A pre-nuptial settlement made with the intent to defeat and delay creditors is voidable under the Transfer of Property Act, 1882, Section 53.

JUDGMENT :- This is a second appeal sought to be preferred against the decree and judgment of the learned Subordinate Judge of Devakottai in A.S. No. 46 of 1958 confirming the decree and judgment of the learned District Munsif of Devakottai in O. S. No. 144 of 1957. The facts of the case have been fully set out in the judgments of the courts below and need not be reset here.

2. On relevant and acceptable evidence both the Courts below came to the conclusion that the settlement in question was a pre-nuptial settlement of gift and that it was brought into existence by collusion of the parties thereto to defeat and, defraud the creditors of the heavily indebted settlors family and that the transaction was not at all a bona fide one. The lower Court also approached the case from the standpoint whether the defendants have satisfactorily established that the transaction was not bona fide but brought into existence to defeat and delay the creditors of the settlor and came to the conclusion that the defendants have affirmatively established their case. I am bound by these findings of fact.

3. It is settled law that a settlement made before and in consideration of marriage is protected but where there is an intent in the minds of both parties to the marriage to defeat and delay creditors and to make the celebration of marriage part of a scheme to protect property against the rights of creditors, the settlement will be voidable Colombine v. Penhall, (1853) 1 Sm. and G. 228.

4. The law is the same in India, England and the United States of America. So far as India is concerned, the Hindu and Mohammadan. Laws were not inconsistent with the provisions of section 53 of the Transfer of Property Act. Under both the systems of law a transfer was bad if made to defraud creditors. (See AIR commentaries on the Transfer of Property Act, 3rd (1950) Edn. page 759). Section 53 of the Transfer of Property Act embodies the principles of 13 Eliz (I). Chap. 52 and 27 Eliz (I), Chap. 43, and thus codified has been recognised as the law in this country. In England these Elizabethan Statutes were re-enacted by sections 172 and 173 of the Law of Property Act, 1925 (15 Geo. V. Chap. 20).

5. The American law follows the English law. The Uniform Fraudulent Conveyances Act was approved by the National Conference of Commissioners in Uniform State Laws. It has been adopted in a considerable number of States. The law is in the main declaratory and a restatement of the Statute of 13 Elizabeth. (See 24 American Jurisprudence Fraudulent Conveyances, p. 165).

The law has been summed up in 37 Corpus Juris (?) Fraudulent Conveyances) as follows : Any transaction for the conveyance of property may be vitiated for fraud. The precise form which a fraudulent alienation may assume is immaterial. Courts will look beyond mere form to the substance of the transaction. What cannot be done directly, cannot be done by indirection. Forms are of little moment, for, where fraud appears, Courts will drive through all matters of form and expose, and punish the corrupt act. Whatever may be the external formality of the deed, if its design is to defraud creditors it is invalid. (P. 334-335; see also 27 Corpus Juris p. 449 note 25).

6. Thus, a conveyance or transfer of property in fraud of creditors may take the form of an absolute sale and conveyance or transfer of real or personal property, even though a valuable consideration is paid, and even though the instrument of conveyance is duly acknowledged and recorded. It may take the form of an assignment or transfer of a note, life insurance policy, patent right, or other chose in action; or of a legacy. It may take the form of a bond and mortgage; a deed of trust, mortgage, or pledge; an alleged trust by parol agreement; a voluntary conveyance or transfer; an ante-nuptial or post nuptial settlement by a husband an his wife, directly or through a third person, or to trustees for her benefit; a transfer of an option; a fraudulent judgment