Professional Documents
Culture Documents
Section 53 of the Transfer of Property Act, 1882 talks about fraudulent transfers. Every owner of
a property has the right to transfer his property as he likes. But the transfer must be made with a
bonafide intention. Where the transfer is made with a fraudulent intention, it means intending to
defeat the interest of the creditor or interest of any subsequent transferee.
1. Object- The primary object of sub-section (1) of Section 53 of the Act is to make assets
of the Transferor available to the general body of the creditors.
2. Scope- The application of the section will be in force even if the transfer doesn’t “defeat”
but only “delays” the creditors.
3. Requirement-The requirement of the section is to avoid the possibility of the retention of
all the benefits by the debtor.
OBJECTIVE
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.
In case of Gharbhoya vs. Deodatta (1937), the court held that Section 53 doesn’t apply where
the debtor doesn’t retain any benefit for himself and if it is found that the transfer was for
adequate consideration which was entirely expanded in satisfaction of genuine debts of the
debtor.
Burden of Proof
The burden of proving that a transfer is fraudulent falls on the creditors under Section 53 of the
TPA, 1882, as they are attacking the debtor with this section. Once the creditor establishes that
the transfer was made fraudulently in order to defeat or delay his claims, the burden shifts to the
transferee to prove that he acted in good faith, is a bona fide purchaser for value, and was not a
party to the fraud.
Conclusion
The extent of fraudulent transfers is full of potential issues and traps. When a creditor is about to
begin collection proceedings, a debtor may have left his or her assets to family and friends,
leaving the creditor with no options to get back his money. It was such practice that compelled
the legislature to enact a provision which secures the creditors against deceitful debtors.