vustudents
08-29-2012, 10:29 PM
Q. What is the effect of fraudulent transfer of property under transfer of property act. (2002)
1. Introduction:
A transfer made with intention to defeat any right of the transferee or of any other person interested therein is fraudulent transfer of property. such transfer is not void but voidable at the option of person named.
2. Relevant provisions:
Sec. 53 transfer of property act.
Cross reference Sec. 17 of contract act.
3. Fraudulent transfer:
According to Sec. 53
Every transfer of immoveable property made with intent to defeat the creditors of the transferor shall be voidable at the option of any creditors so defeated or delayed. nothing in this section shall impair the rights of a transfer in good faith and consideration. noting in this sub-section shall effect any law for the time being in force relating to insolvency a suit instituted by a creditor (which term included a decree holder whether he has or has not applied for execution of 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. 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 purpose 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.
4. Illustrations:
(i) A being heavily indebted tries to dispose of his immoveable property and covert it into cash to defeat his creditors B being aware of all these facts, purchased such property from A. this sale is voidable at the option of creditors so defeated. if however, B is not aware of the above circumstances and purchase the property in good faith, the sale would not be void. but if B takes the property by way of gift, without paying any consideration, for the same, the sale shall be voidable at the instance of the creditors regardless of the fact whether B had or had not any intention of A to defraud his creditors.
(ii) A settles his property on B for the benefit of his daughter by subsequently sells it G for consideration. here the first transfer shall not be presumed to have been effected with intent to defraud the subsequent purchaser G, the settlement in favour of B will hold good unless. G proves that the first transfer was fraudulent.
5. Determination of fraudulent intention:
Fraudulent intention may be determined by the following evidence.
(a) That the debtor made a voluntary settlement.
(b) That the debtor a grossly inadquate consideration without reserving sufficient property for the payment of his debt.
(c) That he put all his property out of reach of those who might become his creditors before embarking on a hazardous enterprise or.
(d) That the transfer is in embarrassed circumstances and the transaction is between relation.
(e) That the transfer was a mere cloak for retaining a benefit for the transferor.
6. Essentials of fraudulent transfer:
(i) Transfer with intent to commit fraud.
(ii) Fraud is intended against.
(a) Either to defeat or delay the creditors.
(b) To defraud subsequent transferees.
(iii) Suit by creditors must be representative in nature.
7. How transfer may be avoided:
Fraudulent transfer may be avoided by following ways.
(i) By filing a suit to setaside the fraudulent transfer.
(ii) By pleading S. 53 in defence.
(iii) By pleading S. 53 in execution proceeding.
(iv) Avoiding by conduct.
8. Conclusion:
To conclude I can say that fraudulent transfer is voidable at the option of creditor or transferee but bonafied transfees for consideration without knowledge of the option is exception to this rule.
1. Introduction:
A transfer made with intention to defeat any right of the transferee or of any other person interested therein is fraudulent transfer of property. such transfer is not void but voidable at the option of person named.
2. Relevant provisions:
Sec. 53 transfer of property act.
Cross reference Sec. 17 of contract act.
3. Fraudulent transfer:
According to Sec. 53
Every transfer of immoveable property made with intent to defeat the creditors of the transferor shall be voidable at the option of any creditors so defeated or delayed. nothing in this section shall impair the rights of a transfer in good faith and consideration. noting in this sub-section shall effect any law for the time being in force relating to insolvency a suit instituted by a creditor (which term included a decree holder whether he has or has not applied for execution of 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. 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 purpose 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.
4. Illustrations:
(i) A being heavily indebted tries to dispose of his immoveable property and covert it into cash to defeat his creditors B being aware of all these facts, purchased such property from A. this sale is voidable at the option of creditors so defeated. if however, B is not aware of the above circumstances and purchase the property in good faith, the sale would not be void. but if B takes the property by way of gift, without paying any consideration, for the same, the sale shall be voidable at the instance of the creditors regardless of the fact whether B had or had not any intention of A to defraud his creditors.
(ii) A settles his property on B for the benefit of his daughter by subsequently sells it G for consideration. here the first transfer shall not be presumed to have been effected with intent to defraud the subsequent purchaser G, the settlement in favour of B will hold good unless. G proves that the first transfer was fraudulent.
5. Determination of fraudulent intention:
Fraudulent intention may be determined by the following evidence.
(a) That the debtor made a voluntary settlement.
(b) That the debtor a grossly inadquate consideration without reserving sufficient property for the payment of his debt.
(c) That he put all his property out of reach of those who might become his creditors before embarking on a hazardous enterprise or.
(d) That the transfer is in embarrassed circumstances and the transaction is between relation.
(e) That the transfer was a mere cloak for retaining a benefit for the transferor.
6. Essentials of fraudulent transfer:
(i) Transfer with intent to commit fraud.
(ii) Fraud is intended against.
(a) Either to defeat or delay the creditors.
(b) To defraud subsequent transferees.
(iii) Suit by creditors must be representative in nature.
7. How transfer may be avoided:
Fraudulent transfer may be avoided by following ways.
(i) By filing a suit to setaside the fraudulent transfer.
(ii) By pleading S. 53 in defence.
(iii) By pleading S. 53 in execution proceeding.
(iv) Avoiding by conduct.
8. Conclusion:
To conclude I can say that fraudulent transfer is voidable at the option of creditor or transferee but bonafied transfees for consideration without knowledge of the option is exception to this rule.