SVKMSW

NMIMS SCHOOL OF LAW

PROJECT SUBMITTED ON;

DOCTRINE OF FRAUDULENT TRANSFER
IN COMPLIANCE TO PARTIAL FULFILLMENT OF THE MARKING
SCHEME, FOR TRIMESTER VII OF 2016-2017, IN THE SUBJECT OF
PROPERTY LAW
SUBMITTED TO FACULTY:
ISHA KHURANA

SUBMITTED BY:
AASHI SIROHIWALA
B.B.A. LL.B. (HONS.)
ROLL NO. A002

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Sr. No.

Particulars

Pg. No.

1.

Abbreviations

3.

2.

Table of Statutes

4.

3.

Table of Cases

4.

4.

Chapter 1: Introduction

5.

1.1Essentials
1.2Scope
1.3Gratuitous transfer to defraud subsequent
transferee
1.4Cancellation of registered sale deed by
registering authority
1.5Exceptions to Section 53 (1)

5.
6.
7.
8.
8.

6.

Chapter 2: Review of Literature

10.

7.

Chapter 3: Analysis of the Twynes Case

12.

8.

Chapter 4: An Attaching Creditor

14.

9.

Chapter 5: Proving Fraudulent Intention

22.

10.

Chapter 6: If there are several creditors

24.

11.

Chapter 7: United States Law on Fraudulent

Transfer

27.

12.

Chapter 8: Conclusion and Suggestions

30.

13.

Bibliography

31.

INDEX

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ABBREVIATIONS
AIR
Cal
Co.
CPC
Edn.
Eliz.
Eng. Rep.
LJ
LJ
Mad.
Para
Punj
SC
SCC
TPA
UFTA
UVTA

All India Reporter

Calcutta
Company
Civil Procedure Code
Edition
Elizabeth
English Reports
Law Journal
Law Journal
Madras
Paragraph
Punjab
Supreme Court
Supreme Court Cases
Transfer of Property Act
Uniform Fraudulent Transfer Act
Uniform Voidable Transfer Act

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TABLE OF STATUTES
Civil Procedure Code, 1908
Provincial Insolvency Act, 1920
Transfer of Property Act, 1882
Uniform Disclaimer of Property Interests Act of 1999

TABLE OF CASES
Ahmad Husain v. Kallu (1929) 27 All LJ 460
Bachan Singh Harnaam Singh v. Bansari Das Hariran , AIR 1961 Punj 361 (DB)
BFP v Resolution Trust Corp, 511 US 531; 114 S Ct 1757 (1994).
C. Bhandari v. Dy. Commrl T. Officer, AIR 1976 SC 656 (660)
Union of Inida v. Rajeshwari and Co., MANU/SC/0045/1986
Hakim Lal v. Moosharshar Sahu, (1907) 34 Cal 999 (1015)
Hamda Ammal v. Avadiappa Pathar , (1991) 1 SCC 715
Lindon v. Sharp, (1843) 13 LJC.P. 67
Mina Kumari v. Bijoy Singh, (1917) 44 Cal 662
N.L.N.L. Chettiar v. J. Chettiar , AIR 1972 Mad. 34 (35)
Partridgle v. Gopp, (1758) 28 ER 647: 1 Edn 164
Prabhu Nath v. Sarju Prasad, AIR 1940 All 407
Phullan Mian v. Jogendra Ram, AIR 2006 Pat 183: 2007
SBI Home Finance Limited v. Credential Finance Limited & Ors,
MANU/MH/0148/2001
Twyne case, (1602) 3 Co. Rep. 80 b: 76 ER 809
Union of Inida v. Rajeshwari and Co., MANU/SC/0045/1986
Yanala Maheshwari v. Ananthula Sayamma, AIR 2007 AP 57

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CHAPTER 1: INTRODUCTION
No man has so absolute power over his property as that he can alienate the same when such
alienation directly tends to delay, hinder, or defraud his creditors, unless it is made upon
good consideration and bona fide.1
-

Lord Keeper

These are the words of Lord Keeper and the same is the principal of Section 53 of the TPA
which explains the doctrine of fraudulent transfer which states that 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. This means that the transfer is
valid in the eyes of law but it can avoided by that creditor whose interest has been defeated or
delayed.
1.1 Essentials
The essential requirements of this section are:
-

There must be a transfer of immovable property

Transfer must have been made with an intent to defeat or delay the creditors of the

transferor
The transfer shall be voidable at the option of the creditor whose interest has been
defeated or delayed

This section does not affect

-

The rights of a transferee in good faith and for consideration2

Any law for the time being in force relating to insolvency3
Any rule of Mahomedan Law
Any fraudulent assurance where the fraud has not been carried out.

1Partridgle v. Gopp, (1758) 28 ER 647: 1 Edn 164

2 Para 2 of S, 53 of the Transfer of Property Act, 1882
3 Para 3 of S. 53 of the Transfer of Property Act, IV of 1882
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1.2 Scope and Extent

Transfer of immovable propertyq
The first essential is that the transferor transfers his immovable property with an intention to
delay or defeat the rights of the creditors. The transfer should be valid and confers a good title
upon the transferees only then this section is applicable. The term transfer includes a sale, a
marriage settlement, a deed of appointment, a surrender of a life estate, a relinquishment, a
collusive award or decree. If the transfer the transfer is a fictitious one, so that the real owner
remains the original transfer all along, this transfer will not be subject to the application of
the rule enunciated under S. 53. A fictitious transfer is outside the scope of this rule4.
Intent to defeat and delay the creditors
A creditor is a person to whom a financial liability is owed and the term includes both a
secured and unsecured; existing or subsequent creditors. The creditor should be understood in
wide sense. This section uses the term delay or defeat, so any transfer that has the effect of
delaying the realisation of the claim of the creditor would also be voidable at the option of
such creditors.5 This principal also applied when the debtor intended to defeat a single
creditor out of many.
Voidable
Fraud does not render the transaction void but only voidable at the instance of the party
defrauded. Hence the section renders the transaction voidable at the option of the person
defrauded, defeated or delayed. On avoidance, relief will only be granted on principles of
justice, equity and good conscience. Such a person has a double option either to avoid or
affirm the transaction. If he affirms or does any act amounting to ratification it is destructive
of his right to void.
Other properties are available with the transferor (debtor)
Where other properties are available with the debtor to satisfy the demands of the other
creditors, it would lead to rebuttal of the inference of defeating or delaying the creditors by
the impugned transaction.6

4 Prabhu Nath v. Sarju Prasad, AIR 1940 All 407

5 Yanala Maheshwari v. Ananthula Sayamma, AIR 2007 AP 57
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Entire Debtors property not transferred

The terms of Section 53(1) are satisfied if the transferor does not defeat the creditors. The
fact therefore that the entirety of the debtors property was not sold cannot itself negative the
applicability of Section 53(1) unless there is a cogent proof that there is other property left
sufficient in value and of easy availability to render the alienation in question immaterial for
the creditors.
Mohomedan Law
There is no rule of Mohamedan Law which allows an indebted person to make wakf with the
intent to defeat or delay the creditors. To dedication by a person in debt under Mahomedan
Law no propection is afforded by TPA. A deed of Waqf executed as a device to put the
property out of reach of the creditors has been held to be a transfer to which this section
applies, the court observing that S. 53 does not infringe any rule of Mohamedan Law, for
under the law no person can make a waqf of his entire property without making arrangements
for the payments of his debts7.

