NATIONAL UNIVERSITY OF ADVANCED LEGAL STUDIES,

KOCHI

Law of Property

Project: Remedies for Fraudulent Transfers

under Transfer of Property Act, 1882

Navaneeth SS
1529, Semester 4
 INDEX

I. Fraudulent Transfer………………………………………………... 3
II. Essentials of the Doctrine of Fraudulent Transfer……………..… 8

1. Transfer of property…………………………………………..…....8
2. The property must be immovable in nature…………………..…….9
3. Transfer in question must have been done with the plan or scheme in
mind to delay or defeat…………………………………….…...….10
4. Such delay or defeat must be suffered by the creditor(s)………...…11
5. The transfer would be voidable…………………………………....12
6. Transfer must be for consideration………………………………..13

III. Exceptions to the Doctrine of Fraudulent Transfer…………….13

IV. Remedies………………………………………………………….16

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 I. Fraudulent Transfers
In India, the law that governs the transactions and transfers of Immovable property between
two or more people is the Transfer of Property Act, 1882. However, it only deals with
transfer of property by parties by virtue of sale, gift, exchange, mortgage and lease. The Act
does not deal with transfers that occur due to inheritance, insolvency or forfeiture. In the Act,
a transfer is defined as “act by which a living person conveys property, in present or in
future, to one or more living person or to himself and one or more other living persons”1 In
this, the term “Living Person” is not restricted to Individuals, but rather entities such as an
Association or a Company and so on.2 The party who transfers property is known as
transferor and the party who receives the property is termed Transferee. In order to be
competent to transfer, the person must have a valid title of Immovable Property. 3 And must
also have attained majority age, must have a sound mind and is not otherwise disqualified
under any existing law.4

Following are some examples of transactions which do not come under the purview of
transfer of property:

a. Surrender and relinquishments.

b. Relinquishment of share by one co-parcener in favour of the other.5
c. Partition and family settlements but in case such partition is done with the
design or scheme which is aimed towards affecting creditors in a manner that
would delay or defeat the interests of the creditors, this section will apply

Where it is claimed that the transfer was a transaction that would be deemed to be fictitious
or sham ( in the eyes of law ) and there was no real transfer and was merely used in such a
manner that it acted as a shield for achieving a hidden agenda, Section 53 is not applicable.

Amongst the list of transfers that comes under the purview of the act, the transfers made with
a malicious intention to defeat or delay the creditor are termed as Fraudulent Transfers. The
same is enshrined under section 53 of the Transfer of Property Act, 1882 as follows:

1
Section 5, The Transfer of Property Act, 1882.
2
Hindustan Lever v State of Maharashtra, (2004) 9 SCC 438, Shriomani Gurudwara Prabandhak Committee,
Amritsar v. Som Nath Dass and Ors. (2000) 4 SCC 146.
3
Section 7, The Transfer of Property Act, 1882.
4
Section 11, The Transfer of Property Act, 1882.
5
Sundar Lal v. Gursaran Lal, A.I.R. 1938 Oudh 65

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“Fraudulent Transfers– (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.

(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.”

The Law pertaining to the same also states that such fraudulent transactions are voidable at
the potion of the person so defrauded. However, since the act directs such cases of fraudulent
transfers to be voidable at the option of the Transferor, the burden of proof of the same also
lies on the creditor. But, if there appears a prima facie intention of the debtor to defeat or
delay the creditor, then the debtor must explain the same and make his case. We can see that
throughout the Act, it focuses on helping the bona fide transferee. An example of the same is
Section 41 of the Act:

“Transfer by Ostensible Owner- where, with the consent, express or implied, of the persons
interested in immovable property, a person is the ostensible owner of such property and
transfers the same for consideration, the transfer shall not be voidable on the ground that the
transferor was not authorised to make it; Provided that the transferee, after taking
reasonable care to ascertain that the transferor had power to make the transfer, has acted in
good faith.”

The section is based on the Principle of Estoppel6 which was brought forth in the case of
Cairncross v Lorimer7, which states that, when a person has consented to an act and based on
that consent or inference of consent from conduct, others have done the act which they could
not have been done without such consent, then the person who did that act cannot question
the legality of that act.

