FRAUDULENT TRANSFER
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.
About Section 53-
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.
Essentials of Fraudulent Transfer
The three essentials of a fraudulent transfer are:
1. Transfer of immovable property.
2. Made with intent to defeat or delay the creditors of the transfer.
3. Shall be voidable at the option of the creditor so defeated or delayed.
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.
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.
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.
About Section 53-
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.
Essentials of Fraudulent Transfer
The three essentials of a fraudulent transfer are:
1. Transfer of immovable property.
2. Made with intent to defeat or delay the creditors of the transfer.
3. Shall be voidable at the option of the creditor so defeated or delayed.
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.
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.
