Transfer of Property Act (TPA)
Actionable Claims under Sections 130 to 137: Meaning, Transfer, Notice, and the Liabilities of a Transferee
An actionable claim is property you cannot hold in your hand — a debt somebody owes you, or a beneficial interest in moveable property that is not in your possession. The Act makes it transferable, and does so with a short and workable machinery: a writing signed by the transferor completes the transfer, and notice to the debtor protects the transferee against payments and dealings. What the chapter carefully excludes is equally important: a secured debt, a mere right to sue, and the instruments that have their own law — negotiable instruments, shares and mercantile documents of title.
1. The Definition
Section 3, TPA — 'actionable claim' '‘actionable claim’ means a claim to any debt, other than a debt secured by mortgage of immoveable property or by hypothecation or pledge of moveable property, or to any beneficial interest in moveable property not in the possession, either actual or constructive, of the claimant, which the civil courts recognise as affording grounds for relief, whether such debt or beneficial interest be existent, accruing, conditional or contingent.' |
1.1 The two limbs
Limb | Content |
|---|---|
An unsecured debt | A claim to any debt other than one secured by a mortgage of immoveable property, or by hypothecation or pledge of moveable property. The security is what takes it out of the definition: a secured creditor has property to proceed against, and his rights are transferred as an interest in that property |
A beneficial interest in moveable property not in possession | Where the claimant has a beneficial interest in moveable property of which he has neither actual nor constructive possession, and which the civil courts recognise as affording grounds for relief |
In either case | The claim may be existent, accruing, conditional or contingent — so a claim that has not yet matured is still an actionable claim |
2. What Is and What Is Not an Actionable Claim
The claim | Position |
|---|---|
Arrears of rent already due | An actionable claim — an unsecured debt |
Money due under a contract, or a book debt | An actionable claim |
A claim to the return of earnest money, or to a deposit | An actionable claim |
The right to the benefit of a contract, and a partner's share of profits | An actionable claim, as a beneficial interest in moveable property not in possession |
A claim under a lottery ticket | An actionable claim — a right to participate in the draw, and a contingent claim to the prize |
A debt secured by a mortgage, hypothecation or pledge | Not an actionable claim; it is excluded in terms |
A claim for unliquidated damages | Not an actionable claim — it is a mere right to sue, and not transferable under section 6(e), until the amount is ascertained and becomes a debt |
A decree of a court | Not an actionable claim; a decree is transferable, but under its own law and procedure |
Money in the claimant's own possession | Not an actionable claim — the second limb requires that the property be not in his possession |
Copyright, a patent, and similar rights | Not actionable claims; they are property of another kind, with their own statutes |
3. Actionable Claim Distinguished
Actionable claim | The thing compared | |
|---|---|---|
A mere right to sue | A claim to a debt or to a beneficial interest, recognised as affording grounds for relief; transferable under section 130 | A bare right to litigate — damages for a tort or for breach of contract — which is not transferable under section 6(e) |
A debt | Every unsecured debt is an actionable claim | A secured debt is not; and a debt may be actionable although it is contingent or not yet payable |
A chose in action | The Indian expression is narrower than the English chose in action, which covers everything recoverable by action, including negotiable instruments, shares and rights in intellectual property | The Act takes those out of the chapter by section 137 |
A negotiable instrument | Transferred by a signed writing under section 130, and the transferee takes subject to equities | Transferred by negotiation — delivery, or endorsement and delivery — and a holder in due course takes free of equities |
A beneficial interest in property in possession | The second limb requires the property to be not in the possession of the claimant | Where the claimant has actual or constructive possession, the interest is not an actionable claim |
4. Section 130: The Transfer
Section 130, TPA — the substance The transfer of an actionable claim, whether with or without consideration, is effected only by the execution of an instrument in writing signed by the transferor or his duly authorised agent, and is complete and effectual upon such execution. Thereupon all the rights and remedies of the transferor, whether by way of damages or otherwise, vest in the transferee, whether notice of the transfer is given or not. The transferee may sue or institute proceedings in his own name, without obtaining the transferor's consent and without making him a party. Proviso — where a debtor, having no notice of the transfer, pays the transferor, the payment is valid as against the transferee. |
- Writing is essential, and signature by the transferor or his agent. No registration is required, and the transfer may be with or without consideration.
- The transfer is complete on execution. Notice to the debtor is not a condition of validity.
- But notice matters practically. Until the debtor has notice, a payment by him to the transferor is good, and dealings between the debtor and the transferor bind the transferee.
- The transferee sues in his own name, which is the great convenience of the section and the point of difference from the old English rule requiring the assignor to be joined.