In Dr. Vimla v. Delhi Administration, the Supreme Court stated that the word "defraud"
entails two elements: deception and harm to the individual deceived. This harm isn't limited
to monetary loss. It can also be described as the taking of someone's property or assets, as
well as harming someone's body, mind, or reputation. In a fraudulent transfer, the actual

6
Hoorbai v Aishabai, (1910) 12 Bom LR 457: 6 IC 898; Satyanarayan Murthi v Pydaya, (1943) 1 Mad LJ 219 : AIR
1943 Mad. 459 ; Lulsingh v Granth Saheb, AIR 1950 Pepsu 104 .
7
Cairncross v Lorimer, (1860) 3 Macq 827, p 829.

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owner of a property is not held liable, unless the apparent ownership of the transferor has
been created by him. Such a situation occurs not only when the owner allows another to
represent such ownership by express words of consent but also when it is implied in conduct.8
Therefore, in a case where the real owner was aware of another person dealing with his
property and misrepresenting it to be his own, and he willingly allows it, his inaction or
silence will imply consent.9 This is based on the principle that “when one of two innocent
persons must suffer from the fraud of a third, he shall suffer who, by his indiscretion, has
enabled such third person to commit the fraud”.10

One of the important considerations to avail the protection under this clause is the
categorization of ostensible owners. In the Supreme Court judgement of Binapani Paul v.
Pratima Ghosh,11 an ostensible person has been defined as “one who has all the indicia of
ownership without being the real owner.” Such a person must be actively able to represent
himself as actual owner of the property. A series of cases have confirmed which positions
would not constitute ostensible ownership, for example, that of a manager, professed agent,
menial servant or the trustee of an idol.

Section 3 of the TPA lays down that “a person is said to have notice of a fact when he
actually knows that fact, or when, but for wilful abstention from an enquiry or search which
he ought to have made, or gross negligence, he would have known it.”

This section envisions such notice to be of two types- direct and constructive.

Direct notice refers to explicit knowledge of the title of the property. The second part of the
definition deals with constructive notice where the presence of “wilful abstention from an
enquiry/search or gross negligence” has lead the belief that the transferor is the actual owner,
then the transferee is fixed with the constructive notice of the fact of lack of good title of the
transferor.

Therefore, for a transferee to benefit under Section 41, he/she must have taken all measures
of enquiry to confirm the valid title of the transferee such as examination of title-deeds,

8
TRANSFER OF PROPERTY ACT: BONA FIDE AND FRAUDULENT TRANSFERS; Available at
https://lexforti.com/legal-news/transfer-of-property-act-bona-fide-and-fraudulent-transfers/#_ftn2
9
Sara Chunder v Gopal Chunder, (1893) ILR 20 Cal 296
10
Baidya Nath v Alef Jan, (1922) 36 Cal LJ 9
11
AIR 2008 SC 543

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registration papers etc. This proof of enquiry is essential to seek protection under this
section.12 in the absence of which constructive notice will be assumed, rendering this Section
inapplicable. Wilful omission of existing avenues of inquiry will disentitle such transferees
from relief under this Section.

The Supreme Court, in Dr. Vimla v. Delhi Administration13 has observed that the term
“defraud” involves two elements namely, deceit and injury to the person deceived. This
injury is not limited to economic loss. It can also be construed as deprivation of property or
money as well as harm caused to any person in body, mind or reputation. Fraudulent
Transfers in general parlance, therefore, refer to transfers which are made with an intention to
defraud.

Doctrine of Fraudulent Transfer

Lord Keeper in the case of Partridge v Gopp14 had enunciated certain words which are
relevant herein. He opined that no one has power over his property to such extent using
which he, whilst using his right of alienation of property, can delay, defraud or hinder his
creditors. The only the situation he can do is when it is bona fide and is done upon
consideration considered good in the eyes of law.