1.3 Subsequent transferee

Sub section (2) of section 53 provides that a transfer made gratuitously with the intent to
defraud a subsequent transferee shall be voidable at the instance of that transferee. This sub
section comes into play where a prior transfer is made without consideration and a
subsequent transfer of the same property is made for consideration. The prior transfer without
consideration should have been made with intent to defraud creditors. In such a case, where
the same property is transferred again to a subsequent transferee the prior transfer shall be
voidable at the option of the subsequent transferees.
For example, A, makes a settlement of his property to his children and subsequently he sells
the same property to B. If B can prove that the sale was made with the intention to defraud
him, the settlement is liable to be set aside. Even a fraudulent transfer does not impair the
rights of a transferee who acted in good faith and purchased the property for valuable
consideration. There was no evidence in this case to show that the defendant had any
6 Saroj Ammal v. Sri Venateshwara Finance Corporation, AIR 1989 NOC 4
7 Ahmad Husain v. Kallu (1929) 27 All LJ 460
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knowledge of the existence of any agreement executed in favour of the plaintiff. The
appellate Court had no jurisdiction to interfere in the findings of the Trail Court without a
cross appeal by the plaintiff. 8
However, such transfer shall not be deemed to be fraudulent by reason only of any
subsequent transfer for consideration.

1.4 Cancellation of registered sale deed by registering authority

When a sale deed is vitiated on account of fraud perpetrated by the transferor and the
transferee, the sale deed is void, the true owner has not to file suit in the Civil Court for the
cancellation of sale deed, may execute a cancellation deed of the fraudulent sale deed and
approach the Registering authority for the registration of the same, and the registered
authority has the power to cancel the sale deed registered earlier. When the provisions of the
Registration Act and Registration Rules elaborately deal with the circumstances and
situations when the registering officer has to reject the documents for registration, it is not
possible to hold as a general rule that whenever a cancellation deed is submitted, the
registering officer is bound to reject the acceptance and registration of the same.
Basically the Registering authority has been held to have the power to cancel registration of
fraudulent sale transactions. The sale in such cases takes place by reason of fraud played by
the transferor and transferees. Such a registration is null and void in the eyes of law. The true
owners can nullify such sale by executing and registering a cancellation deed without seeking
a declaration or cancellation of the transfer deed from the court. The registration of a
document cannot be taken to be an absolute sale divesting owners of their rights and
rendering otiose sections 31 and 34 of the Specific Relief Act, 1963.

1.5 Exceptions

If the transferee is in good faith and consideration

In considering whether the transaction has defeated or delayed creditors, the section lays
down an exception in paragraph 2 that notwithstanding fraudulent intent of the transferor to
defeat or delay his creditors the transferees right shall not be impaired if he has acted in good
faith and for consideration. Both the ingredients are essential. The meaning of the second
para of Sub s (1) is that if a person acquires property for value and in good faith, that is
8 Phullan Mian v. Jogendra Ram, AIR 2006 Pat 183: 2007
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without being a party to any design on the part of the transferor to defeat or delay creditors,
his rights will not be affected by the section, although the transferors intention may be
fraudulent. To hold that a transaction is hit by the provisions of Section 52 of the TP Act, the
court must record a categorical and definite finding that the transaction was not a bona fide
transaction. A thing is deemed to be done in good faith where it is in fact done honestly: on
point whether it is done negligently or not every case stands on its own merits. The test of
good faith which has been applied in English decisions is whether the transfer is a mere
cloak for retaining a benefit to the grantor. It is a question of fact in each case whether the
transferee acted in good faith and without knowledge of the transferors intent of selling ,
though the conclusions to be drawn from such an instrument are question of law.

Insolvency Law
The law of insolvency aims at providing for equal distribution of the assets of the insolvent
among the creditors, and therefore, its provisions are more stringent. It says that a transfer
made voluntarily at the time within 2 years prior to adjudication and a transfer for
consideration made within three months prior to adjudication are voidable as against the
Official Receiver under Section 53 and Section 54 of the Provincial Insolvency Act, 1920.9
A preference to one creditor which would be valid under S. 53 of TP Act would, if the debtor
were adjudged insolvent within three months, be deemed fraudulent under S. 56 of the
Presidency Towns Insolvency Act 1909, or S. 54 of the said Act. Similarly, a voluntary
transfer may be set aside under those Acts if the transferor is adjudged insolvent within 2
years, although it may not offend against S. 53 of TP Act. Again, a transfer by a debtor of all
his property to a particular creditor is not necessarily voidable under this section; but under
Insolvency Acts it may operate as fraudulent transfer or fraudulent preference. The case of
fraudulent preference falling under the Insolvency Acts must be distinguished from those
falling under this section.

9 DR AVTAR SINGH ,TRANSFER OF PROPERTY ACT, pg 152 (Universal Law Publishing, 4th Ed.) (2014)
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CHAPTER 2: REVIEW OF LITERATURE

Fraudulent Conveyance law and its proper domain

-

Douglas G. Baird & Thomas H. Jackson10

This article talks about how the law of fraudulent transfer in England developed and evolved.
The author is this article very well puts the importance of the same. It explains why the
Parliament passed a statute making illegal and void any transfer made for the purpose of
hindering, delaying, or defrauding creditors.' This law is commonly known as the Statute of
13 Elizabeth. The author explains that it was intended to curb what was thought to be a
widespread abuse. Until the seventeenth century, England had certain sanctuaries into which
the King's writ could not enter. A sanctuary was not merely the interior of a church, but
certain precincts defined by custom or royal grant. Debtors could take sanctuary in one of
these precincts, live in relative comfort, and be immune from execution by their creditors. It
was thought that debtors usually removed themselves to one of these precincts only after
selling their property to friends and relatives for a nominal sum with the tacit understanding
that the debtors would reclaim their property after their creditors gave up or compromised
their claims. The Statute of 13 Elizabeth limited this practice. This article talks about the
practice before the enactment of the statute and the mischief which it aims to suppress. The
researcher also analyzed the problems faced by the judges in cases of fraudulent transfer. The
article talks about the difficulty that courts and legislatures have faced for hundreds of years
has been one of trying to define what kinds of transactions hinder, delay, or defraud
creditors.6 From very early on, common law judges developed per se rules, known as
"badges of fraud," that would allow the courts to treat a transaction as a fraudulent
conveyance even though no specific evidence suggested that the debtor tried to profit at his
creditors' expense. Basically this article beautifully analyzes the law related to the fraudulent
transfer in England the mischief that the statute wanted to suppress.

