TRANSFER OF PROPERTY ACT

1882

ASSIGNMENT

TOPIC: SECTION 53

FRUADULENT TRANSFER

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 TABLE OF CONTENTS

I. Table of Cases………………………………………………………………..P.03

II. Introduction…………………………………………………………………..P.04

III. Section 53 & Its Essentials…………………………………………………...P.05

IV. English Law on Fraudulent Transfers………………………………………..P.10

V. Indian Law on Fraudulent Transfers…………………………………………P.11

VI. Sham Transfers……………………………………………………………….P.12

VII. How Fraudulent Intention in the Transfer Can Be Proved…………………...P.14

VIII. If there are Several Creditors…………………………………………………P.16

IX. Exceptions to Section 53 (1)………………………………………………….P.17

X. Section 53 (2): Gratuitous transfer to defraud subsequent transferee………...P.18

XI. Burden of Proof……………………………………………………………….P.18

XII. Conclusion…………………………………………………………………….P.19

XIII. Bibliography…………………………………………………………………..P.20

Table of Cases:

 Chandradip v. Board of Revenue

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  Chogmal Bhandari v. Deputy Commercial Tax Officer, Kurnool

 Edwards v. Harben

 Immani Appa Rao v. Gollapalhili Rama Lingamurthi

 Jangali Tewari v. Babban Tewari

 Joshua v. Alliance Bank

 Kapini Goundan v. Sarangapani

 Kanchanbai V. Moti Chand

 Middleton v. Collak

 Mina Kumari v. Bijoy Singh

 Musahur Sahu v. Hakim Lal

 Nath v. Dhunbaiji

 Petherpermal Chetty v. Muniandi Servai

 Sunder Lal v. Gurusaran Lal

 Twyne’s case.

 Vinayak v. Kaniram

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 I. INTRODUCTION

The Transfer of property Act came into existence in 1882. Before that, the transfer of
immovable property was governed by the principles of English law and equity. The preamble
of Act sets out the objectives of the legislation. Scope of the Act is limited. It applies only to
transfer of property by the act of parties and not by operation of law. Also, this Act deals with
a transfer of property intervivos, i.e. A transfer between living persons. It contains the
transfer of both movable and immovable property but a major portion of the enactment is
applicable to both transfer of immovable properties only. This Act is exhaustive.

In this assignment, we are specifically analysing section 53 i.e. fraudulent transfer. According
to this Act every owner of a property has right to transfer his property as he likes. There must
be a bonafide intention to transfer. If there is a Fraudulent Intention, the intention of defeating
the interest of creditor or interest of any subsequent transferee, the transfer is not valid in the
eyes of law. These transfers arise in debtor and creditor relations, particularly with insolvent
debtors. The action against such debtors is typically brought by creditors or by bankruptcy
trustees. Here in fraudulent transfer, the object of transfer would be bad in eyes of equity and
justice though it is valid in law. In some cases fraudulent transfers are valid in law but not
void, but because they are made with malafide intention, equity would render it voidable by
the person who was so defrauded.

This principle of equity has been incorporated in Section 53 of Transfer of Property Act,
1882. This section disallows a person to convey or alienate his property when such
conveyance defeats or delays the interest of his creditor or any subsequent transferee.

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 SECTION 53 OF TRANSFER OF PROPERTY ACT STATES
FRAUDULENT TRANSFER

Section 53 in the Transfer of Property Act, 1882

1[53. Fraudulent transfer.—

(1) Every transfer of immoveable property made with intent to defeat or delay the creditors of
the transferor shall be voidable at the option of any creditor so defeated or delayed. Nothing
in this sub-section shall impair the rights of a transferee in good faith and for consideration.
Nothing in this sub-section shall affect any law for the time being in force relating to
insolvency. A suit instituted by a creditor (which term includes a decree-holder whether he
has or has not applied for execution of his decree) to avoid a transfer on the ground that it has
been made with intent to defeat or delay the creditors of the transferor shall be instituted on
behalf of, or for the benefit of, all the creditors.
(2) Every transfer of immoveable property made without consideration with intent to defraud
a subsequent transferee shall be voidable at the option of such transferee. For the purposes of
this sub-section, no transfer made without consideration shall be deemed to have been made
with intent to defraud by reason only that a subsequent transfer for consideration was made.]

