Fraudulent Transfers

Fraudulent Transfer

(Sec.53 of the Transfer of Property Act 1882)

 “The transfer of immovable property made with intent to defeat the creditors of the transferor shall be voidable at the option of such creditor.”

But the transfer made in good faith and for consideration does not affect.

The voluntary settlement, however free from fraud, is, by the operation of the statute deemed fraudulent and void against the subsequent purchaser for a valuable consideration.

‘A voluntary conveyance, if made bona fide and without any fraudulent intent and for valid consideration, should not be deemed fraudulent.’

Fraudulent transfer is Voidable and not Void:

If a debtor transfers his immovable property with an intention to defraud his creditors, such transfer is a ‘voidable one at the option of the creditor’ and ‘not void.’ That means such transfer is good and operative. The creditor may set it aside on equitable grounds.

(Void means fictitious or void deed which is void ab initio (from the beginning itself) and it is inoperative. Hence it does not require to be set aside.

Limitation to set aside such fraudulent transfer:

The creditor can file a suit against the fraudulent transfer which is governed by Article 113 of the Limitation Act 1963 i.e. 3 years from the date of such fraudulent transfer.