10 Baird, Douglas G., and Thomas H. Jackson., Fraudulent Conveyance Law and Its Proper
Domain, Vand. L. Rev. 38 (1985): 829.
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The Uniform Acts' Loophole in Fraudulent Conveyance Law

-

Adam J. Hirsch11

This article illuminates a glitch in the Uniform Disclaimer of Property Interests Act of 1999
(UDPIA) which allows persons to disclaim not only inheritances but, in one special
circumstance, part of their own, pre existing ownership interest in property. The article
suggests a strategy whereby an insolvent debtor can exploit this glitch to put property out of
the reach of creditors and thereby to employ disclaimer law to effect what would otherwise
constitute a per se fraudulent conveyance. In the process, the article analyzes the legislative
history of UDPIA to show how the glitch found its way into this Uniform Act and also offers
a novel analysis of the legality of insolvent disclaimer generally under the text of UDPIA.
Further sections of the article weigh the advantages and shortcomings of the proposed asset
protection strategy in comparison to alternative ones already in use, including analysis of the
availability of the strategy to debtors who do not themselves reside in a UDPIA jurisdiction
and the viability of the strategy for debtors who enter a bankruptcy proceeding.

11 Hirsch, Adam J, The Uniform Acts' Loophole in Fraudulent Conveyance Law, Public Law
Research Paper 272 (2007): 07-21.
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CHAPTER 3: ANALYSIS OF TWYNES CASE 12

In this case, The judgment creditor, "C, was owed two hundred pounds by the judgment
debtor, Pierce. Pierce, also owed another debt of four hundred pounds to Twyne of
Hampshire. We can infer from ensuing events that Pierce and Twyne were close friends; on
the other hand, Pierce and "C" had an arms-length, business relationship. Anticipating the
judgment and the subsequent arrival of the Sheriff, Pierce made 'a general deed of gift' of all
his goods and chattells to his friend Twyne. Even though Pierce had purportedly conveyed the
assets to Twyne, Pierce retained possession of the assets, and treated them as his own. He
sold some of the goods, and, as for the livestock, 'he shore the sheep, and marked them with
his own mark.' "C" obtained a writ of execution, and the Sheriff set out to satisfy the
judgment debt by seizing goods and chattels from Pierce. The Sheriff was not exactly
successful. In the words of the Star Chamber, 'divers persons, by the command of the said
Twyne, did with force resist the said Sheriff.' As one might expect, further litigation ensued.
In short, the Star Chamber held that Pierce's 'gift' to Twyne had 'the signs and marks of fraud.'
The supposed gift from Pierce to Twyne was set aside. The Star Chamber found that there
were six indicia of fraud in Twyne's Case, which required the court to void the purported gift
from Pierce to Twyne under the Statue of Fraudulent Conveyances, 13 Eliz C5, 1571.
First, the gift purported to transfer everything Pierce owned, including his clothes, and other
necessities. Such a 'general' transfer is highly irregular. The gift had signs and marks of fraud
without exception
Second, Pierce retained possession ofthe goods. He treated them as his own.
Third, the deed of gift from Pierce to Twyne was made in secret.
Fourth, the transfer was made with "C's" litigation looming ominously over Pierce.
Fifth, Twyne apparently held the goods in trust for Pierce, who had full use of them. The
court held that 'fraud is always apparelled and clad with a trust, and a trust is the cover of
fraud.
Sixth, the deed of gift itself was suspicious. It recited, for no apparent reason, that this was an
honest, true, and bona fide gift, so he drafted a clause which aroused suspicion. In short, the
clause proved the exact opposite of its terms.

12 Twyne's Case, Star Chamber, 1601, 3 Coke 80b, 76 Eng Rep 809.
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The end result: The deed of gift was voided, and Twyne was convicted of fraud. Further,
Twyne and the 'divers persons' under his command were convicted of rioting. Presumably, the
Sheriff was more successful in his next attempt to obtain the goods and deliver them to "C".
While the various 'badges of fraud' set forth in Twyne's Case have been developed and
refined over the last four centuries, the case has stood the test of time as a common law
precedent which courts in the United States still find useful in the contemporary world.
Twyne's Case is still a valid common law precedent in the United States today. In BFP v
Resolution Trust Corp13, the Supreme Court has recently held that a transfer of title to an
asset without transfer of possession, or a transfer for grossly inadequate consideration, would
raise a rebuttable presumption of actual fraudulent intent. The Court cited the English
common law 'badges offraud' doctrine, as set forth in Twyne's Case, as authority for that
proposition.

13 BFP v Resolution Trust Corp, 511 US 531; 114 S Ct 1757 (1994).

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CHAPTER 4: AN ATTACHING CREDITOR

A question arises that While disposing of an application under attachment before judgement,
is it obligatory to determine the question whether the transfer made by the judgement debtor
is a fraudulent transfer within the meaning of Section 53 of Transfer of Property Act.
Normally, in a money Suit brought by a creditor against debtor, the only necessary party is
the debtor and the only issue to be answered is whether the debt is proved. The provisions
of Order XXXVIII Rules 5 and 13 of the Civil Procedure Code empower the Court to
attach the property belonging to the Defendant even before judgment is pronounced against
him. This can be done if the Court is satisfied that with the intent to obstruct or delay the
execution of any decree that may be passed against him, the Defendant Is : about to
dispose of the whole or any part of his property; or is about to remove the whole or any
part of his property beyond the local limits of the jurisdiction of the Court. When such
conditions exist, the Court is empowered to direct the Defendant to produce security within
the time fixed by it in such sum as may be specified by it or to show cause why the
Defendant should not furnish such security. If the Defendant fails to show cause, or fails to
furnish security, then the Court is empowered under Rule 5(3) of Order XXXVIII of the
Civil Procedure Code to make an order attaching the property before judgment. Rule 7
provides that unless expressly so provided, the attachment before judgment is to be made in
the same manner as attachment of property in execution of a decree. Even if the property is
attached, it is open to any one who claims the property to be his, to put forth such a claim
before the Court and Rule 8 of Order XXXVIII provides that such a claim shall be
adjudicated upon in the manner provided for adjudication of the claim to property attached
in execution of a decree for the payment of money. Rule 10 provides that attachment before
judgment shall not affect the rights existing prior to the attachment of persons who are not
parties to the suit, nor bar any person holding a decree against the Defendant from applying
for the sale of the property under attachment in execution of such decree.

