What is fraudulent transfer?

The principle of Section 53 is based on the rule of justice, equity and good conscience. The section enumerates fraudulent transfer.

  1. Every transfer of immovable property, made with the intent to defeat or delay the creditors of the transferor, comes into the category of the fraudulent transfer and therefore, they are voidable at the option of the creditors, who are so defeated or delayed.
  2. Every transfer of immovable property made, without consideration with intent to defraud a subsequent transferee, comes under the category of fraudulent transfer. Therefore, it is voidable at the option of such transferee.

In both circumstances, the transfer is voidable at the option of the person affected by such fraudulent transfer. The rule is adopted by Punjab where the Act is not in force.

Illustrations:

  1. ”A” obtained a decree against B for the possession of certain properties and mesne profits estimated at RS. 10,000. ”B”, a month later, executed a deed of trust,settling all the property, of which he was then possessed,on his wife and children. The settlement was voidable under Section 53.
  2. ”A” sells property to B in fraud of creditors. Creditor C attaches the property in execution of a decree against A. B objects to the attachment and C maintains his right to attach and B’s objection is dismissed. B, then, sues for a declaration of his right to the property. C may plead, in defence, that the transfer to B was in fraud of creditors.

A creditor’s suit: A creditor’s suit, to avoid a transfer, must be a suit on behalf, not only of himself, but of the whole body of creditors. This is because the debtor might, otherwise, be exposed to the multiplicity of suits by each and every creditor. It has, however, been held that it is enough if the suit is in substance, on behalf of all creditors, even though it is not a representative suit as such. A single creditor can, of course, file a suit if he is the only creditor.

 

 

 

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3 Comments

  • Narender Jha says:

    DEar Sir,
    Please advise whether a person has bought a flat in Group housing Society and the property is freehold. He has applied for membership also. During the period the owner has done the unauthorized or illegal construction by way of extension of the balcony. Can the MC refused to give his membership. If so under which section of the Co-operative act / rules can be hold and wha5t are the other remedy are available to the MC to curb the illegal construction. Where to approach.
    Your valuable advise on this will be highly appreciated. Regards

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  • Narender Jha says:

    Dear Sir,
    This is to bring to your kind attention that inspite of so many request by MC by way of issuing notices etc,the members/residents/owner of the flat has not stopped the unauthorized construction i.e extention of balconey, which will damage the structure of the company. AGM is schedule to be held in last week of September. Few members has reported the matter of unauthorized construction to MCD. Now the Agenda issued for extension of balcony is prejudice, since the MCD will decide the fate of Unauthorized construction
    Kindly advise what should we do or discuss on the date of AGBM on the agenda item of extension of Balcony.
    Thanking you

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  • Narender Jha says:

    Dear Sir,
    One of the member who leaves on the ground floor has approached the Society that he will not make payment of maintenance charges relating to use of lift. Whether his request will be accepted. If so, in that case how we should bifurcate the uses of lift charges out of the maintenance charges of Rs.3000 per month. which is a consolidated one.

    REgards

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