Table of Contents Table of Cases 02 Introduction

03 Section 53 & Its Essentials

04 English Law on Fraudulent Transfers
05 Indian Law on Fraudulent Transfers
06 Sham Transfers
07 How Fraudulent Intention in the Transfer Can Be Proved
09 If there are Several Creditors
10 Exceptions to Section 53 (1)
12 Section 53 (2): Gratuitous transfer to defraud subsequent
transferee 13 Burden of Proof
13 Conclusion 14
Bibliography 15 1|
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Table of Authorities Table of Cases:  Twyne’s case. 05 
Edwards v. Harben 05 
Sunder Lal v. Gurusaran Lal 06 
Nath v. Dhunbaiji 06  Joshua v. Alliance Bank
06  Jangali Tewari v. Babban Tewari
07  Petherpermal Chetty v. Muniandi Servai
07  Immani Appa Rao v. Gollapalhili Rama Lingamurthi
07  Mina Kumari v. Bijoy Singh 10  Chogmal Bhandari v.
Deputy Commercial Tax Officer, Kurnool 10  Musahur
Sahu v. Hakim Lal 11  Middleton v.
Collak 11  Vinayak v. Kaniram
12  Kapini Goundan v. Sarangapani
12  Chandradip v. Board of Revenue
13 2|Page
INTRODUCTION Every owner of a property has right to
transfer his property as he likes. There must be a bonfire
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. 3|Page
Section 53 & Its Essentials Section 53 deals with the
Doctrine of Fraudulent transfers. It provides that:- Section
53(1) explains about – 1. Transfers of an immovable
property, 2. Made with intent to defeat or delay the
creditors of the transferors, 3. Shall be voidable at the
option of creditor so defeated or delayed. But the
exceptions to the provisions of this sub section are- a) The
rights of a 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. 4|Page
ENGLISH LAW ON FRAUDULENT TRANSFERS The English
law regarding the fraudulent transfer is depended upon the
Twyne’s1 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.
Harben2, 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. 1 Reported in 3,
coke, 80. 2 2 Term Rep. 587 5|Page
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
Lal3, 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. Dhunbaiji4, 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 Bank5, 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. 3 A.I.R 1938 Oudh 65. 4
(1899) 23 Bom. 1. 5 (1895) 22 Cal. 185. 6|Page
 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 Tewari6, 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
Servai7, 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. In the case of Immani Appa Rao v. Gollapalhili
Rama Lingamurthi8, 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

6
A.I.R 1982 All. 316..
7
(1907-08) LR 35 IA 98.
8
(1962) 3 SCR 739.

7|
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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 favors 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. 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.

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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. 9|Page
 IF THERE ARE SEVERAL CREDITORS If there are several
creditors, transfer in favor 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
Singh9, 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, Kurnool10. 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 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

9
A.I.R. 1916 P.C. 238.
10
A.I.R. 1976 S.C. 656.

10 |
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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 Lal11, 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. Collak12, 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. 11
(1915) LR 43 IA 104. 12 (1876) 2 Ch D 104. 11 | P a g e
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. NNo 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. Kaniram13, 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.
Sarangapani14, 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 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 13 A.I.R. 1926 Nag. 293. 14 (1916) Mad.
W.N. 288 12 | P a g e
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 Revenue15, the onus to prove the fraud lies on the
person alleging it. But it may be noted that the burden to
prove the intention would largely depend upon the facts and
circumstances of each case. 15 A.I.R. 1978 Pat 148. 13 | P a
ge
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. 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. 14 | P a g e
BIBLIOGRAPHY BOOKS  Dr.G.P.TRIPATHI ON THE
TRANSFER OF PROPERTY ACT, (16 th EDITION, 2009). 
S.N.SHUKLA ON THE TRANSFER OF PROPERTY ACT, (27th
EDITION, 2009).  MULLA ON THE TRANSFER OF
PROPERTY ACT, (10th EDITION, 2006).  Dr. POONAM
PRADHAN SAXENA, PROPERTY LAW, (2nd EDITION, 2011) 
Dr. AVTAR SINGH, TEXT BOOK ON THE TRANSFER OF
PROPERTY ACT, (2nd EDITION, 2009) STATUTES 
TRANSFER OF PROPERTY ACT, 1882. . 15 | P a g e