Preferential transfer to one creditor is not fraudulent if debts are genuine and no benefit is reserved to the debtor.

A debtor outside bankruptcy or insolvency may lawfully prefer one creditor by making a transfer in satisfaction of genuine debts, provided the consideration is real and no benefit is reserved to the transferor. Section 53 of the Transfer of Property Act, 1882 is attracted only where the transfer is a fraudulent device to put property beyond the reach of creditors or to retain an advantage for the debtor. Mere prejudice to another creditor's expected execution does not by itself establish fraud. On the stated facts, the conveyance was supported by genuine consideration and was therefore not void under Section 53.

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Issues: Whether a transfer by a debtor, made for adequate consideration in satisfaction of genuine debts and without reservation of benefit, can be impeached under Section 53 of the Transfer of Property Act, 1882 merely because it preferred one creditor and may have defeated another creditor's anticipated execution.

Analysis: The applicable rule is that a debtor, outside bankruptcy or insolvency, may lawfully pay one creditor in full and leave others unpaid. A transfer is hit by Section 53 only if it is a fraudulent device that removes property from the reach of creditors or reserves some benefit to the debtor. Where the consideration is real, the debts are genuine, and no benefit is retained by the transferor, the fact that another creditor is prejudiced does not by itself establish fraud under the section. The challenged conveyance had to be judged on its own merits, and the finding that consideration for it was real took it out of the category of fraudulent transfers.

Conclusion: The transfer in favour of the respondents was not void under Section 53 merely because it preferred one creditor over another; the challenge failed.

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