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Section 133: Warranty of solvency of debtor

Transfer of Property Act • Official Statutory Text & Practice Guide

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Act 1882
Section 132 All 137 Sections of Transfer of Property Act Section 134

Legal Commentary & Landmark Judgments: Section 133

Section 133 regulates the warranty of solvency of the debtor where the transferor of an actionable claim warrants the debtor's solvency.

  • Warranty of Solvency Presumption: Where the transferor of an actionable claim warrants the solvency of the debtor, the warranty, in the absence of a contract to the contrary, applies only to his solvency at the time of the transfer.
  • Monetary Ceiling: The warranty is limited to the amount or value of the consideration for which the transfer was made.
  • No Future Solvency Guarantee: Does not guarantee that the debtor will remain solvent at the future date of repayment unless an express continuing guarantee is given.
Key Landmark Precedents:
  • Union of India v. Sri Sarada Mills Ltd., (1972) 2 SCC 877: Discussed commercial warranties in debt factoring under Section 133.
  • CIT v. P.V. Kalyanasundaram, (2007) 10 SCC 1: Affirmed statutory parameters of solvency warranties in commercial debt assignments.
Courtroom Practice & Strategic Litigation Guidance:

In factoring agreements, if the buyer of debts requires the assignor to guarantee recovery, insert an express 'with-recourse' continuing solvency covenant to override Section 133 default limitations.

Section 132 All 137 Sections of Transfer of Property Act Section 134