In a suit

instituted by creditor for recovery of money from the debtor often the creditor may ask
attachment before judgement of a property. The property may have already been sold by the
debtor to the transferee. The creditor alleges that such a transfer is a bonafide one. On the
other hand the transferee says that the attachment before judgement is not possible and the
creditor should institute a separate proceeding for the same. Now the question arises
whether a creditor can ask for attachment before judgement of the property which is
transferred to third parties. Lets analyze this with the help of case laws.
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SBI Home Finance Limited Vs.Credential Finance Limited & Ors14

FACTS: The Notice of Motion was taken out for attachment before Judgment of two
tangible assets of the first Respondent ( original defendant) being two office premises at
Nariman Point, Mumbai. It was alleged that the first Respondent owed a large sum of
moneys to the Appellant ( original plaintiff) and the claim of the Appellant was virtually
admitted. The learned Single Judge took the view that the first Respondent had only two
tangible assets begin the office premises at Nariman Point, Mumbai. It was admitted that
this had been sold off to the third and fourth Respondents whose registered office addresses
were also shown to be situated at the office address of the first Respondent. The Appellant
impleaded the present third and fourth Respondents as Respondents to the Notice of
Motion and applied for attachment before judgment of the two office premises which were
disclosed to have been sold even before the Suit was filed. The main premise on which the
said relief was sought against the third and the fourth Respondents was that the transfer of
the two office premises to the said Respondents was made with intent to defraud or delay
the creditors of the transferor (first Respondent) and. therefore, it was hit by Section 53 of
the Transfer of Property Act, 1882 and voidable at the option of the Appellant creditor. The
Notice of Motion was dismissed as against the second Respondent and the relief of
attachment of the office premises was declined by the learned Single Judge by the
impugned order. Apart from dismissing the Notice of Motion as against the second
Respondent, the learned Single Judge also vacated the ad-Interim injunction orders against
the third and the fourth Respondents. Consequently taking a cue from Rule 10 of Order
XXXVIII of C.P.C15., the learned single judge was of a view that there could be no order of
attachment before judgement passed against the third and forth Respondents as the said
property had already been sold to him. Hence the plaintiff (creditor ) filed this present
appeal.
CONTENTIONS BY THE PARTIES: Mr. Tulzapurkar, learned Counsel for the
Appellant, urged that the reasoning of the learned Single Judge is erroneous in law. He
14 SBI Home Finance Limited Vs. Credential Finance Limited & Ors,MANU/MH/0148/2001
15 Attachment before judgment not to affect rights of strangers, nor bar decree holder from applying
for sale.- Attachment before judgment shall not affect the rights, existing prior to the attachment, of
persons not parties to the suit, not bar any person holding a decree against the defendant from
applying for the sale of the property under attachment in execution of such decree.
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contends that there is nothing In Section 53 of the TPA 1882 which requires a creditor
intending to take advantage of the Section to necessarily bring a Suit for avoiding the
transaction by which his debtor has fraudulently, or with intent to defraud or delay,
alienated valuable property. He contends that a transfer of property voidable at the option of
the creditor under Section 53 of the Act would continue to be the property of the debtor
and, therefore, be liable to attachment before judgment under Order XXXVIII Rule 5 of the
Civil Procedure Code, notwithstanding the provisions of Rule 8, if the attaching creditor
seeks to avoid the transaction between the creditor and the third party by invoking Section
53 of the TPA. He urged that the learned Single Judge was wrong in his assumption that the
third and the fourth Respondents (transferees of the office premises) were necessary or
proper parties to the money Suit brought by the Appellant against the first and the second
Respondents. He, therefore, contended that because of this misdirection in law the learned
Single Judge has not gone into the issue as to whether there was a case made out under
Section 53 of the TPA, 1882 and has dismissed the Notice of Motion on an assumption that
even if such case was made out the Motion must fail as against third and fourth
Respondents.
ISSUE: the properties in question were agreed to be and actually sold to the third and the
fourth Respondents much before the date on which the Suit was brought by the Appellant.
Normally, therefore, by reason of Rule 10 of Order XXXVIII, an attachment before Judgment
could not be levied against the properties which had already been sold to the third and the
fourth Respondents. Do the provisions of section 53 of the TPA. 1882 make any change?
JUDGEMENT: Section 53 of the TPA, 1882 enables a creditor to avoid the transfer of
immovable property which has been made with intent to defraud, defeat or delay and such a
transfer would be voidable at the option of any creditor so defrauded, defeated or delayed.
The Court held that in the instant case if the Appellant can show that the transfer of the
office premises at Nariman Point. Mumbai was made by the first Respondent to the third
and the fourth Respondents under circumstances which would fall within the ambit of
fraudulent transfer, the Appellant would be entitled to avoid the transfer. In such a situation,
the said properties shall be treated as properties of the first Respondent itself, and the fact
that a fraudulent attempt was made to put them beyond the reach of the Appellant creditor,
would be good reason to make an order of attachment before judgment under Order 38
Rule 5 of the Civil Procedure Code. We would have, therefore, thought that the issue as to
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whether the circumstances contemplated by Sec. 53 existed would have been first
determined. The Courts held that there is nothing in the provisions of TPA. 1882 which
requires the issue to be raised by a substantive Suit as Sec 53 does not prescribe the mode
by which the issue is to be determined. The Court held that under the present procedure of
determination of such claims to the Property attached in execution or before attachment,
when a person makes a claim or objection to the property under attachment, the Court has
to finally adjudicate such claim or objection. If upon such claim or objection being
preferred, the creditor raises the issue that such claim or objection has no substance because
the transfer to the claimant/objector is hit by Section 53, then the said issue also has to be
adjudicated as it would involve adjudication of the title or right to or interest in the
property. The Court deciding the claim would have to adjudicate all these issues and render
a final decision which would have the force of a decree subject to Appeal. The High Court
took a view that there was no need for the Appellant to bring a substantive Suit for
determination of the issue raised by it, namely, that the transfer was void. Appellants
unequivocal declaration, even in the Notice of Motion, and seeking of an attachment before
judgment of the alienated property amounted to avoiding the alienation of the property. If
the order for attachment before judgment had been made, and the third and the fourth
Respondents had come forth with a claim to the property, the Court would then have to
necessarily determine their title to or interest in the attached the property. At that time, the
contention of the Appellant that the transfer was hit by Section 53 would also have to be
adjudicated. If this can be done after attachment and notice to the third and the fourth
Respondents, the Courts saw no reason why this could not be done before attachment by
issuing notices to and hearing the third and the fourth Respondents, even if they were not
parties to the Suit itself.
In Hamda Ammal v. Avadiappa Pathar16 the appellant Hamda Ammal purchased the
property in question as per a sale deed dated 9-9-1970. The sale deed was registered on 2610-1970. Meanwhile, a money suit was filed against the vendor of the property on 13-91970. In that suit, the property in question was attached before judgment on 17-9-1970.
After referring to Rule 5 of Order XXXVIII C.P.C., the Supreme Court held:
The above provision itself makes it clear that the attachment before judgment would be made
where the court is satisfied that the defendant is about to dispose of the whole or any part of
his property or is about to remove the whole or any part of his property from the local limits
16 Hamda Ammal v. Avadiappa Pathar , (1991) 1 SCC 715
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of the jurisdiction of court with the intention to obstruct or delay the execution of any decree
that may be passed against him. Thus this provision would not apply where the sale deed has
already been executed by the defendant in favour of a third person. A transaction of sale
having already taken place even prior to the institution of a suit cannot be said to have been
made with the intention to obstruct or delay the execution of any decree. It would be a
different case altogether if a creditor wants to assail such transfer by sale under Section 53 of
the Transfer of Property Act, 1882 on the ground of a fraudulent transfer. Such suit would be
decided on totally different considerations in accordance with the provisions of Section 53 of
