Legal provisions regarding Dishonest or fraudulent removal or concealment of property to prevent distribution among creditors under section 421 of Indian Penal Code, 1860.
Dishonest or fraudulent removal or concealment of property to prevent distribution among creditors:
ADVERTISEMENTS:
Section 421 refers to frauds connected with insolvency. The offence under Section 421 consists in a dishonest disposition of property with intent to cause wrongful loss to the creditors. It will cover benami transactions made in fraud of creditors. It will apply to property both movable and immovable.
If a dishonest or fraudulent transfer, removal or concealment or delivery of such property is made by the insolvent without adequate consideration so as to prevent its distribution among his creditors according to Indian law, the offence under Section 421 would be established even if that property is in a foreign State.
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Section 421 does not penalise all transfers made by a debtor, but only those made (i) dishonestly or ‘fraudulently’ (ii) without adequate consideration, and (iii) with intent to prevent lawful distribution of property amongst creditors.
The words ‘removal, concealment or delivery’ are wide and embrace cases of withdrawal of property, unconnected with transfer, from its being made available to creditors. The word ‘delivery’ must be understood ejusdem generis with removal or concealment, for it was not intended to prevent a mere transfer of custody, though it may have been fraudulent and with intent to prevent just distribution of it amongst creditors.
ADVERTISEMENTS:
To prove an offence under Section 421, the points required are:
i) The accused removed, concealed, delivered or transferred to any person or caused it to be so transferred.
ii) Such delivery or transfer was without adequate consideration;
iii) The accused acted dishonestly or fraudulently;
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iv) That it was moreover intended to prevent or which the transferor knew to be likely to prevent the distribution of that property according to law among his creditors or the creditors of any person.
The offence under Section 421 is non-cognizable, but warrant should, ordinarily, issue in the first instance. It is bailable and is compoundable with the permission of the Court before which the prosecution is pending. It is triable by any Magistrate.