The Transfer of Property Act, 1882, in Section 53 which deals with the Doctrine of
Fraudulent Transfer, embodies this very principle wherein it says that every transfer of
property, which is immovable in accordance with the relevant section of The Transfer of
Property Act, 1882, which is done possessed with an intention aimed to delay or defeat the
creditors [ or the people to whom the transferor owes some kind of liability which is financial
in nature ] of the transferor shall be voidable.
15

Such option to consider the transaction void or not has been left in the hands of the aggrieved
party who, here, will be the delayed or defeated creditors. This means that even though such
transfer is, in the eyes of law, valid but it is left upon the creditor as to whether he wishes to

12
Sheogobind v Anwar Ali, (1929) Pat 305.
13
Dr. Vimla v. Delhi Administration 1963 AIR 1572
14
Partridgle v. Gopp,(1758) 28 ER 647 (648).
15
Doctrine of Fraudulent Transfer under Section 53 of TPA; Available at :
http://www.legalserviceindia.com/legal/article-4978-doctrine-of-fraudulent-transfer-under-section-53-of-
tpa.html

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avoid or not. The motive of the legislature behind such arrangement is to give the option to
the party who has suffered or whose interest has been affected.

Section 53 is attracted in cases wherein any transfer of property, which is immovable in

accordance with the relevant sections of The Transfer of Property Act, 1882, is done with the
design or scheme to fulfil the objective of defrauding his creditors in a manner that they are
defeated or delayed.

It was such practice that compelled the legislature to enact this section. Their objective was to
lend protection to creditors who are those to whom the transferor owes some sort of liability
which is financial in nature. The basic objective is to lend a blanket to such people who suffer
in the nature of delay or defeat of their interest. Such people whose mere fault was to lend
money to the ill-intentioned transferor must be provided some kind of security- one which
only the legislature through legal policy can provide.

The doctrine of Fraudulent Transfer from the perspective of English Law

Whilst delving into the Doctrine of Fraudulent Transfer from the perspective of Indian Law,
it is interesting to see the perspective of the English Law – more so in the case of legislation
which were introduced in the colonial era, like The Transfer of Property Act, 1882.

The doctrine of Fraudulent Transfer, from the the perspective of English Law is dependent, to
the most extent, upon a the celebrated case of Twyne.16 In this particular case law, Pierce
owed certain liability which was financial in nature to two parties – Twyne and C. Now, C
i.e. the second person to whom Pierce owed such liability [ financial in nature ] approached
the court by filing a suit seeking help in repayment of his debt by Pierce.

However, before the suit could come to any kind of fruition in the court, Pierce, being in the
possession of goods as well as the chattels, in hush-hush manner made a deed of gift which
was general in nature with the subject matter encompassing the totality of his belongings of
chattels and goods to Twyne, the first person to whom Pierce owed such liability [ financial
in nature ]. Such a gift was repayment of the debt that was owed to Twyne. On a later
instance, C secured judgment to procure goods and chattel in a manner that satisfies C’s debt.
In execution of such judgment, the seizure was sought to be done – to which Twyne resisted.

16

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Twyne brought forth the argument that he had been a purchaser for value, which cannot be
deemed to be inadequate, consideration which was also bona fide within the Fraudulent
Conveyances Act, 1584.

In another celebrated case dealing with a similar issue, Edwards v. Harben,17 the judgment,
which was delivered by Buller, J., opined that if the possession is not done via a deed [made
before or after], it is deemed to have been carried out with an intent to defraud. In such a
case, it is void.

II. Essentials of the Doctrine of Fraudulent Transfer

The essential requirements of Section 53 of TPA are as mentioned below:

7. Transfer of property
8. The property must be immovable in nature
9. Transfer in question must have been done with the plan or scheme in mind to
delay or defeat
10. Such delay or defeat must be suffered by the creditor(s)
11. The transfer would be voidable
12. Transfer must be for consideration

1. Transfer of Property

The very first essential is the application of The Transfer of Property Act, 1882 itself. If the
transaction does not fall within the ambit of such legislation, there is absolutely no question
of application of Section 53 of The Transfer of Property Act, 1882. According to the Act,18
transfer of property means when any person transfers property to one or more people, or to
himself and one or more people.

Such a person may include a company, a body of individuals, an individual or association,

and even immovable property can be transferred – which would not, in any case, include
growing crops, standing timber, or grass. Such transfer can be in present or even the future.
However, there are certain rights which cannot be, in any case, be transferred which have

17
Edwards v. Harben, 2 Term Rep. 587.
18
The Transfer of Property Act, 1882, §5, No. 4, Acts of Parliament, 1982 (India).