the Act.It was also held that Rule 10 of Order XXXVIII CPC makes it clear that attachment
before judgment shall not affect the rights, existing prior to the attachment, of persons not
parties to the suit.
Rajan alias Rajan Gopinathan Vs. Dr. D. Jayashree Nayar and Leela D/o. Bhaskaran17
FACTS : Rajan, the appellant, instituted the suit, on the file of the Court of the Subordinate
Judge of Mavelikkara, against the second respondent Leela, for realisation of a sum of Rs.
8,69,000/- on the basis of the promissory note allegedly executed by Leela in favour of
Rajan for Rs. 6,60,000/-. The suit was filed by the plaintiff under Order XXXVIII Rule 5 of
the Code of Civil Procedure for attachment before judgment of an extent of 8.083 cents of
land situated in Elamkulam Village in Ernakulam. The court below passed an order of
attachment dated 12.4.2006. The attachment was effected. The first respondent, Dr.
Jayasree Nayar, filed for lifting the order of attachment before judgment made. The
application was filed under Order XXI Rule 58 of the Code of Civil Procedure. The court
below, by the order dated allowed the application and the attachment was lifted, which is
under challenge in this appeal filed by the plaintiff.
CONTENTIONS OF THE PARTIES : Dr. Jayasree Nayar, the claimant, contended that
the property under attachment had been sold by the defendant to one Dileep on 12.1.2006.
Dileep sold the property to the claimant on 6.10.2006. The claimant stated that she is a
bona fide purchaser for value. The property was purchased by Dileep before the institution
of the suit. The claimant purchased the property after making due enquiries and believing
that the property is free from mortgage, charge or attachment. The application for
attachment before judgment was filed making a false statement that the property belonged
17 Rajan alias Rajan Gopinathan Vs. Dr. D. Jayashree Nayar and Leela D/o. Bhaskaran,
MANU/KE/0677/2099
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to the defendant Leela at the time of making the application. She had no right in the
property at the time of instituting the suit or at the time of passing the order of attachment.
The plaintiff on the other hand contented that the sale deed in favour of the claimant is a
fraudulent transfer and it does not bind the plaintiff, a creditor of the defendant.
JUDGEMENT : The Court held that the question whether the transfer is hit by Section
53 of the TPA need not be considered in a claim made by a transferee under Rule 8 of
Order XXXVIII C.P.C. Rule 5 of Order XXXVIII C.P.C. would apply only when the Court
is satisfied that the defendant, with intent to obstruct or delay the execution of any decree
that may be passed against him, is about to dispose of the whole or any part of his property.
If the property had already been transferred by the defendant, Rule 5 would not apply at all.
Rule 5 provides that the court can direct the defendant to produce and place at the disposal
of the Court, when required, the said property or value of the same, or such portion thereof
as may be sufficient to satisfy the decree. The defendant cannot do this if he had transferred
the property before passing the order under Rule 5. Rule 10 of Order XXXVIII makes it
abundantly clear that attachment before judgment shall not affect the rights existing prior to
the attachment, or persons not parties to the suit. The purpose of Rule 5 is to interdict the
defendant from disposing of his property with intent to obstruct or delay the execution of
any decree that may be passed against him. If he had already transferred his property, such
a contingency would not arise. The Courts further went on to answer whether the transfer is
a fraudulent transfer attracting is a different matter. That question has to be adjudicated
upon at the appropriate stage or in appropriate proceedings. What is that stage or the
proceedings, is the crucial question. Is it at the trial stage or in execution ? The answer to
that question would depend upon Rules 8 and 10of Order XXXVIII read with Rule 58 of
Order XXI C.P.C. as well. The claim to an attachment, whether it is made before judgment
or in execution, has to be dealt with under Rule 58 of Order XXI C.P.C. Rule 8 of Order
XXXVIII C.P.C. makes it clear that the claim preferred to the property attached before
judgment shall be adjudicated in the manner provided in Rule 58 of Order XXI C.P.C.
In order to answer the question whether the defence under Section 53 of the TPA should be
adjudicated in a claim to the property attached before judgment, the provisions of
Rules 5 to 11-A of Order XXXVIII C.P.C. along with Rule 58 of Order XXI. The purpose
of attachment before judgment is distinct and different from attachment in execution,
though the attachment before judgment would ensure to the stage of execution as well in
view of Rule 11 of Order XXXVIII C.P.C. The attachment before judgment would cease
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when the suit is dismissed on the merits or when it is dismissed for default. Rule 11A(2) of
Order XXXVIII C.P.C. mandates that attachment before judgment would not revive on
setting aside the order for the dismissal of the suit for default and on restoration of the suit.
Sub Rule (2) of Rule58 of Order XXI provides for determination of all questions including
questions relating to right, title or interest in the property attached, arising between the
parties or their representatives. But it is further qualified by the expression, namely,
"relevant to the adjudication of the claim or objection". What is relevant to the adjudication
depends on the question whether it is an adjudication under Order XXXVIII or under
Order XXI. If the determination of the question is to be made in execution, certainly the
question of applicability of Section of the Transfer of Property Act would arise, since once
for all it is to be determined whether the property is available to be proceeded against in
execution. In the case of an attachment before judgment, that question need not be decided,
going by the scheme of Order XXXVIII. The expression "relevant to the adjudication of the
claim or objection" occurring in Rule 58 of Order XXI assumes importance in that context.
At the stage of passing an order for attachment before judgment, nobody is sure whether
the suit would be decreed. There are various situations in which the attachment before
judgment may cease to exist. For example, the suit may be dismissed on merits, or it may
be dismissed for default. Or else, the court may hold that it has no jurisdiction to decide the
suit. Or, the suit may be dismissed on the ground of limitation. Why should "all questions
including questions relating to right, title and interest in the property attached" be
determined, irrespective of whether it is "relevant to the adjudication of the claim or
objection" ? . It held that only those questions which are relevant to the adjudication need
be determined, as provided in Rule 58of Order XXI, in the matter of a claim to the
property attached before judgment. Rule 58 of Order XXI speaks of "claims" and
"objections" whereas; Rule 8 of Order XXXVIII speaks of only "claim". Objection, if any,
to attachment before judgment shall be determined under Order XXXVIII itself and not by
recourse to Rule 58 of Order XXI. At the stage of determining the claim to the
property attached before judgment, the requirements and limitations of Rule 5 of Order
XXXVIII are relevant. But such requirements or limitations need not be relevant while
adjudicating a claim to the property attached in execution. Rule 10 of Order XXXVIII is
relevant while considering a claim to the property attached before judgment. But the
ingredients constituting Rule 10 would not be conclusive at the stage of execution. It would
be subject to further scrutiny under Section 53 of TPA. Sub Rule (1) Rule 58 of Order XXI
CPC contemplates a claim or objection on the ground that "such property is not liable to
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such attachment". The expression "relevant to the adjudication of the claim or objection"
occurring in Sub Rule (2), is to be read along with Sub Rule (1) and also along with Order
XVIII Rule 5. If so, it could be seen that all questions which may otherwise arise in a
properly constituted suit need not necessarily arise in adjudication under Rule 58 of Order
XXI. The limitations under Rule 5 of Order XXXVIII cannot be got over by recourse to a
defence in a claim petition, when such defence is not relevant for adjudication at that stage.
It is also relevant to note that a fraudulent transfer is not void but only voidable. In the case
of a fraudulent the creditor is not without remedy. He can file a suit to avoid the transfer. Or
else, he can avoid the same in execution as well. A suit coming under Section 53 of the TPA
shall be instituted on behalf of, or for the benefit of, all the creditors. Sub Rule (4) of
Rule 58 of Order XXI which provides that the order made on adjudication shall have the
same force as if it were a decree, is not a conclusive test as to the scope of enquiry in the
matter of a claim made to the property attached before judgment. A decree would be
conclusive and binding on the questions decided in the suit or which might and ought to
have been raised. When the court allows a claim to the property attached before judgment,
on the ground that the transfer took place before the order of attachment, that would not
preclude the attaching creditor from contending that the transfer is hit by Section 53 of the
TPA in appropriate proceedings. The courts were of the view that, such a contention of
fraudulent transfer would not attract Explanation IV of Section 11 of the Code of Civil
Procedure so as to bar the attaching creditor from raising the question in appropriate
proceedings.

