Every owner of a property has a bundle of rights attached, which includes the right to

transfer his property and alienate it. There must be a bona-fide intention to transfer. If
there is a Fraudulent Intention, the intention of defeating the interest of creditor or
interest of any subsequent transferee, the transfer is not valid in the eyes of law. These
transfers arise in debtor and creditor relations, particularly with insolvent debtors. The
action against such debtors is typically brought by creditors or by bankruptcy trustees.
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.
The research fails to conduct primary research in the form of questionnaires,
interviews, field research, etc. The research conducted is of secondary nature.
Materials and fact written are taken from various books, reports, articles and the
internet.

This section consists of two parts. The first part lays down 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.
To take one illustration, A, who is heavily indebted, and against whom a suit for
the recovery of debts is going to be filed, sells his house to B to save it from
being attached and sold in payment of the debt. If B knows of A's fraudulent
intention, the sale to B is liable to be set aside at the option of the creditors. It
will be seen that the rights of a transferee in good faith and for consideration are
not affected even though the transfer is made with intent to defeat the creditors.
The second part of the section lays down that every transfer of immovable
property made without consideration with intent to defraud a subsequent
transferee shall be voidable at the option of such transferee, but that no
presumption to defraud shall necessarily arise by reason only that a subsequent
transfer for consideration was made.
The basic requisites for the applicability of Section 53 may be stated to be: (i)
there should be a transfer of immovable property; (ii) the transfer ought to have
been made with intent to defeat or delay the creditors; and (iii) the suit must be
brought by the creditor, acting on behalf of or for the benefit of the entire body
of creditors. The primary requirement for the applicability of the section,

therefore, appears to be the existence of a valid transfer.

Fraudulent intention in transfers must be proved by direct or circumstantial evidence

and every case must be examined in the light of surrounding circumstances. Some
circumstances that give a strong presumption that the transfer was fraudulent are:
The transfer was made in secret and haste.
The transfer was made soon after the decree ordering the payment of debt was passes
against the judgment-debtor.
The debtor in the case transferred whole of his property without keeping anything for
himself.
Not only these circumstances, but there are many other circumstances in which
inference of intent to defeat or delay creditors may be drawn. So every case is
depended upon its own facts and circumstances.

If there are several creditors, transfer in favour of one creditor does not amount to an
intention to defeat or delay the remaining creditors. Its upon the debtors discretion to
pay his debts in any order of his preference.
If A has taken loan from B, C and D, transfers certain properties to C in satisfaction of
the loan taken from him. This transfer necessarily cannot be considered as a transfer
made to defeat or delay the interest of other creditors. It was happened in the case of
Mina Kumari v. Bijoy Singh1, the Privy Council held that in the case there are two or
more creditors, the debtor can give preference to any creditor and can clear his debts
in any order he chooses.

A transferee is protected if he takes property in good-faith and consideration. When a

transferee purchases a property in good-faith and consideration, the creditors cannot
take benefit of 53(1). Where a transferee has no knowledge i.e. no actual or
constructive notice of the fraudulent intention of the transferor, the creditors cannot
claim the property or avoid the transfer under Section 53(1). But if the transferee is

1 A.I.R. 1916 P.C. 238.

aware of the fraudulent intent an aim and keeps silent, it is not be done in good-faith
and cannot get the benefit of this exception.
In the case of Vinayak v. Kaniram 2, the transferors intention was to convert his
immovable property into cash so as to keep it out of reach of the creditors and the
purchaser was aware of that intention of the debtor. The Court held that the purchaser
was also a party to fraud as he was aware of that fraudulent intention and sale was

voidable at the option of the creditors.

The rights of the transferee created under the law of insolvency are not affected by
Section 53 even if the transferors intent was to defeat or delay the creditors interest. .
In such cases, the Insolvency Courts are competent here to decide whether the transfer

was voidable under Section 53 of TPA.

The Registering Authority has been held to have an inherent power to cancel
registration of fraudulent sale transactions. The true owners can nullify such sale by
executing and registering a cancellation fees without seeking a declaration or
cancellation of the transfer deed from court. A creditor obtained a decree against a
widow who had a life interest in the property gifted to her by her husband. For egThe widow in order to render the property out of reach of the creditor surrendered her
interest to her son. It was held that the surrender was voidable at the option of the

creditor under section 53.

Section 53 of Transfer of Property Act, 1882 deals with Fraudulent Transfers. The
first part of this section deals with the transfer made to defeat or delay the creditors of
the transferors and it is voidable at the option of such creditor. The second part deals
with the gratuitous transfers with intent to defeat or delay the creditors. This section
has some exceptions in respect of the transfers done towards the transferee in good
faith and consideration. The primary requirement for the applicability of
the section, therefore, appears to be the existence of a valid transfer.
Where it is claimed that the transfer made by the debtor was a sham
and fictitious transaction and there was no animus transferendi, i.e.
when the real intention of the parties was not to give effect to the
supposed transfer at all and it was merely to be used as a shield or a
facade for achieving solve ulterior purpose, Section 53 of the Transfer
of Property Act cannot legitimately be taken aid of. Policy of law
always has been to frown upon all attempts at fraudulent transfers. In

my opinion, the laws regarding fraudulent transfers must be made stricter and such
2 A.I.R. 1926 Nag. 293.

transferors or transferees who committed fraud must be penalized for committing

fraud.