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been stipulated in Section 6 of The Transfer of Property Act, 1882. This transfer, moreover,
shall be valid (in the eyes of law) and additionally, should bestow a good title upon the
transferee.

2. The property must be Immovable in Nature

Section 53 of The Transfer of Property Act, 1882 attracts application to only those property
which is considered to be immovable in nature. At this juncture, we face the pertinent
question as to what are immovable properties:
While The Transfer of Property Act, 1882 does not define what is immovable property,
according to Section 3 of the Act, the immovable property does not, within its ambit, include:

a. Grass [which refers to fodder]

b. Standing Timber [which refers to trees which are fit to be used in repairs
or buildings]
c. Growing Crops [which includes all such vegetables, etc. which are grown
with the sole purpose of their produce]

Scholars consider this definition to be a negative one since instead of outrightly providing
definition of immovable property, The Transfer of Property Act, 1882, merely gives us three
things that are not immovable property.

We look towards the General Clauses Act, 1867, for a more comprehensive definition of
immovable property. The General Clauses Act, 1867 specifies the following as immovable
property:

i. Land: The term land includes within its ambit both - the lower as
well as the upper surface area of earth. Any kind of interest which
tends to vest in such would be treated as it is of immovable
property. It includes streams, well, etc.
ii. Benefits which are arising out of the land : Within such portion is
includes every thing which deals with interest and rights vested
inland, as defined above. Right of collect of rent is one prominent
example.
iii. Things that are attached to Earth

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 iv. In order to determine whether a fixture in question is of permanent
nature or is merely temporary, we must consider the following
points:
a. Mode of fixation – that is to say it is temporary,
standing on its own or has been dug in the Earth,
etc.
b. Objective or the purpose which the fixation is
intended to fulfil

3. Transfer in question must have been done with the plan or scheme in mind to delay
or defeat

The third essential of Section 53 is that the intention behind the transfer must be to delay or
defraud creditors. This is to say that it is important to cull out the intention behind the transfer
which is in question. If such transfer has been with the scheme or design to result in delay or
defeat of the creditors – such transfer is voidable. Now the question arises as to how can this,
seemingly, ill–intention is proved? It must be proved by making use of evidence – which may
be direct or circumstantial in nature. Each case in question must be looked closely into and
examined keeping in mind the surrounding circumstances. Some situations which tend to
give strong presumption that the transfer, in question, was carried out with a scheme or
design which is fraudulent in nature are:

• If the transfer was made under such circumstances that it was not widely known i.e. in
secrecy
• If the transfer was done in haste.
• If the transfer was carried out soon after a decree was passed against the judgment-
debtor. Such decree must be such to order the repayment of debt.
• If the transfer was such that the debtor, mysteriously, transferred the whole of his
property without any thought to himself – i.e. without keeping any part of the property
for himself.
• The consideration made for the transfer was such which was significantly small, when
it is compared to the real, original or actual value of the property transferred.
• In accordance to the evidence discovered, it was proved that there is actually no
consideration payment, contrary to what was given in the sale deed.

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 There are many more such circumstances but what is pertinent is that each case is
read in a different light, dependent solely on its own facts and circumstances – there is
no straight – jacket formula.

4. Such delay or defeat must be suffered by creditor(s)

The fourth essential is that the delay or defeat must have been suffered by creditor(s). This is
to say the ill – intentioned transfer, in question must be such wherein the affected people is or
are creditor(s). Herein, it is pertinent to understand the term "creditor". It is said to be
understood in a wide sense for this section.

In the case of Ram Das v Debut,19the term was interpreted to include such people to whom
the transferor owes some kind of liability which is financial in nature [ i.e. creditors ] which
would include not only those to whom he owes at the time of transfer in question as well as
those to whom he owes at a time which is after the transfer in question.

In order to effectuate application of The Transfer of Property Act, 1882, more specifically,
the Section 53 of the Act, it is necessary for the affected party to be a person to whom
liability is owed to by the transferor, a liability which is financial in nature. However, it is not
necessary for the creditor to be secured. On the contrary, such affected creditor could be an
unsecured one as well.

