Privity of contract is followed which means that only the parties to the contract can sue. Such transfer is voidable at the option of the subsequent transferee.Įxceptions of Fraudulent Transfer under Transfer of Property Act are: –įraming of suit under fraudulent transfer.The transfer is done with the intention to defraud a subsequent transferee and with intention to defeat or delay his creditors.The transfer is done without consideration.Transfer of the property done by the transferor.The essentials of Fraudulent Transfer under Transfer of Property Act are as follows: – What are the essentials of Fraudulent Transfer under Transfer of Property Act? 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 basic objective is to lend a blanket to such people who suffer in the nature of delay or defeat of their interest. 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. It was such practice that compelled the legislature to enact this section. 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. Objective behind the Doctrine of Fraudulent Transfers Once, facts are proved sufficiently to show prima facie the intention of the debtor to defeat or delay the creditors, the debtor is required to make his case and explain the facts. Since the Act makes all such cases voidable at the option of creditors/transferees, the burden to prove such fraudulent conduct or intent initially lies on the creditors. The Section incorporates the common law principle of equity, justice and good conscience as it attempts to prevent defeat of legitimate claims of creditors or transferees. The law stipulates that all cases of such fraudulent transfers, are voidable at the option of the party so defrauded (the creditors or the subsequent transferee). Nothing in this sub-section shall impair the rights of a transferee in good faith and for consideration. The Transfer of Property Act deals with fraudulent transfers under Section 53 “Fraudulent Transfers : – Every transfer of immovable 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. The court may set aside a fraudulent transfer at the request of the defrauded creditor. In the fraudulent transfer, the property is put out of reach of the creditor so that the creditor is delayed from satisfying his debt.įor example: – When ‘A’ transfers his property to ‘B’ without giving him his ownership of the property with the intention to keep his assets out of reach of his creditor, such a transfer is called a fraudulent transfer.Ī fraudulent transfer of property gives rise to a civil cause of action. Thus a fraudulent transfer arises in a creditor-debtor relationship. Fraudulent Transfer in general parlance, therefore, refer to transfers which are made with an intention to defraud.
Section 53 of the Transfer of Property Act, 1882 talks about fraudulent transfers. Where the transfer is made with a fraudulent intention, the object of the transfer would be bad in the eyes of equity and justice, though it is valid in law. 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. To constitute a fraudulent transfer there should be an intention to hinder the creditor from his equitable and legitimate rights. Every transfer of immovable 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. Meaning of Fraudulent Transfer: – Fraudulent Transfer means the illegal transfer of property to defraud creditors. What is Fraudulent Transfer under Transfer of Property Act?
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