insolvency law.