Moreover, even a subsequent creditor i.e. a person to whom the liability which is financial in
nature is owed to at a later date than the transferor, can move to the court under this particular
section. This connotes to the fact that debt to exist at the time of effectuating the transfer is
not mandatory.

If transfer of property is effectuated before the transaction of debt, possessed with the
intention or scheme that the transferor would undertake a liability [which would be financial
in nature] upon his head in future and for such purpose wanted to restrict his property from
the reach or hold of future creditors, it is deemed to be equally wrong or fraudulent in the
eyes of law. Such transaction is also liable to be set aside. Such setting aside, however, would
be at the insistence of creditors only since such transaction is deemed voidable.

19
Ram Das v. Debut, A.I.R. 1930 All 610

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However, armed with the mere fact that the loan was undertaken right after the property was
transfer or that there were subsequent debtors, is not sufficient for establishing the fact that
there was a scheme or design to defraud, delay or defeat the subsequent creditors.

Furthermore, one must remember that by usage of ‘creditors’, the legislator does not mean
that the intention should be to delay or defeat all the people to whom the transferor owes
some kind of liability which is financial in nature. The intention or scheme or plan to delay or
defeat some or even just one of the people to whom the transferor owes some kind of liability
which is financial in nature is sufficient to ensure application of Section 53.

In the case of Kanchanbai v. Moti Chand,20 the term creditors used in Section 53 was
discussed. In such case, the transferor undertook a liability which was financial in nature
amounting to a value of Rs. 2600 i.e. two thousand and six hundred rupees. The creditor
requested repayment of the money which was owed to him. However, even after doing so, he
was not paid back. At such instance, such person to whom money was owed warned that he
would move to the court to seek payment of his money. On receipt of notice of such filing of
suit, the transferor, by executing a gift deed [ in favour of his daughter ], gifted his property.
At this point, fed up of the transferor’s antics, the creditor moved to the court seeking respite
under Section 53 of the Act.

The transferor put forth the argument that Section 53 requires more than one creditor and in
the present instance, there is only one creditor. Hence, Section 53 would not be applied.
The learned court, on the other hand, opined that the usage of word creditors cannot be
construed to mean that Section 53 would be applicable only in the occasion of presence of
multiple creditors. This section would attract application even if one single creditor is delayed
or defeated or when there was an intention to delay or defeat even a single creditor.
Therefore, in the present case, Section 53 was held to be applicable.

5. Transfer would be voidable

20
Kanchanbai v. Moti Chand, A.I.R. 1967 MP 145

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Every transfer of property, which is immovable in accordance to the relevant section of The
Transfer of Property Act, 1882, which is done possessed with an intention aimed to delay or
defeat the creditors [ or the people to whom the transferor owes some kind of liability which
is financial in nature ] of the transferor shall be voidable. Such option to consider the
transaction void or not has been left in the hands of the aggrieved party who, here, will be the
delayed or defeated creditors.

This means that even though such transfer is, in the eyes of law, valid but it is left upon the
creditor as to whether he wishes to avoid or not. The motive of the legislature behind such
arrangement is to give the option to the party who has suffered or whose interest has been
affected.

However, the fact that only the particular part of transaction which was effectuated with an ill
– intention, would be regarded as one which is fraudulent in nature. The rest of the transfer –
which was not tainted with this scheme, would be effectuated normally i.e. something akin to
severability would be effectuated. The catch here is that in transfers wherein a major part of
the transaction in question is held to be one made possessed with an ill – intent to delay or
defeat the creditor(s) and fraudulent parts of the transaction cannot be severed from the rest
of the transaction, then whole of such transaction in question would be held to be voidable.

6. Transfer must be for consideration

The transfer must be such which is for consideration, one which is not such which was
significantly small, when it is compared to the real, original or actual value of the property
transferred. This is to say the consideration for the transaction, in question, must be adequate.

III. Exceptions to the Doctrine of Fraudulent

Transfer

The Transfer of Property Act, 1882, by way of Section 53 has recognized two exceptions that
the doctrine of fraudulent transfer is not applicable to:

1. The person to whom the transfer is made does the whole deed in good faith
and for consideration.

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 2. Application of any law which relates to insolvency which is being enforced at
such time.

The person to whom the transfer is made does the whole deed in good faith
and for consideration.

