Any sale of property by a person in debt is illegal under this section.

This section only applies to transfers made dishonestly or fraudulently, especially without adequate payment in return, intended or likely to prevent creditors from getting their fair share; genuine, fairly priced sales are not covered.

Indian Penal Code, 1860

Section 421

repealed

Dishonest or fraudulent removal or concealment of property to prevent distribution among creditors

Whoever dishonestly or fraudulently removes, conceals or delivers to any person, or transfers or causes to be transferred to any person, without adequate consideration, any property, intending thereby to prevent, or knowing it to be likely that he will thereby prevent the distribution of that property according to law among his creditors or the creditors of any other person, shall be punished with imprisonment of either description for a term which may extend to two years, or with fine, or with both.§

Why this exists

This section protects the rights of creditors, people owed money, by preventing debtors from cheating them out of their fair claims through dishonest transfers or concealment of assets. It exists because insolvency and debt recovery laws depend on a debtor's property being available for fair distribution, and without this provision, debtors could easily defeat legitimate claims by hiding or giving away assets before creditors could reach them. Under the Bharatiya Nyaya Sanhita, 2023, this corresponds to Section 320.

How courts read it

Courts require proof of dishonest or fraudulent intention specifically aimed at preventing fair distribution of property among creditors, and examine whether any transfer made was without adequate consideration, since a genuine sale for fair value would not ordinarily attract this section.

Common misconceptions

Myth: Any sale of property by a person in debt is illegal under this section.
Fact: This section only applies to transfers made dishonestly or fraudulently, especially without adequate payment in return, intended or likely to prevent creditors from getting their fair share; genuine, fairly priced sales are not covered.