Exception:
A transferee from such debtor will be protected

A) If he acquires property for value in good faith without the knowledge of transferor's
intention.
      B) If the himself is a creditor and the transfer is made in satisfaction of his pre-existing
debt.

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 ESSENTIALS OF FRAUDULENT TRANSFER

The following are some of the essential elements of Fraudulent Transfer:

1. A transfer must be made by a debtor to a third person for consideration.

2. The intention behind the transfer was to defeat or defraud the creditors.
3. The transfer is voidable at the option of the creditor.
4. The creditor can file suit on behalf of himself and all other creditors.
5. If the property was purchased by the transferee in good faith, he will not be liable.

But the provisions of this sub section shall not affect-

a. The rights of subsequent transferee in good faith, for consideration.

b. Any law for the time being in force relating to insolvency.

Section 53(2) explains about-

1. Transfer of an immovable property,

2. Transfer without consideration and again transferred to another person,

3. The subsequent transferee may avoid the first transfer.

 For the purpose of Section 53(2), if a transfer is made without consideration, it is

deemed to be made with intent to defraud.

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 ESSENTIAL INGREDIENTS- EXPLANATION

Section 53(1);
1. Transfer by the transferor
2. Of Immovable property
3. with the intention to defeat or delay his creditors
4. The transfer is voidable at the option of the creditor defeated or delayed
Provided that there is no subsequent transferee, who
1. Acted in good faith, and
2. The Transfer was for consideration

Section 53(2)
1. Transfer by the transferor
2. Of Immovable property
3. The transfer is done without consideration
4. The transfer is done with the Intention to defraud subsequent transferee
5. Such Transfer is voidable at the option of the subsequent transferee

TRANSFER:
In order to attract this section, there must be a transfer. The transfer must be of immovable
property. The transfer must be a real one which creates a vested title in favour of the third
party. Fictitious transfer musts do not attract this section. The fictitious transfer is where the
transfer is where the transferor remains the real owner of the property.

Hence, in order to set aside the transfer under section 53, it has to be proved that the transfer
was real one and not a sham one.

Example: x took a loan from y and kept his property A as security. X then gets the property
mutated in favour of his son. The mutation is done without affecting a transfer. As the father
is still the owner of the property, what appears to be a transfer is merely a sham and as Y still
has the claim over this property, there is no need to move under section 53 of TPA.

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INTENTION TO DEFEAT CREDITOR;

A creditor is a person to whom the transferor owes financial flexibility, in order to apply
section 53 of TPA, it is necessary for a creditor to exist, and it is not necessary for the
creditor to be secured. The creditor can be unsecured as well.

Even a subsequent creditor can move under this section. This means that it is not necessary
for the transferor to be in debt at the time of the transfer. If the transfer is made prior to the
debt transaction, with the intention that the transfer might take a loan in future and wanted to
take option of the future creditor. It is equally fraudulent and be set aside at the option of the
creditors. But the mere fact that the loan was taken right after the transfer of property of there
was subsequent indebtedness, is not evidence of fraudulent intention towards subsequent
creditors.

A Muslim wife in lieu of her dower debt amounts as a creditor.

The basic objective behind this section is to protect the creditors from being delayed or
defeated by removing the possible security. In order to attract section 53, it is necessary that
intention is fraudulent. Hence behind the transfer must be to defeat or delay the creditors.

The phrase ’creditors’ doesn’t mean that the intention should be to defeat or delay all the
creditors. The intention to defeat some or even just one of the creditor is enough to attract
section 53.

Kanchanbai V. Moti Chand1

Transferor owed the creditor Rs 2600. The creditor asked for the money back. When even
after being asked for the recovery of money, transferor didn’t pay back, the creditor
threatened to file a suit. After receiving the notice of the same, the transferor executed a gift
deed in favour of her daughter in law. Creditor filed a suit under section 53 if the TPA against
the transfer.

It was contented that by the transferor that section 53 of TPA was attracted in the present case
as there was just a single creditor.