The transferee i.e. the person to whom the transfer is made is protected by law if they took
the property, in question, in absolute good faith and gave due consideration for the same.
When the transferee i.e. the person to whom the transfer is made purchased any property,
being immovable in nature, possessing such intent which is considered good faith and paid
consideration which is considered adequate – the creditors [ i.e. the people to whom the
transferor owes some kind of liability which is financial in nature ] cannot take the help or
derive benefit from Section 53 of the Act.

In the instance that the person to whom the transfer is made lacks any knowledge i.e.
possessed no constructive or actual notice of the ill – intent or intention which was fraudulent
nature of the transferor, the creditors [ i.e. the people to whom the transferor owes some kind
of liability which is financial in nature ] cannot try to stake claim over the property or to
effectuate the transfer as void under Section 53 of the Act. But if the transferee i.e. the person
to whom the transfer is made was keenly aware that the transferor was possessed of such foul
intent and keeping such in mind aims to keep mum about it, the transferee is not in good faith
and would not be covered by the exception.

In the case of Vinayak v. Kaniram,21 it was discovered that the intention of the person making
the transfer was not one which could be termed as one which was good since the intention
was to sell off his property which was immovable in nature and procure cash for it in return
so as to, effectively, keep it out of the hands of the people to whom he owed any kind of
liability which was financial in nature. Now, to make matters more interesting, it was further
discovered that the purchaser of the property was well – aware of his ill – intention to
defraud.

21
Vinayak v. Kaniram, A.I.R. 1926 Nag. 293

14
The learned court, herein, held that since the person who purchased the property was aware
of the transferor’s ill – intention, he also becomes party to the fraud because of his
knowledge. The transaction of sale was held to be voidable i.e. option to consider the
transaction void or not has been left in the hands of the aggrieved party who, here, will be the
delayed or defeated creditors.
In the case of Kapini Goundan v. Sarangapani,22 a person belonging to the male population,
had taken a huge sum of money which was his liability which was financial in nature. The
man, being clever and thinking he was bigger than law, effectuated transfer of his property to
children who were borne from his marriage to his first wife in order to to, effectively, keep it
out of the hands of the people to whom he owed any kind of liability which was financial in
nature.

He did so claiming it as a reward for her allowance to him to wed the second wife. In this
case possessing interesting factual matrix, the learned Madras court, held that the
consideration the person belonging to the male population was good in law and the transfer
lacked any indication of malice which would be to keep the property away from the people to
whom he owed any kind of liability which was financial in nature. However, according to the
author, the learned court erred in its decision and it would be wise to consider this decision to
be an exception and not something of general nature.

Application of any law which relates to insolvency which is being enforced at such time.

The rights of the person to whom the transfer is made, those which stem from any law which
relates to insolvency which is being enforced at such time, are not effectuated by the
application of Doctrine of Fraudulent transfer i.e. Section 53 even if the person transferring
the property possessed such intent which was such to effectuate the interests of the people to
whom he owed any kind of liability which was financial in nature so as to in effect, delay or
defeat it.

The main point of the laws on insolvency are that the properties owned by the person who
has become insolvent are distributed in an equal manner between such people to whom he
owed any kind of liability which was financial in nature. However, if any one person to

22
KapiniGoundan v. Sarangapani, (1916) Mad. W. N. 288

15
whom he owed any kind of liability which was financial in nature is preferred, in any manner,
over the other then the transfer is considered to be of fraudulent by nature under such section.
Wherein the person who is transferring the property, is declared to be insolvent and in such
circumstances, he sells off his property – the transaction cannot be, in any case, avoided by
the people to whom he owed any kind of liability which was financial in nature.

IV. Remedies
The remedies under fraudulent transfers as aforementioned are ranging from a variety of
means and methods depending on the facts and the circumstances of each individual case and
it varies extensively depending on the intention of the accused parties and other factors as
such. The following are a few of the possible scenarios and outcomes in situations that are
more common than the rest.

