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Fradulent Transfer: Introduction

Section 53 of the Transfer of Property Act deals with fraudulent transfers of immovable property. It consists of two parts - the first makes transfers voidable if made with intent to defeat or delay creditors, and the second makes transfers without consideration voidable if made to defraud a subsequent transferee. A transfer may be set aside by a creditor if the transferee was not in good faith or did not provide consideration. However, a transferee is protected if they acquired the property in good faith for value without knowledge of the transferor's intent, or if they are a creditor and the transfer satisfied a pre-existing debt. If a creditor establishes a transfer was made to defeat them, the burden

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71 views

Fradulent Transfer: Introduction

Section 53 of the Transfer of Property Act deals with fraudulent transfers of immovable property. It consists of two parts - the first makes transfers voidable if made with intent to defeat or delay creditors, and the second makes transfers without consideration voidable if made to defraud a subsequent transferee. A transfer may be set aside by a creditor if the transferee was not in good faith or did not provide consideration. However, a transferee is protected if they acquired the property in good faith for value without knowledge of the transferor's intent, or if they are a creditor and the transfer satisfied a pre-existing debt. If a creditor establishes a transfer was made to defeat them, the burden

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ishwar
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FRADULENT TRANSFER

Introduction : --

the object of the fraudulent transfer is to protect the creditor and subsequent
transferee. Fraudulent transfer is voidable at the option of creditor and transferee.
S. 53 consists of two parts. The first part is in respect of transfer of immovable
property made with intent to defeat or delay the creditors of the transferor and
second part is in respect of transfer with intent to defraud a subsequent transferee.

Fraudulent transfer S. 53 --

Every transfer of immoveable property made with intent to defeat or delay


creditors of the transferor shall be voidable at the option of any creditor so defeated
or delayed,
and every transfer of immovable property made without consideration,with intend
to defraud a subsequent transferee, is voidable at the option of such transferee.
Thus,S.53 deals with two types of fraudulent transfers. As far the first rule is
concerned, when the consideration for transfer and good faith on the part of
transferee are present, the intention of the transferor to defeat or delay his creditor
is immaterial. Thus,S.53 has a limited scope restricted to immoveable property and
not to movable property. Moreover the benefit of this section is not restricted to
existing creditors alone, but it extends to subsequent creditors also. This section
does not make the translation void-ab-initio but only voidable and that to only at
the option of any person defeated delayed or defrauded.
Under the transfer of property Act a transfer of immovable property by a debtor
may be set aside by his creditor :
A) if the transferee is not a transferee in good faith for the transferor's creditor,
and

B) if the transferee is not a transferee in good faith for consideration.


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.
If the creditor established that transfer was made with the object of
defeating him, the shifts on the transferee to prove ---)

1) that he had paid a fair price, and


2) that he was not a party to he fraud

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