Q. ‘A’ a son had sent money to father from time-to-time. Later when the father was heavily indebted he transferred some immovable property to his son. The transaction was challenged by the father’s creditor as fraudulent to defraud them. Is the transaction valid? Give reasons and also refer case law, if any, on the point.
West Bengal Judicial Service Exam. 1992
Ans: The transaction is not valid—Abdulla Khan v. Purshottam, (1947) 49 Bom LR 875.
Reasons: According to Section 25 a contract without consideration is void. But this general rule is subject to three exceptions given in Section 25(1) to 25(3). Section 25(2) is one of the exceptions of the general rule and relevant part of Section 25(2) provides that an agreement without consideration is not void if it is a promise to compensate (wholly or in part) a person who has already voluntarily done something for the promissor.
Facts of this problem have been taken from the famous case of Abdulla Khan v. Purshottam referred above. In this case the Bombay High Court held that in this case Section 25(2) will not apply because for the application of second exception given in
Section 25(2) the intention of the promisor must have been to compensate the promisee. The Court further held that in this case property transferred by father to his son while he was heavily indebted was done with an intention to defraud the creditors and not to compensate the son.
On the basis of above discussions it can be said that in the given problem transaction between father and son of transferring property is not valid and transaction will not fall within exception given in Section 25(2) because real intention of father was not to compensate the son but to defraud the creditors.
Source: Kishor Prasad, Problems & Solutions on Civil Law