5. Sections 131 to 135
Section | Provision |
|---|---|
131 — notice | Every notice of transfer of an actionable claim must be in writing, signed by the transferor or his agent, or, where he refuses to sign, by the transferee or his agent, and must state the name and address of the transferee |
132 — liability of the transferee | The transferee takes the claim subject to all the liabilities and equities to which the transferor was subject in respect of it at the date of the transfer |
133 — warranty of solvency | Where a transferor of a debt 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, and is limited to the amount or value of the consideration |
134 — mortgaged debt | Where a debt is transferred for the purpose of securing an existing or future debt, the debt so transferred, if received by the transferor or recovered by the transferee, is applicable first in payment of the costs of recovery, then in or towards satisfaction of the amount secured, and the residue, if any, belongs to the transferor or the person entitled to receive it |
135 — insurance against fire | Every assignee, by endorsement or other writing, of a policy of insurance against fire, in whom the property in the subject insured is vested, may sue in his own name; and he is subject to all liabilities and equities to which the assignor was subject at the date of the assignment |
Marine insurance was formerly dealt with by section 135A of the Act. That provision was repealed when the Marine Insurance Act, 1963 was enacted, and the assignment of a marine policy is now governed by that Act.
6. Section 136: Incapacity of Officers Connected with Courts
Section 136, TPA 'No judge, legal practitioner or officer connected with any Court of Justice shall buy or traffic in, or stipulate for, or agree to receive any share of, or interest in, any actionable claim, and no Court of Justice shall enforce, at his instance, or at the instance of any person claiming by or through him, any actionable claim so dealt with by him as aforesaid.' |
- The prohibition is on trafficking in litigation by those who administer it, and it applies to judges, legal practitioners and officers connected with any court.
- The sanction is refusal of enforcement. The court will not enforce the claim at his instance, or at the instance of anyone claiming through him.
- The object is the purity of the administration of justice, and the section is a statutory expression of the old objection to champerty and maintenance by officers of the court.
7. Section 137: What the Chapter Does Not Apply To
Section 137, TPA 'Nothing in the foregoing sections of this Chapter applies to stocks, shares or debentures, or to instruments which are for the time being, by law or custom, negotiable, or to any mercantile document of title to goods.' 'Mercantile document of title to goods' includes a bill of lading, dock-warrant, warehouse-keeper's certificate, railway receipt, warrant or order for the delivery of goods, and any other document used in the ordinary course of business as proof of the possession or control of goods, or authorising or purporting to authorise the possessor of the document to transfer or receive the goods it represents. |
Excluded thing | Its own law |
|---|---|
Stocks, shares and debentures | The Companies Act and the articles of the company; transfer by instrument of transfer and registration |
Negotiable instruments | The Negotiable Instruments Act, 1881 — transfer by negotiation, and the special position of a holder in due course |
Mercantile documents of title to goods | The Sale of Goods Act and mercantile usage — transfer by endorsement and delivery, passing the right to the goods |
8. Assignment of a Debt, and Assignment Against Novation
Point | Assignment of a debt | Novation |
|---|---|---|
What happens | The creditor transfers his claim to a third person; the debtor's obligation continues, owed now to the transferee | The old contract is extinguished and a new one substituted, with a new party or new terms |
The debtor's consent | Not required. The transfer is complete on the signed writing | Essential — all parties must agree to the substitution |
Equities | The transferee takes subject to the equities available against the transferor — section 132 | The new contract stands on its own terms, and the old equities go with the old contract |
Notice | Not a condition of validity, but until notice the debtor may safely pay the transferor | The debtor is a party, so the question does not arise |
Governing law | Sections 130 to 137 of the Act | Section 62 of the Indian Contract Act, 1872 |
9. Landmark Cases
📖 Sunrise Associates v. Government of NCT of Delhi, (2006) 5 SCC 603 Held: The Court held that a lottery ticket confers no more than a right to participate in the draw and a contingent right to the prize. That right is a chose in action and falls within the definition of an actionable claim in section 3 of the Transfer of Property Act, being a beneficial interest in moveable property not in the possession of the claimant. Ratio: A claim need not be presently enforceable to be an actionable claim; a contingent beneficial interest in moveable property not in possession suffices. |
📖 Union of India v. Sri Sarada Mills Ltd., (1972) 2 SCC 877 Held: A claim for unliquidated damages does not give rise to a debt until the liability is adjudicated and the amount ascertained. Until then the claimant has a mere right to sue, which is not an actionable claim and is not transferable. Ratio: The line between an actionable claim and a mere right to sue is drawn by whether the claim has crystallised into a debt. |
10. Related Topics and Provisions
- 'Actionable Claim' under Section 3 — the definition in detail
- Mere Right to Sue, Section 6(e) — what cannot be transferred
- Section 6, TPA — what may and may not be transferred generally
- Negotiable Instruments Act, 1881 — the law section 137 leaves undisturbed
- Section 62, Indian Contract Act, 1872 — novation, rescission and alteration
- Marine Insurance Act, 1963 — which replaced the former section 135A