FICTITIOUS TRANSFERS Flashcards
[s 53] Fraudulent transfer.
(i) Transfer of an immovable property;
(ii) The transferor owes financial liability to creditors;
(iii) The transfer is with intention to defeat or delay creditors;
(iv) Such transfer is voidable at the option of the creditors.
Transfer
The first essential is that the transferor transfers his immovable property with an intention to delay or defeat the rights of the creditors. There must be a transfer of his property.
The rule applies only when there is a real transfer of the property so as to create a vested title in favour of a third party. This title may be vitiated at the instance of a creditor whose claims have been fraudulently delayed or defeated by the transferor.
If the transfer is a fictitious one, so that the real owner remains the original transferor all along, this transfer would not be subject to the application of the rule enunciated under section 53. It is only when the transfer is a genuine one, but the intention behind effecting this transfer is not genuine or bona fide that the rule applies.
Defeat or Delay Creditors
The basic principle underlying this section is that the claims of creditors should not be allowed to be delayed or defeated by removing the possible security, against which the claims of such creditors can be executed. The 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.
A transfer with a deliberate attempt to defeat the rights of the decree-holder would be hit by section 53.
Burden of Proof
In order to challenge the transfer of property on the ground of fraud in transfer of property, it is pertinent that the petitioner to explain under what circumstances he was concerned with the property and how he could get possession of the property.
The primary onus of proving that the transfer was effected with intention to defeat or delay the creditors is on the creditor but once he proves that, then the burden is on the transferee to prove that he bought the property in good faith and for consideration which he can do by establishing that he paid fair value for the property.
Presumption of Fraudulent Intention
There is no presumption in law that a transfer is affected with an intention to delay or defeat the claims of the creditors and the existence of fraudulent intention has to be proved. It would not be presumed by the court.
s 53A] Part performance.
The section seeks to protect prospective transferees, and allows them to retain the possession of the property, as against the transferors, who after executing an incomplete instrument of transfer, fail to complete it in the manner specified by law, without there being any fault on part of the transferee.
It has to be understood clearly, that in execution of a transfer, there are corresponding duties imposed by law on both the transferor and the transferee. Generally, upon the transferor is the duty to execute the transfer deed in a manner specified by the law, and upon the transferee is the duty to pay the consideration as and when required by the
transferor.
It must also be understood that in matters relating to the execution of the transfer deed, the transferor only has to play a lead role. It is he who has to sign the deed, it is his signatures that are to be attested by the competent witnesses and it is he at whose behest the deed would be registered at the Registrar’s office.
On the other hand, the transferee’s main duty is to pay the consideration, and he can be asked to do
the same even in advance or at any time the transferor may specify him to do so.
In situations where initially the parties agreed to a transfer of the property and in furtherance of any kind of written agreement, the transferor gives the possession of the property to the transferee, it would show that they had the intention to act upon the agreement that they had entered into.
If under these circumstances, the transferee has
either paid the full consideration or is ready and willing to fulfill his part of the contract but the transferor does not want to go ahead with the transfer, under the doctrine of part performance, the transferor or any one claiming under him would be debarred from getting back the possession of the property which has once been given to the transferee.