It was observed by the court that: the phrase creditors would also include a single creditor.
The section would be attracted even when a single creditor is defrauded or there was

1
AIR 1967 MP

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intention just to defraud a single creditor. Here the transfer was done with the intention to
defeat and delay the creditor's claim. Hence, section 53 would be applicable.

Mere preference of one creditor over the others is not sufficient to attract this section unless
it's shown that it was done with the intent to defraud other creditor's claim.

Example: A mortgaged his property X to C1, C2, and C3. While repaying the loan, he gave
preference to C1. Mere this fact won't amount to intention to defraud C2 and C3.

The transfer should be defeat and delay the creditors. If the transferor transfers his property
but is willing to pay the creditors back what he owes to them or if just a portion of the
property is transferred and there is another property left which is sufficient in value to pay
back the creditors then, the Section 53 will not apply

Example: A took a loan from C and mortgaged the property X as security. After a few days,
he sold the property X to B. Now C can question or deny the transfer under Section 53. But in
order to move under Section 53, he has to prove that he is not able to recover the money from
A personally. If A is ready to pay back the money to a personally without involving the
property, then Section 53 will not be attracted.

The section operates only against the fraudulent transfers. There might arise a case where the
transfer is done for two considerations one of which is for fraudulent intention, which is
separable from each other then, the whole transaction would not be regarded as fraudulent.
Only that portion of the transaction would be regarded as fraudulent for which there was an
intention to defraud and the transfer would be given effect to the extent the transaction can't
be regarded as fraudulent. But in cases where the substantial portion of the transaction is
fraudulent and the fraudulent and not fraudulent portions cannot be separated, then the whole
transaction would become voidable.

ENGLISH LAW ON FRAUDULENT TRANSFERS

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The English law regarding the fraudulent transfer is depended upon the Twyne’s2 case. In this
case Pierce was indebted to Twyne and also to C. C filed a suit against Pierce for satisfaction
of his debt, but when the suit was pending in the court, Pierce who was in the possession of
goods and chattels, in secret made a general deed of gift of all his goods and chattels to
Twyne, in satisfaction of his debt, without any obstruction that Pierce continued in possession
of the goods, and marked them with his own mark. Afterwards C had judgment against Pierce
and when his goods were sought to be seized in execution of the judgment, Twyne and others
resisted. Here the question arises whether the gift in favor of Twyne was fraudulent, the court
held that:

1. The gift had the signs and marks of fraud, because the gift is general, there is no
necessity for the donor to do this. For it is commonly said, quod dolosus vesatur in
generalibus.

2. The donor continued in possession and used them as his own, so it clearly shows that
he had defrauded and deceived the creditor.

3. The gift was made in secret, et done clandestine sunt simper suspiciosa.

4. The gift was made during the pendency of suit.

5. Even after the gift was made, the donor was still in possession and therefore here
there was a trust between the parties and the fraud is covered by the trust.

6. The gift deed contains that it was made truly, honestly and bonfire.

So in this case we should observe that, even if there was a true debt due to Twyne, but the gift
which was made with no consideration and bonfire, and it shall be deemed that a gift made
with any trust in favor of donor is considered to be done with fraud. In another case regarding
the same issue, Edwards v. Harben3, the judgment was given by Buller,. J. he said if the
possession is not followed by deed, it is deemed to be done with fraudulent intent and it is
void.

2
Reported in 3, coke, 80.
3
2 Term Rep. 587

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 INDIAN LAW ON FRAUDULENT TRANSFERS

Section 53 of TPA as it is originally stood was based on the statutes of Elizabeth. Now, this
section is in consonance with that of the English statute. The first part of the section deals
with the transfers in fraud of creditors, and the second deals with the fraud of subsequent
purchaser. A transfer though it may not offend this section could be still be avoided either
under Section 55 of the Presidency Towns Insolvency Act, 1909, or Section 53 of the
Provincial Insolvency Act, 1920, and a provision saving insolvency law is introduced in the
section.