Thus we can see that there are conflicting judgements on the same with no proper precedent
which can be followed therefore the Apex Court should put some light on the same and
explain the provision. However it is a well settled law that the attaching creditor need not
file a separate suit under S. 53 of the T.P. Act in a representative capacity to put forth his
case that the transfer was in fraud of the creditors and he is entitled to plead by way of
defence in the claim proceeding.

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CHAPTER 5: PROVING FRAUDULENT INTENTION

Except when parties stand on equal footing fraud is never presumed in law though prior to the
Amending Act, 20 of 1926, a rule of presumption since abrogated was laid down in paragraph
2 of sub section (1) in cases of gratuitous transfers and transfers for grossly inadequate
consideration to bring the law in India in conformity with the law in England.
It is a settled law that a transfer of property made with a deliberate intention of avoiding
payment of just debts is not in itself a ground of setting aside the transaction. The knowledge
and the real intention determine whether it was a fraudulent transfer or no. The essential
ingredient of a fraudulent transfer is evidence of intention to defeat or delay creditors.
Without such proof to be established by general law of evidence the transfer is not a
fraudulent one. Intent to defeat and delay the creditors is a question of fact. How the intention
is proved would depend upon facts and circumstances in that particular case.18
There are and can be no ruled establishing a particular circumstance to an indelible badges of
fraud. However Secrecy of transfer may be a mark of fraud. 19
It is for the creditors to prove that the transfer was a fraudulent and cumulatively establish
fraud. It was held in Bachan Singh Harnaam Singh v. Bansari Das Hariran 20, that
unexplained secrecy, by and large, the transaction being between close relations , the entire
property being transferred, having been transferred is Prima facie evidence of fraudulent
intention. However, the conduct of the vendee in not getting mutation entered is also not
wholly unimportant for determining collusion between the parties where there is one single
creditor whose claims are defeated, a transfer may legitimately be presumed to be fraudulent.
In transaction for value there must be there must be evidence of an actual or express intent to
defeat and delay the creditors, as distinguished from a voluntary settlement where it is only
necessary that the settlement has a tendency to delay and defeat creditors. Conclusion of

18 C. Bhandari v. Dy. Commrl. T. Officer, (1976) 3 SCC 749

19Twyne case, (1602) 3 Co. Rep. 80 b: 76 ER 809
20 AIR 1961 Punj 361 (DB)
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possession is a strong fact of fraudulent intention though not conclusive 21, for when
conveyance is not absolute such continuance is not evidence of fraud as , for instance, in
mortgages, nor where permission is given to the vendor for his convenience, nor is the
transaction tainted owing to an interval between execution and possession.
The onus is on the plaintiff who wishes to avoid the transfer. If the transfer is for valuable
consideration and is made with the full intention that the title in property should pass to the
transferee and if no benefit be retained to the transferor when the object of the transfer might
have been to defeat an impending execution. The general creditors are not defeated in such a
case, for instead of the property remains the money representing the price and the creditors
can proceed against the same. In case of a voluntary conveyance or gift the onus is on the
plaintiff to prove that at the date of the gift he was a creditor of the donor, that the transfer
was voluntary and that his claim was defeated or delayed thereby and the Courts would
presume that the transfer was made with intent to defeat or delay the creditors22.
In a suit where creditors seek declaration that the transfer of the property made by the debtor
was fraudulent and as such they are not bound by it, the onus to prove want of good faith is
on the creditors who impuge the said transaction. It is essentially necessary that the facts
should be considered as a whole. Once the creditor establishes his case, then the transferee
has to prove that he was not involved with the transferor and he was a bona fide purchaser
and fell within the exception.

21 Lindon v. Sharp, (1843) 13 LJC.P. 67

22 Baird, Douglas G., and Thomas H. Jackson. "Fraudulent Conveyance Law and Its Proper
Domain." Vand. L. Rev. 38 (1985): 829.
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CHAPTER 6: IF THERE ARE SEVERAL CREDITORS

It is well settled law that the mere fact that the debtor chooses to prefer one creditor to
another, either because of priority of the debt or otherwise, by itself cannot lead to the
irresistible inference that the intention was to defeat the other creditors.23
In a Landmark case, of Union of Inida v. Rajeshwari and Co 24 , the ratio laid down was:
Transfer which defeats or delays creditors, is not an instrument which prefers one creditor
to another; but an instrument which removes property from creditors to benefit of debtor."

