Transfer of Property Act (TPA)
Mere Right to Sue under Section 6(e): Bare Rights of Action, Actionable Claims and the Rule Against Trafficking in Litigation
A debt may be sold, and with it the right to sue for the debt. A claim for damages for a broken contract may not, because there is nothing to sell except the lawsuit itself. Section 6(e) draws that line in four words — a mere right to sue cannot be transferred — and the whole difficulty lies in the word mere. The right to sue is not forbidden as an appendage of property that passes; it is forbidden as a commodity in itself, because the law will not let a stranger buy another man's litigation.
Figure 1: The remedy as part of a transferable claim, and the remedy stripped out and sold alone
1. The Clause
Section 6(e), TPA 'A mere right to sue cannot be transferred.' Compare section 3, which defines an actionable claim as 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, actual or constructive, of the claimant — which the civil courts recognise as affording grounds for relief. An actionable claim is transferable, under sections 130 to 137. |
2. What Makes a Right to Sue 'Mere'
A right to sue is mere when it is transferred by itself, unaccompanied by any property to which it is incidental. Two situations must therefore be kept apart.
- The remedy as an incident. A creditor assigns a debt; the right to sue the debtor goes with it, because the assignee has acquired the claim of which the remedy is the enforcement. Nothing in clause (e) prevents this.
- The remedy alone. A person who has been defamed, or whose goods have been damaged, purports to sell his right to bring the action. The buyer takes no property; he takes only the chance of a decree. This is what the clause strikes at.
3. Transferable and Non-Transferable Claims
Transferable | Not transferable — a mere right to sue |
|---|---|
A debt, whether or not it has been sued upon | A claim for unliquidated damages for breach of contract |
A decree for money | A claim for damages in tort — defamation, assault, negligence, trespass |
A claim for a liquidated sum, ascertained or ascertainable by calculation | A right to sue to set aside a transaction for fraud |
A claim under an insurance policy after the loss has occurred, the amount having become a debt | A claim to recover PAST mesne profits, which is a bare right of action |
Arrears of rent already accrued, if expressly assigned | A right to sue for compensation for a wrong done to the transferor before the transfer |
The benefit of a contract, where the assignee takes the contractual rights and not merely the remedy | The right to sue for damages for a wrong, sold to a stranger with no interest of his own |
The leading modern authority In Union of India v. Sri Sarada Mills Ltd., (1972) 2 SCC 877, the Supreme Court held that a claim for unliquidated damages does not give rise to a debt until the liability is adjudicated and the damages assessed; until then there is no actionable claim, and what the claimant holds is a mere right to sue, which cannot be assigned. The decision is the standard citation for the proposition that the assignability of a claim depends on whether it has crystallised into a debt. |
4. The Policy: Maintenance and Champerty
The clause carries into the law of transfer an old principle of public policy directed against maintenance — the support of litigation by a stranger — and champerty — such support in return for a share of the proceeds. Indian law has never treated champertous agreements as automatically illegal in the way English law once did; the courts examine whether the agreement is extortionate, unconscionable or made for an improper purpose, and will refuse to enforce it if it is. But section 6(e) is absolute in its own field: whatever the terms, a bare right of action is not property and cannot be conveyed.
- The dispute would change character. A litigant who has suffered a wrong sues to be compensated; a purchaser sues to make a return on a speculation.
- It would multiply litigation. A market in claims creates an incentive to buy up grievances and press them, including claims their original holders would have let go.
- The defendant would face a stranger. A defendant is answerable to the person he wronged, not to whoever has bought the file.
5. Situations to Distinguish
Situation | Position |
|---|---|
A transfers land to B, and also assigns his subsisting claim for damages against a trespasser | The claim for past damages is a mere right to sue and does not pass; the right to sue for wrongs after the transfer belongs to B as owner |
An insurer pays the insured and takes over his claim against the wrongdoer | This is subrogation, which operates by law and by the contract of insurance; it is not an assignment of a bare right to sue |
A party to a contract assigns the benefit of it before breach | Permissible — the assignee takes the contractual rights; it is not the sale of a remedy |
A decree-holder assigns his decree | Permissible — a decree is property, and the assignment is recognised by the Code of Civil Procedure |
A person entitled to a share of partnership profits assigns that share | Permissible — the share is property, and the right to an account goes with it |
An advocate takes a share of the subject matter of the litigation as his fee | Not a transfer under section 6(e), but governed by professional rules, which forbid it |
6. Clause (e) and Section 136
Section 6(e) keeps a bare right of action out of the market altogether. Section 136 approaches the same mischief from the other end: no judge, legal practitioner or officer connected with a court of justice shall buy or traffic in, or stipulate for, or agree to receive any share of, or any interest in, any actionable claim, and no court shall enforce such a claim at his instance. The first provision limits what may be sold; the second limits who may buy.
Retention aid Has the claim hardened into a sum of money? If it has — a debt, a decree, a settled insurance claim — it is property and may be sold. If all that exists is a grievance waiting to be valued by a judge, it is a mere right to sue and belongs to the person wronged. |
7. Landmark Cases
📖 Union of India v. Sri Sarada Mills Ltd., (1972) 2 SCC 877 Held: A claim for damages for short delivery, being a claim for unliquidated damages, is not an actionable claim. It does not become a debt until the amount is ascertained by agreement or by adjudication, and an assignment of such a claim is an assignment of a mere right to sue. Ratio: The assignability of a claim depends on whether it has crystallised into a debt. |
8. Related Topics and Provisions
- What May Be Transferred, Section 6 — the general rule and the other exceptions
- Section 3, TPA — the definition of an actionable claim
- Sections 130 to 137, TPA — the transfer of actionable claims, and the disqualification in section 136
- Section 23, Indian Contract Act, 1872 — unlawful object and consideration, and champertous agreements
- Union of India v. Sri Sarada Mills Ltd., (1972) 2 SCC 877 — unliquidated damages and actionable claims
- Mere Right of Re-entry, Section 6(b) — the neighbouring clause resting on the same policy against speculation