This section is applicable only where the transaction is transfer of property within the
meaning of Section 5 of the Act. In the case of Sunder Lal v. Gurusaran Lal4, it was held
that relinquishment of share by one co-parcener in favor of other is not a transfer of property
within meaning of this section and Section 53 does not apply. Surrender is not a transfer of
property, but in the case of Nath v. Dhunbaiji5, the court held that surrender by a life-estate
holder is a transfer and it is covered by this section. In the case of Joshua v. Alliance Bank 6, a
settlement was provided for the appointment and it was found that the appointment was done
to defeat or delay the creditors.

Therefore observing the facts, the court held that appointment made with reference to the
settlement was fraudulent transfer. Naturally a question is arises regarding the Section 53 of
TPA, that when the consideration is good in part. If the transfer was for the purpose of
delaying or defeating creditors, the transaction will be set aside as there was fraud in it. But if
a part of the consideration is utilized for paying off a mortgage debt of the transferor, then
either the transfer would be treated as valid to that extent or if the transfer is set aside the
vendee is given charge on the property.

4
A.I.R 1938 Oudh 65.
5
(1899) 23 Bom. 1.
6
(1895) 22 Cal. 185.

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 SHAM TRANSFERS

Sham transfer means fictitious transfer. When the transferor does not intend that the property
should be really vested in the transferee, such transfers are therefore unreal or colourable and
never meant to operate between the parties. Such transfers are fictitious transfers. Benami
transaction is also a sham transfer because the real owner has no intention that property
should belong to ostensible owner. It can be clearly explained by the following cases.

In the case of Jangali Tewari v. Babban Tewari7, a sham transfer is not a real transfer at all.
The intention of the real owner is not necessarily fraudulent. So, such transfers do not require
to be avoided because the real title already vests in the transferor.

In the case of Petherpermal Chetty v. Muniandi Servai8, a sale deed of land was executed in
June 1895 in favor of the predecessor of the appellant. The transaction was a benami
transaction, it was not real. An equitable mortgagee of the land sued in September 1895, to
establish his lien on the ground that the sale was intended to defraud creditors and obtained a
decree by which the equitable mortgagee was paid off and the mortgage was discharged. On
the death of the vendor of the land, the appellant, legal representative of the purchaser was
sued by the heir of the vendor (respondent in the case) for the recovery of the land. The
defence argument was that the plaintiff, on account of his participation in the fraudulent
attempt to defeat his creditor, was not entitled to recover possession of the land.

The court held that:-

Persons have been allowed to recover property which they had assigned away, where they
had the intention to defraud or delay creditors, who, in fact, were never injured. But when
fraudulent or illegal purpose has actually been effected by mean of the colourable grant, the
legal maxim in pari delicto potior est condition possidentis applies. The court will help
neither party. It says let the estate lie where it falls. To enable a fraudulent party to retain
property transferred to him in order to effect a fraud must, according to the authorities, be
effected. Then alone, does the fraudulent grantor or transferor, lose the right to claim the aid
or support of the law to recover the property he has parted with. The principle however will
not apply in the case if the transferor seeks for possession from the transferee before the fraud
is effectuated.

7
A.I.R 1982 All. 316..
8
(1907-08) LR 35 IA 98.

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In the case of Immani Appa Rao v. Gollapalhili Rama Lingamurthi 9, a sale of property was
made with the mutual consent of the vendor and the vendee to defraud the creditors of the
vendor. There was no consideration and the transferee also agreed to act as a benamidar until
the transferor required him to reconvey the property to his sons. The transferor and his sons
trespassed and occupied the property, as the creditors were defrauded. The transferor, in
defence, urged that the transferee has no rights in the property as the transfer was a fraudulent
transfer. So in this case the court observed that:-

The transferors emphasized that the doctrine which is pre-eminently applicable to the present
case is ex dolo malo non oritur action or ex turpi causa non oritur actio. It means they
contended that the right of action cannot arise out of fraud or out of transgression of law.
According to them it is necessary that the possession should lie where it lies, in pari delicto
potior est condition possidentis. The law favours him who is actually in possession in case
where there is guilty of fraud on both the parties. The principle of public policy is that no
court will lend its aid to a man who founds his cause of action upon an immoral or illegal act.
If the cause of action arises from the plaintiff’s side, the court says that he has no right to be
assisted; it is same in the case of defendants.