The Judicial Committee in Mushar Sahu v. Hakimlal25 observed that:

As a matter of law their Lordship take it to be clear that in a case which no
consideration of law of bankruptcy or insolvency applies there is nothing to
prevent a debtor paying one creditor in full and leave others unpaid although the
result may be that the rest of his assets will be insufficient to provide for the
payments of the rest of the debts. The law is in their Lordships opinion, rightly
stated by Palles C.B. in In Re Moroney, 1888 LR 21 Ir. 27, 62, where he says that
the right of creditors, taken as a whole, is that all the property of the debtor
should be applied in payment of demands of them or some of them, with without
consideration or reserved or retained by the debtor to their prejudice. It follows
from this that security given by a debtor to one creditor upon a portion of or upon
all his property (although the effect of it, or even the interest of the debtor in
making it, may be to defeat an expected execution of another creditor) is not
fraud within the statue; because notwithstanding such an act, the entire property
remains available for the creditors or some or one of them, and the statue gives

23 C. Bhandari v. Dy. Commrl T. Officer, AIR 1976 SC 656 (660)

24 Union of Inida v. Rajeshwari and Co., MANU/SC/0045/1986
25 Mushar Sahu v. Hakimlal 43 Ind App 104 (06),AIR 1915 PC 115
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no right to rateable distribution, the right of the creditors by such act is nit
invaded or affected.

The Judicial committee further observed that:

The transfer which defeats or delays creditors is not an instrument which
prefers one creditor to another but an instrument which removes property from
the creditor to the benefit of the debtor.
Thus it can be said that when a transfer is made for adequate consideration in satisfaction of
debts and without the debtor getting any benefit out of the same it cannot be said that a fraud
is committed and no ground of impeaching it lies in the fact one creditor was loser by a
payment being made to another proffered creditor, there being no case for bankruptcy.
Where a debtor has several creditors and some property and if he transfers that property to
one of the creditors without any further circumstances appearing, that may be a preference,
but it cannot be said to be a fraudulent preference. There should be more than a mere
preference and this fact must be established that such a preference was a fraudulent one. If
the debtor sells property to another creditor in discharge of debts due to him, but it is found
that the prize realized is considerably in excess of the debt to be discharged, it can be said that
in such a case that there was an intention to defraud the other creditors while preferring one,
the intention has to be found. But if the transferor has other properties available for meeting
the demands of his creditors, an inference to defeat the creditors by sale of a single item
cannot be formed. But if the creditors purpose is not to realize his debt but to help the debtor
cover up his property, he cannot shy himself by showing that his debt was bona fide.
If the intention was that the proceeds of the sale be earmarked for the payment of particular
debts of which the pressure was more, it would be a case of fraudulent preference, and the
alienation can be challenged not under Section 53 but only under the law of insolvency.26

26 Abdul Shukoor v. Arji Papa Rao, AIR 1963 1150 (1156)

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As different from the Bankruptcy Act the object of Section 53 is not to secure equality of
distribution of property amongst creditors. It is firmly a settled in England that a debtor,
provided the transaction is not invalidated as a fraudulent preference under Bankruptcy Law,
may openly choose a particular creditor to the rest and may transfer property to him for a
bonafide purpose of discharging his debt even after other the other creditors have brought
actions or recovered judgement and such transfers are not void under the statue of Elizabeth
against the preferred creditors.27
It was held in N.L.N.L. Chettiar v. J. Chettiar28 that it is not improper for the debtor to
prefer his creditors among the many in order to discharge his debt by transfer of his property.
The intention of the section is the debtor must not retain a benefit for himself. The transfer
which defeats or delays creditor is not an instrument which removes property from the
creditors as a body for the benefit of the debtor. The debtor must not retain the benefit for
himself. He may prefer one creditor and leave the other unpaid.
In Mina Kumari V. Bejoy Singh29 , A obtained a decree for his debt against B. Before the
property could be attached in execution, B sold the property to C in part satisfaction of a debt
due to her. The property was then attached and sold in execution to D. It was held that C was
entitled to possession of the property as against D. It was true that B had deliberately given
preference to a creditor C with whom he had family ties but still the transfer was not
fraudulent under Section 53.
Thus if a debtor with the purpose of cheating his creditors, knowing that the money is more
easily shuffled out of sight than land, makes a sale and his object is known to the purchaser,
the purchasers title is worthless though he may have paid the full price owning to want of
good faith. But the rule is different when the property is taken for a debt. One creditor of a
failing debtor is not bound to take care of another. If the assets are not large enough to all
somebody must suffer. The preferring of one creditor to another by a judgement debtor did
not make a transfer a fraudulent one. A debtor may pay his debts in any order he chooses
27 Hakim Lal v. Moosharshar Sahu (1907) 34 Cal 999 (1015)
28 N.L.N.L. Chettiar v. J. Chettiar AIR 1972 Mad. 34 (35)
29 Mina Kumari v. Bijoy Singh, (1917) 44 Cal 662
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preferring any creditor he pleases for all that is contained in Section 53. The decided cases
seem to go further show that though a creditor may consciously and even intentionally obtain
a preference over another creditor by a transfer of a judgement debtor, the transaction cannot
on that ground alone be impeached by any one creditor if it be for good consideration and
retains no benefit for the debtor.

CHAPTER 7: UNITED STATES LAW ON FRAUDULENT

TRANSFER
Most of the States in The United States of America have adopted the Uniform Fraudulent
Transfer Act; the purpose of the act is to prevent defendants from divesting themselves of
assets while claims are pending, or in anticipation of future claims. It lays down in detail the
law related to fraudulent transfer. UFTA has some peculiar provisions which India should
also add to section 53. Lets analyze the provisions. Which was amendment in the year 2014
with a very few changes. It is now know as Uniform Voidable Transaction Acts which is still
to be adopted to most of the States 30. UVTA made several improvements to UFTA. Some of
the changes are more significant than others. The inclusion of a choice of law rule at UVTA
10 will limit litigation and likely create a more stable lending environment. The removal of
the exclusion from avoidance for Article 9 strict foreclosures also provides needed clarity.
The clarification of burdens of proof and evidentiary standards will reduce the improper
imposition of common-law fraud standards in avoidance actions. The change of fraudulent
to voidable also will reduce confusion among the courts when applying UFTA or UVTA.
The other minor changes to the language of UFTA modernize the act and bring it in line with
other uniform laws and the Bankruptcy Code. Overall, the changes are a positive step.31
Section 5 of the said act lays down what would lead to a fraudulent transfer in order to defeat
and delay its present creditor. It states that after the claim of the debtor arose, if the debtor
made a transfer of incurred the obligation without receiving a reasonable equivalent value in
30 Cook, Michael L., and Richard E. Mendales. "Uniform Fraudulent Transfer Act: An Introductory
Critique, The." Am. Bankr. LJ 62 (1988): 87.
31Gary A. Foster, Eric C. Boughman, The Uniform Voidable Transactions Act: An Overview of Refinements to
the
uniform
Fraudulent
Transfer
Act,
Available
at:
http://www.americanbar.org/publications/probate_property_magazine_2012/2015/july_august_2015/2015_aba_r
pte_pp_v29_3_article_foster_boughman_uniform_voidable_transactions_act.html. Last accessed on August
4th , 2016 at 11 am.