In the case that there are a number of creditors i.e. there are more than one creditor, the
transfer which is made in favour of just one of the creditors is not considered to be made
possessed with the intentionaimed to delay or defeatthe creditors [or the people to whom the
transferor owes some kind of liability which is financial in nature]. The logic behind such is
that, ultimately, it is upon the debtor i.e. it is his discretion as to decide his own order of
payment. He has that kind of power in his hands. To give an example – if T takes a loan from
Y, U and O and decides he will transfer his property to Y in order to pay off whatever debt he
owed to Y, it is upon his own discretion. This transfer cannot, prima facie, be termed as one
which is made possessed with the intention aimed to delay or defeat the creditors [or the
people to whom the transferor owes some kind of liability which is financial in nature].

In the case of MinaKumari v. Bijoy Singh,23 the learned Privy Council, opined that in the
instance of existence of two or more people to whom the transferor owes some kind of
liability which is financial in nature, the debtor has the power to give preference to any of the
creditors and clear off his debts in any desired order.

As mentioned in the beginning, the burden of proof with respect to showcasing whether the
transfer was made possessed with the intention aimed to delay or defeat the creditors [or the
people to whom the transferor owes some kind of liability which is financial in nature] lies on
such people to whom the transferor owes some kind of liability which is financial in nature

23
Mina Kumari v. Bijoy Singh,A.I.R. 1916 P.C. 238

16
i.e. the creditors. This is so since they are the ones who can actually prove whatever delay,
defraud or defeat they suffered at the hands of the ill – intentioned transferor.

Sham transfers are an umbrella term which include Benami transactions which are those
transactions where the intention of the transfer is not that the property should go in the hands
of the ostensible owner. In the celebrated case of Jangali Tewari v. Babban Tewari,24 the
learned court opined that a sham transfer cannot be termed as a real transfer, in any kind of
sense, since in actuality it is not one. The real owner is not necessarily possessed of intention
which is one which is fraudulent per so. Hence, these types of transfers, in actuality, do not
need to be avoided since the ‘real’ title already rests with the transferor.

We must note that, the decision as to whether a transaction is real or fraudulent or sham, is
wholly and solely dependent on the factual matrix of the case in question. If it is clearly
proved by the creditors that the transfer of property, which is immovable in accordance to the
relevant section of The Transfer of Property Act, 1882, is done possessed with an intention
aimed to delay or defeat the creditors [ or the people to whom the transferor owes some kind
of liability which is financial in nature ] – then such a transaction can be, no doubt, avoided
by the people to whom the transferor owes some kind of liability which is financial in nature.
However, the present circumstances have changed. The Benami Transaction Act, 1988 stated
that those properties which are purchased under the name or identity of the ostensible owner [
who is also called the benamidar ], the property will belong to such ostensible owner and the
owner, who claims to be the real owner, cannot, in any case, claim from him.

This Act now considers such benami transfer as one which are real in nature under which the
ostensible owner is considered to be the real one as a matter of fact. However, Section 3 of
the Transfer of Property Act, 1882, states that the legal effect of Section 53 of the Act or any
law which is related to the transfer for illegal purposes are not effectuated.

In the case of Chandradip v. Board of Revenue,25 the burden of proof with respect to prove
the fraud was held to lie on the person who alleged such fraud. However, in the humble
opinion of the author, it must be noted that the onus to prove the possession of ill – intention
which would result in delay, defraud or defeat of the creditors would be hugely dependent
upon the facts and surrounding circumstances of each case. This is to say there is no straight

24
Jangali Tewari v. Babban Tewari,A.I.R 1982 All. 316
25
Chandradip v. Board of Revenue,A.I.R. 1978 Pat 148

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– jacket formula whilst proving the intention of the transferor. But if the transfer is merely a
gift to a complete stranger, this question of good faith is completely irrelevant. The motive of
the legislature behind such arrangement is to give the option to the party who has suffered or
whose interest has been affected and to discourage ill – intentioned transfers.

Similarly, there is no straight – jacket formula to ascertain the remedy to a rather complicated
Fraudulent Transfer, hence if the option of invalidating the transfer at the option of the
transferee who had taken part in the transfer in good faith is available, it more often sought.
Such option to consider the transaction void or not has been left in the hands of the aggrieved
party who, here, will be the delayed or defeated creditors. There are certain exceptions to this
doctrine with respect to the transfers which are effectuated towards the transferee with
adequate consideration and in good faith.

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