The Court also said that there is no question of estoppels in such a case because the fraud in
question was agreed by both the parties and both the parties have assisted each other in
carrying out fraud. It also said, in such a cases the transferee would be guilt for liability of
double fraud, as he joined transferor joined in the fraudulent scheme and participated in
commission of the transfer and he committed another fraud by suppressing from the Court the
fraudulent character of the transfer when he made out the claim for the recovery of the
properties conveyed to him. The transfer was not supported by any consideration and
therefore no title is transferred to him.

So in the view of public interests, the Court held that the plea of fraud is allowed and tried
and it is upheld that the estate should lie where it rests.

Notwithstanding the rights of transferor and a benami transferee, if the transfer was made to
defeat the creditors, a creditor himself can ignore a benami transaction and can proceed
against the property as it was of the transferor. The creditor need not have to set it aside under
this section because, benami transaction is not a transfer at all.

9
(1962) 3 SCR 739.

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We have to note that, whether the transfer is real or sham, it is depended upon the facts and
circumstances in each case. If it is clearly shown that the very object of the transfer was to
defeat the interest of creditors, the transfer can be avoided by the creditor under this section.

But the present scenario is changed. The Benami Transaction Act, 1988 provides that
properties purchased in the name of ostensible owner or benamidar shall belong to benamidar
and real owner cannot claim from him. This Act now treats benami transfer as a real transfer
under which the benamidar becomes real owner. However, Section 3 of this Act says that the
provisions of Section 53 of TPA or any law relating to transfers for illegal purposes are not
affected

HOW FRAUDULENT INTENTION IN THE TRANSFERS CAN BE

PROVED

Fraudulent intention in transfers must be proved by direct or circumstantial evidence and

every case must be examined in the light of surrounding circumstances. Some circumstances
that give a strong presumption that the transfer was fraudulent are:

1. The transfer was made in secret and haste.

2. The transfer was made soon after the decree ordering the payment of debt was passes
against the judgment-debtor.

3. The debtor in the case transferred whole of his property without keeping anything for
himself.

4. The consideration paid was very small when compared to the real or original value of
the property transferred.

5. Evidence was shown that there was no actual payment of consideration as given in the
sale deed.

Not only these circumstances, but there are many other circumstances in which inference of
intent to defeat or delay creditors may be drawn. So every case is depended upon its own
facts and circumstances. It is subject to a matter of fact that the transfer is bonfire or
fraudulent.

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IF THERE ARE SEVERAL CREDITORS

If there are several creditors, transfer in favour of one creditor does not amount to an
intention to defeat or delay the remaining creditors. It’s upon the debtor’s discretion to pay
his debts in any order of his preference. If A has taken loan from B, C and D, transfers certain
properties to C in satisfaction of the loan taken from him. This transfer necessarily cannot be
considered as a transfer made to defeat or delay the interest of other creditors. It was
happened in the case of Mina Kumari v. Bijoy Singh10, the Privy Council held that in the
case there are two or more creditors, the debtor can give preference to any creditor and can
clear his debts in any order he chooses.

Another landmark regarding this context is Chogmal Bhandari v. Deputy Commercial Tax
Officer, Kurnool11. The facts of the case were: A partnership of two partners was dissolved in
1963. A registered deed of trust was executed by which the properties were vested in the
trustees for purpose of paying off the creditors. Afterwards a business was started by the
grandson of one of the partners and some provisional assessments were made his name for
the years 1966-1969. In 1971, Sales Tax authorities made the assessments in the name of the
Joint Hindu Family for the first time but found that the tax could not be realized from the
assesses on account of the Trust Deed, and therefore, treated the Deed as void and fraudulent
and contended that the assessments were made to defeat the debts of Sales Tax Department.
But in proceedings, these facts were found. It was found there was no assessment made
against the Joint Hindu Family at the time of execution of Trust Deed. Therefore there was no
real debt due by from one of the executants of the Trust. There was no intention of use of
unlawful purpose by the Trust. In the Trust Deed, the names of the creditors to whom the
debts are to be payable were clearly mentioned. The Trustees did not keep reserve any
advantage for themselves. It was also found that there was no material to show that the
creditors obtained collusive decrees.

