Section 12 of Transfer of Property Act, 1882 II Sec. 12 of TPA II

Section 12 of Transfer of Property Act, 1882 II Sec. 12 of TPA II #insolvencyexception #section12tpa

Oral Transfer of Property (Sec. 9)
   • Section 9 - Oral Transfer of Property...  

Operation of Transfer (Sec. 8)
   • Section 8 of transfer of Property Act...  

Person Competent to Transfer (Sec.7)
   • Section 7 of Transfer of Property Act...  

Condition Restraining Alienation (Section 10)
   • Section 10 TPA : Condition restrainin...  

Restriction Repugnant to Interest Created (Sec. 11)
   • Section 11- Transfer of property Act ...  

This Video covers the topics -

Section 12 provides that where property is transferred subject to a condition or limitation making any interest therein, reserved or given to or for the benefit of any person, to cease on his becoming insolvent or endeavouring to transfer or dispose of the same, such condition or limitation is void.
Nothing in this section applies to a condition in a lease for the benefit of the lessor or those claiming under him.

Illustration: A transfers property to B with the condition that if B become insolvent, then his interest in the property would cease. B later becomes insolvent and A seeks to enforce the condition. In such a case, the condition would be void and B will continue to have interest in the property.

Section 12 prevent a transferee from defrauding his creditors in such an eventuality by allowing the property to revert back to the grantor through such a condition, on the same time also protect the rights of creditors.

 An exception to this rule in the case of a lease, which allows a lessor to impose such a condition for his benefit in the lease. This implies that a lessor may stipulate that if a lessee should become insolvent, the lease may be forfeited and the lessor may re-enter the leased property.

However, if lessee assigns the lease and then is rendered insolvent, then this condition will not apply.(Smith v. Gronow )
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