Property lawFraudulent transferPrivy Council (on appeal from Calcutta)

Musahar Sahu v Lala Hakim Lal

(1915) 43 IA 104; [1915] UKPC 6019151 min read
The case in brief30-second read
Facts
An indebted owner transferred property to one creditor in satisfaction of a real debt. Other creditors, left unpaid, attacked the transfer as made to defeat them under S.53 TPA.
Issue
Is a transfer that prefers one genuine creditor fraudulent under S.53?
Held
No. A debtor may prefer one creditor by paying a real debt, even if others are left unpaid. The preferred creditor owes no duty to protect the others.
Principle
A transfer to a genuine creditor in satisfaction of a real debt is not a fraudulent transfer under S.53 TPA merely because it prefers that creditor and leaves others unpaid; it is fraudulent only if it is a colourable device or keeps a benefit for the debtor.
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Facts

  • An indebted owner transferred property to one creditor in satisfaction of a real debt.
  • Other creditors, left unpaid, attacked the transfer as made to defeat them under S.53 TPA.

Issue

  1. Is a transfer that prefers one genuine creditor fraudulent under S.53?

Held

  • No. A debtor may prefer one creditor by paying a real debt, even if others are left unpaid. The preferred creditor owes no duty to protect the others.
  • Such a transfer is fraudulent only if it is a sham or colourable device, or if the debtor keeps a benefit for himself.

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Citation

Musahar Sahu v Lala Hakim Lal (1915) 43 IA 104; [1915] UKPC 60

Reported: https://www.bailii.org/uk/cases/UKPC/1915/1915_60.html (PC judgment not on IK; IK has only the 1907 Calcutta HC stage). This is an educational summary, not the judgment itself. Cite the reported version in professional or academic work.