Here the question arisen before the Supreme Court was that whether this Trust Deed was hit
by Section 53 of TPA or not. In this context, Supreme Court held that:-

Observing the facts and circumstances of the case, it cannot be said that Trust was executed
to defraud the creditors, Sales Tax Department. Under the section a person must prove two

10
A.I.R. 1916 P.C. 238.
11
A.I.R. 1976 S.C. 656.

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facts to challenge the transaction. Firstly, the document was executed by settler. Secondly,
the said document was executed with a clear intention to defraud or delay the creditors. It is a
matter of the fact that intention would be proved on the basis of facts and circumstances
surrounding the case. The Supreme Court also held that, it is a well settled that a mere fact
that the debtor chooses to prefer one creditor to the either because the priority of the date or
otherwise by itself cannot be misleaded that it was done to defeat the other creditors.

In Musahur Sahu v. Hakim Lal12, Kisun Binode and Musahur Sahu were the debtor and
creditor respectively. Musahur Sahu sued the Judgment-Debtor Kisun Binode for the
recovery of his debts in December, 1900. Musahur Sahu presented a petition for attaching the
properties of the debtor as a security. This petition was filed in January, 1901, when the
original suit was during pendency. In February, 1901, Kisun Binode, the debtor gave an
affidavit that he has no intention to attach any property, accordingly the petition for
attachment was dismissed. But after the petition was dismissed, Kisun Binode sold his
properties to Hakim Lal who was another creditor of him. Then Musahur Sahu, pleaded that
the transfer to Hakim Lal were done do defeat or delay his interest and therefore it should be
held void under Section 53 of TPA and the properties should not be given to Hakim Lal.

In this case, the appeal was dismissed by the Privy Council, and held that transfer of property
by a debtor to one creditor in preference of the other is not a fraudulent transfer with the
intent to defeat or the delay the interest of another creditor. The Lordships observed in the
case Middleton v. Collak13, the transfer if defeats or delays the creditors is not an instrument
which prefers one creditor to another but an instrument which removes a property from the
creditors to the benefit of the debtor. The debtor must not remain any advantage or benefit for
himself. He may one creditor and leave another unpaid. The court further observed that as
soon as it is found that the transfer here impeached was made for adequate consideration in
satisfaction of genuine debts, and without retaining any benefit to the debtor, it follows that
no ground for impeaching it lies in the fact that the plaintiff who also was a creditor was a
loser by a payment being made to this preferred creditor, there is no question being bankrupt.

12
(1915) LR 43 IA 104.
13
(1876) 2 Ch D 104.

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EXCEPTIONS TO SECTION 53(1)

Section 53(1) recognizes two exceptions. The rule that a fraudulent transfer can be avoided
by creditors is not applicable to:

a) A transferee in good-faith and consideration,

b) Any law relating to insolvency for the time being in force.

A transferee in good-faith and consideration:

A transferee is protected if he takes property in good-faith and consideration. When a

transferee purchases a property in good-faith and consideration, the creditors cannot take
benefit of 53(1). Where a transferee has no knowledge i.e. no actual or constructive notice of
the fraudulent intention of the transferor, the creditors cannot claim the property or avoid the
transfer under Section 53(1). But if the transferee is aware of the fraudulent intent an aim and
keeps silent, it is not be done in good-faith and cannot get the benefit of this exception.

In the case of Vinayak v. Kaniram14, the transferor’s intention was to convert his immovable
property into cash so as to keep it out of reach of the creditors and the purchaser was aware of
that intention of the debtor. The Court held that the purchaser was also a party to fraud as he
was aware of that fraudulent intention and sale was voidable at the option of the creditors.

In Kapini Goundan v. Sarangapani15, a man who had taken large sum of money as loan,
transferred his whole property to the children of his first wife in consideration of her relations
allowing him to marry a second wife. In this case, the Madras court held that the
consideration was good and the transfer was not on the basis of fraudulent intention to keep it
away from creditors. It should be noted that this decision must be regarded as only an
exception and should not be regarded as a general rule.

Therefore, good-faith on the part of transferee is more significant factor in protection of

rights of the transferee than payment of consideration.

