Q.
“Every transfer of immovable property made intent to defeat or delay the creditor of
the transferor shall be voidable at the option of any creditor so defeated or delayed”.
Comment.
Ans. Section 53 in The Transfer of Property Act, 1882. Fraudulent transfer.—
(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.
Nothing in this sub-section shall affect any law for the time being in force relating to insolvency.
A suit instituted by a creditor (which term includes a decree-holder whether he has or has not
applied for execution of his decree) to avoid a transfer on the ground that it has been made with
intent to defeat or delay the creditors of the transferor shall be instituted on behalf of, or for the
benefit of, all the creditors.
(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. For the purposes of this
sub-section, no transfer made without consideration shall be deemed to have been made with
intent to defraud by reason only that a subsequent transfer for consideration was made.]
Intention to defeat or delay the creditors:
A creditor here is a person to whom the transferor owes the financial liability. In order to apply
Section 53 of TPA, it is necessary for a creditor to exist, and it is not necessary for the creditor to
be secured. The creditor can be unsecured as well.
Even a subsequent creditor can move under this section This means that it is not necessary for
the transferor to be in debt at the time of the transfer. If the transfer is made prior to the debt
transaction, with the intention that the transferor might take a loan in the future and wanted to
take the property out of reach of the future creditors, it is equally fraudulent and can be set aside
at the option of the creditors. But the mere fact that the loan was taken right after the transfer of
property or there was subsequent indebtedness, is not evidence of fraudulent intention towards
subsequent creditors.
A Muslim wife in lieu of her dower debt amounts as a creditor.
The basic objective behind this section is to protect the creditors from being delayed or defeated
by removing the possible security. In order to attract section 53, it is necessary for the intention
to be fraudulent. Hence, the intention behind the transfer must be to defeat or delay the creditors.
The phrase ‘creditors’ doesn’t mean that the intention should be to defeat or delay all the
creditors. The intention to defeat some or even just one of the creditors is enough to attract
Section 53.
Kanchanbai v. Moti Chand[2]:
Transferor owed the Creditor Rs. 2600. The creditor asked for the money back/recovery of
money. When even after being asked for the recovery of money, the transferor didn’t pay back,
the creditor threatened to file a suit. After receiving the notice of the same, the transferor
executed a gift deed in favour of her daughter in law. Creditor filed a suit under Section 53 of
TPA against the transfer.
It was contended by the transferor that Section 53 of TPA was not attracted in the present case as
there was just a single creditor.
It was observed by the court that: the phrase creditors would also include a single creditor. The
section would be attracted even when a single creditor. The section would be attracted even
when a single creditor is defrauded or there was intention just to defraud a single creditor. Here
the transfer was done with the intention to defeat and delay the creditor’s claim. Hence section
53 would be applicable.
Mere preference of one creditor over the others is not sufficient to attract this section unless it’s
shown that it was done with the intent to defraud other creditor’s claims.
Example:
A mortgaged his property X to C1, C2, and C3. While repaying the loan, he gave preference to
C1. Mere this fact won’t amount to intention to defraud C2 and C3.
The transfer should be defeat and delay the creditors. If the transferor transfers his property but is
willing to pay the creditors back what he owes to them or if just a portion of the property is
transferred and there is another property left which is sufficient in value to pay back the creditors
then, the Section 53 will not apply.
Example: A took a loan from C and mortgaged the property X as security. After a few days, he
sold the property X to B. Now C can question or deny the transfer under Section 53.
But in order to move under Section 53, he has to prove that he is not able to recover the money
from A personally. If A is ready to pay back the money to C personally without involving the
property, then Section 53 will not be attracted.
The section operates only against fraudulent transfers. There might arise a case where the
transfer is done for two considerations one of which is for fraudulent intention, which is
separable from each other then, the whole transaction would not be regarded as fraudulent.
Only that portion of the transaction would be regarded as fraudulent for which there was an
intention to defraud. And the transfer would be given effect to the extent the transaction can’t be
regarded as fraudulent. But in cases where the substantial portion of the transaction is fraudulent
and the fraudulent and not fraudulent portions cannot be separated, then the whole transaction
would become voidable.