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exchange and the result of this transaction he became insolvent or was insolvent at the time of
the transfer then such a transfer is fraudulent.
Section 5 of the said Act specifically lays down transfers which are deemed to delay the
creditors claim. It lays down two instances where the transfer is deemed to be made with a
fraudulent intention. A transfer made or obligation incurred by a debtor is fraudulent as to a
creditor whose claim arose before the transfer was made or the obligation was incurred if the
debtor made the transfer or incurred the obligation without receiving a reasonably equivalent
value in exchange for the transfer or obligation and the debtor was insolvent at that time or
the debtor became insolvent as a result of the transfer or obligation. A transfer is also
fraudulent if it was made by a debtor after the claim arose and if it was made to an insider for
an antecedent debt, the debtor was insolvent at that time, and the insider had reasonable cause
to believe that the debtor was insolvent. An "insider" can include relatives and partners of the
debtor, and if the debtor is a partnership or corporation, the term can include other general
partners or officers and directors. In India there can be no such presumption. Though such
transfers are prima facie evidence of fraud. Thus in India also the Legislatures should add to
Section 53 as to what will be deemed to be fraudulent transfer as this will ensure a better way
of preserving the rights of the creditor and will also lead to faster disposal of cases.
Section 7 specifically enumerates the remedies available for a creditor.
-avoidance of the transfer or obligation to the extent necessary to satisfy the creditors claim;
-an attachment or other provisional remedy against the asset transferred or other property of
the transferee if available under applicable law
-subject to applicable principles of equity and in accordance with applicable rules of civil
procedure, procedure: (i) an injunction against further disposition by the debtor or a
transferee, or both, of the asset transferred or of other property; (ii) appointment of a receiver
to take charge of the asset transferred or of other property of the transferee; or (iii) any other
relief the circumstances may require. Thus the said Act is very clear and specifically
enumerates the remedies available to the creditor. In India also the section should clearly
enact the remedies available to a creditor in order to avoid confusion.
The said Act also lays down the rights of a transferee and occasions where the transfer cannot
be voidable.

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Section 8 (a) states that A transfer or obligation is not voidable under Section 4(a)(1) against a
person who took in good faith and for a reasonably equivalent value or against any
subsequent transferee or oblige. Section 4 a (b) states that a transfer made or obligation
incurred by a debtor is fraudulent as to a creditor, whether the creditors claim arose before or
after the transfer was made or the obligation was incurred, if the debtor made the transfer or
incurred the obligation: (1) with actual intent to hinder, delay, or defraud any creditor of the
debtor. Thus this provision is very similar to Section 53 of the Transfer of Property Act.
However Section does not specify the word reasonable it just states good faith and
consideration. The word reasonable is very important to fully safeguard the right of the
creditor. A transfer is not voidable under Section 5(b) which is discussed above which talks
about circumstances in which a property transferred to an insider is voidable: (1) to the extent
the insider gave new value to or for the benefit of the debtor after the transfer was made
unless the new value was secured by a valid lien. It also states that the transfer will not be
voidable if it made in ordinary course of business or financial affairs of the debtor and the
insider or if it is made pursuant to a good-faith effort to rehabilitate the debtor and the
transfer secured present value given for that purpose as well as an antecedent debt of the
debtor.
These are some of the significant sections in the Act which gives the doctrine of fraudulent
transfer a clearer prospective. In India the law ambiguous and hence if the said provisions
are added to Section 53 by an amendment it would avoid confusion.

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CHAPTER 8: CONCLUSION & SUGGESTIONS

The emphasis in law to pay ones debts has always been very strong. In fact, even under
religion based laws, prominence has been given to the law relating to debtors and creditors.
This section incorporates the principle of equity, justice and good conscience that prevents a
person to defeat the legitimate claims of his creditors, by dubious means. While law favours
exchange of property as a natural right of a person to deal with it in a normal manner, the law
has always set its face against this privilege being abused to the detriment of the innocent
public, creditors inclusive, who had dealt with transferor on the faith of the security of their
debtor. Any attempt by the debtor to withdraw his assets from the control of his creditors
therefore has always received just condemnation by the courts of law that have compelled the
debtor to make good the representation on the faith of which presumably he had obtained
credit. In such circumstances the courts have never been loath in setting aside such
transactions. Section 53 has two parts. The first part of this section deals with what is
fraudulent transfer and that it is voidable at the option of the creditor. The Second part deals
with gratuitous transfers with the intent to defeat and delay the creditors. This section has also
exceptions which safeguards the rights of the transferee who acts in good faith and for
consideration. In researchers opinion, the law relating to fraudulent transfer is ambiguous.
Certain changes need to be brought about by the Legislators in order to curb these confusions.
Firstly the word reasonable needs to incorporate in Section 53 (1). The later half of the
section which safeguards the rights of the transferee who has acted in good faith and for
consideration. The word reasonable consideration should be added. Often the transferee and
the debtor conspire to defeat the creditor. Transferee often takes the defence that
consideration was involved in the transaction hence acted in good faith. This defeats the
purpose of the provision. Adding the word reasonable will help towards advancing towards
the rights of the creditors and also clear confusion.

Section 53 should also lay down

specifically badges of fraud. This means that the section should lay down specifically as to
what will amount to fraud. For example the UFTA specifically lays down that transferring the
property to an insider (family or friend) without equivalent consideration would lead to a
fraudulent transfer. The section should also specifically lay down the remedies available to
the creditors.

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BIBLIOGRAPHY
Websites
http://heinonline.org/HOL/LandingPage?
handle=hein.journals/ambank62&div=11&id=&page=
http://manupatra.com
http://westlaw.com
http://www.assetprotectionbook.com/forum/viewtopic.php?f=11&t=1226
http://scholarship.law.wm.edu/cgi/viewcontent.cgi?article=1304&context=wmlr
http://www.jstor.org/stable/1332302?seq=1#page_scan_tab_contents
http://ssrn.com
http://revistaselectronicas.ujaen.es/index.php/TAHRJ/article/view/2128/1868

Law reviews and Law Journals

Cook, Michael L. "Fraudulent Transfer Liability Under the Bankruptcy Code."Hous. L.
Rev. 17 (1979): 263.
Baird, Douglas G. and Thomas H. Jackson. "Fraudulent Conveyance Law and Its Proper
Domain." Vand. L. Rev. 38 (1985): 829.

Books
Dr Avtar Singh , The Transfer of Property Act , Universal Law Publishing, 4th edition
Dr Poonam Pradhan Saxena, Property Law, Lexis Nexis, 2nd Edition
G. P. Tripathi, Transfer of Property Act , Central Law Publishing, 18th Ed. 2014
Ashok Kumar Srivastava, The Transfer of Property Act with Easements Act, 1st Ed. 2014
Justice P.S. Narayanas, The Transfer of Property Act, Gogia Law Agency, Ed. 2015

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