Any law relating to insolvency for the time being in force:

The rights of the transferee created under the law of insolvency are not affected by Section 53
even if the transferor’s intent was to defeat or delay the creditor’s interest. The main aspect of
the insolvency laws is that the properties of the insolvent are equally distributed between the

14
A.I.R. 1926 Nag. 293.
15
(1916) Mad. W.N. 288

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creditors. If one creditor is given preference, then it is deemed to be a fraudulent transfer
under this section. Where the transferor (debtor) has been declared insolvent, and the
transferee purchases such property from him, the transfer cannot be avoided by creditors. In
such cases, the Insolvency Courts are competent here to decide whether the transfer was
voidable under Section 53 of TPA.

Section 53 (2): Gratuitous transfer to defraud subsequent transferee

Section 53 (2) enacts that gratuitous transfer of an immovable property with intent to defraud
a subsequent transferee shall be voidable at the option of subsequent transferee. This section
explains about the situation where an immovable property is transferred to person without
consideration and the same property is again transferred to another person. So the subsequent
transferee has advantage under this section where he can avoid the first transfer. But in this
case the subsequent transferee should prove that the first transfer was a sham or fictitious
transfer made to defraud him. The general rule is that the first transfer has advantage or
preference over the second and so on, but if the subsequent transferee proves that the first
transfer was fraudulent and it was made to defraud him, the later transfer would stand valid. It
should be noted that this section only protects the interest of the bonafide transferee and the
transfer should have some value (consideration). The mere fact that the first transfer was
gratuitous and the later transfer was for consideration does not essentially raise the
presumption that the prior transfer was made to defraud. Fraud in the prior transfer must be
fully established by the subsequent transferee.

Under Section 53, the Wakfnama would be voidable only at the option of the person who was
defrauded or delayed. An important fact should be noted that this section does not violate the
rule of Muslim Law.

BURDEN OF PROOF

The burden of proof lies on the creditors of the transferor to show that the transfer was made
to defeat or delay the interest of the creditor. In the case of Chandradip v. Board of
Revenue16, the onus to prove the fraud lies on the person alleging it. But it may be noted that

16
A.I.R. 1978 Pat 148.

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the burden to prove the intention would largely depend upon the facts and circumstances of
each case.

CONCLUSION

Section 53 of Transfer of Property Act, 1882 deals with “Fraudulent Transfers”. This section
has two sub sections. The first part of this section deals with the transfer made to defeat or
delay the creditors of the transferors and it is voidable at the option of such creditor. The
second part deals with the gratuitous transfers with intent to defeat or delay the creditors. This
section has some exceptions in respect of the transfers done towards the transferee in good
faith and consideration. But if the transfer is a gift towards the stranger, then the good faith is
irrelevant. The rights of the transferee created under the law of insolvency are not affected by
Section 53 even if the transferor’s intent was to defeat or delay the creditor’s interest.
Moreover it can be stated that two points are important as far as fraudulent transfer is
concerned; first point is that transfer of property act has discussed fraudulent transfer only in
respect of immoveable property. And second point is that person, who alleges fraudulent
transfer, is under burden to prove fraudulent transfer . The basis of the section is that one
ought to be just before being generous. This section was made to disallow a person conveying
the properties to keep it away from the creditors. In my opinion, the laws regarding
fraudulent transfers must be made stricter and such transferors or transferees who committed
fraud must be penalized for committing fraud.

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 BIBLIOGRAPHY

BOOKS
 G.C.V SUBBARAO’S LAW OF TRANSFER OF PROPERTY ACT,(FOURTH
EDITION)

 Dr. AVTAR SINGH, TEXT BOOK ON THE TRANSFER OF PROPERTY ACT,

(2nd EDITION, 2009)

 MULLA ON THE TRANSFER OF PROPERTY ACT, (10th EDITION, 2006).

 Dr.G.P.TRIPATHI ON THE TRANSFER OF PROPERTY ACT, (16 th EDITION,
2009).
 Dr. POONAM PRADHAN SAXENA, PROPERTY LAW, (2nd EDITION, 2011)

 S.N.SHUKLA ON THE TRANSFER OF PROPERTY ACT, (27 th EDITION,

2009).

STATUTES
 TRANSFER OF PROPERTY ACT, 1882.

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