Actionable Claim according to Transfer of property Act 1882

Table of Content

Table of Contents
Actionable claim .................................................................................................................................... 2
Introduction ....................................................................................................................................... 2
Significance of Actionable Claim ................................................................................................. 2
Conditions of actionable claim ......................................................................................................... 2
Types of Debts.................................................................................................................................... 3
According to section 130 which is also about a transfer of actionable claim ........................... 4
Examples of “Actionable Claim:- .................................................................................................... 4
However the following claims are not “Actionable claims”:- .................................................... 4
Definition of assignment:- ............................................................................................................. 5
Transfer of policy of Marine Insurance ...................................................................................... 8
Notice should be in writing ........................................................................................................... 8
Warranty of solvency of debtor.................................................................................................... 9
Mortgaged debt.............................................................................................................................. 9
Assignment of rights under policy of insurance against fire ......................................................... 9
Assignment of rights under policy of marine insurance ............................................................ 9
Incapacity of officers connected with courts of justice ................................................................ 11
Saving of Negotiable Instruments .............................................................................................. 11
Conclusion ........................................................................................................................................ 11

1
Actionable Claim according to Transfer of property Act 1882

Actionable claim

Introduction
The term actionable claim is that every kind of claim in a movable property which would be
enforced through the courts. But such a wide meaning created confusion. For example, under this
meaning all debts whether secured or unsecured were actionable claims whereas a debt secured by
mortgage of immovable property is, strictly speaking, an ‘interest in land. Similarly, under this
meaning any claim of money whether the amount was fixed amount or uncertain, was an actionable
claim. Because of such confusions there used to be conflicting decisions and the law was neither
clear nor uniform.1

Actionable claim is defined in Section 3 of the Transfer of Property Act as a ‘claim to any debt other
than a debt secured by mortgage of immovable property or by hypothecation or pledge of movable
property or to any beneficial interest in the movable property not in the possession, either actual or
constructive of the claimant which the civil courts recognize as affording grounds for relief, whether
such debt, or beneficial interest be existent, accruing, conditional or contingent2.

Significance of Actionable Claim

Actionable claim means a claim to any debt other than a debt secured under a mortgage or
hypothecation or pledge on any immovable or moveable property, possession of which is given to
person or institution which gave the loan. An Actionable Claim is a plain unsecured debt which
can be claimed by a person against another person and which can be enforced in civil courts
according to law. .

An Actionable Claim is transferable and inheritable and it is deemed to be a property in the hands
of the person who has the claim.

Conditions of actionable claim

Two conditions of actionable claim is that:

1
Anju Harbansh Student, Fourth Year, Hidayatullah National Law University, Raipur, Chhattisgarh,
INTERNATIONAL JOURNAL OF BUSINESS POLICY AND ECONOMICS Vol. 4, No. 2, (2011) : 409-
415
2
Transfer of Act,1882.

2
Actionable Claim according to Transfer of property Act 1882

(1)Unsecured Money Debt:

A debt is an obligation to pay a liquidated or definite sum of money. Such debt may me: (1)
existent, (2) conditional, (3) contingent. If it is now due and owing it is existent. If it is a present
debt but payable in the future it is accruing. A debt which will be due only if a condition be
fulfilled or if a certain specified thing happens is a conditional debt. Contingent debts are debt
which are payable on a certain contingency, e.g., an amount due under a policy of insurance.

Types of Debts
Existent Debt: Where a debt or sum of money3 has already become due and is payable
(enforceable) at present, the debt is existent.

Accruing debt: Where a debt or sum of money is at present due but it is payable not now but on a
future date, the debt is accruing. Accruing debt is due at present but becomes payable only on a
future date

Conditional or Contingent debt: Where the claim for a sum of money exists but the payment
depends upon the fulfilment of any condition, the debt is condition.

Illustrations

(1) A owes Rs. 1000 to B. B’s claim is an actionable claim.

(2) A borrows Rs. 1000 from B and mortgages his house to him. The mortgage debt is not
actionable claim.

(3) A contracted to buy goods from B. On the due date, a fails to take delivery and B sells the
goods in the open market at a loss Rs. 10000. B has a right to claim the damages from A but this
claim is not an actionable claim.

(2) Claim to Beneficial Interest not in Possession of the Claimant

Right of a person to take the possession of a movable property from the possession of the another,
is the actionable claim of that person provided claimant has beneficial interest(i.e. right of
possession) in that property.

Following condition are necessary for an actionable claim: (a) The claim is in some movable
property. (b) The movable property is in possession of another person. (c) The beneficial inters or the right
of the possession of the claimant is recognized by the court.

3
Sinha R. K., “The Transfer of Property Act”, 9th Edition 2

3
Actionable Claim according to Transfer of property Act 1882

According to section 130 which is also about a transfer of actionable claim4

 Transfer of an actionable claim whether with or without consideration shall be effected only by
the execution of an instrument in writing signed
 By the transfer or or his duly authorized agent, shall be complete and effectual upon the
execution of such instrument
 All the rights and remedies of the transfer or, whether by way of damages or otherwise, shall
vest in the transferee, whether such notice of the transfer as is herein after provided be given or
not.
 Right to benefit of a contract falls within the definition of Actionable Claim

Examples of “Actionable Claim:-

“The following claims are “actionable claims”:-

1. Claim for arrear rent;

2. Claim for rent to fall due in future.
3. An option offered to repurchase the property once sold.
4. Benefit of a contract giving option to purchase the land.
5. When a contract for purchase of goods is endorsed by the purchaser, by writing on the
back of the contract under his signature, that he has sold all his rights and interest in the
goods purchased under the said contract to a certain person who is named and properly
identified in such endorsement.

However the following claims are not “Actionable claims”:-

1. A claim which is decreed.

2. Relinquishment of interest of a member retiring from joint Hindu Family business in
favour of the members who continue to be co-partners of the same.
3. “Right to Sue”, though it is a right but not an actionable claim.
4. A claim for main profits.5

4
. http://www.lawzonline.com/legalencyclopedia/a/Actionable-Claim.html
5
http://www.ipropertybook.com/bnm/actionable-claim/

4
Actionable Claim according to Transfer of property Act 1882

Definition of assignment:-

“When the rights, title and interest in debt due to or accruing due to a person are transferred
to another person”

Transfer of life insurance policy, National Saving Certificate of supply bills etc, to the name of bank
or a security against borrowing from banks are examples of assignment.

Every actionable claim or chose in action is assignable except in four cases:

 where the assignment is prohibited by law,

 where the terms of the contract under which the claim accrues prohibit such assignment,
 where the contract is of a personal nature, and
 where the assignment would increase the burden on the other party.

There are synopsis regarding this section which is:-

 There must be present transfer of existing actionable claim

The word “Transfer” means a present transfer6. A promise by the debtor to pay money to his
creditor, when he, the debtor, might receive a debt due to him by a third person, does not constitute
an assignment of the debt so as to charge the debt in the hand of the third person7.
 Assignment her with of rents and profits and assignments of lessor’s of revision under a
lease.

In this case the assignee will be in title to only right to realize the rents and profit by virtue of the
assignment in his favour but in case of reversion the rights which the laser head on the date of the
reversion will be transfer to him8

 Assignment of part of debt

There is nothing in this section which prohibits the transfer of a part debt.

 Transfer by operation of law

This section does not affect a transfer of an actionable claim by operation of law, or in execution of
in decree or order of a court, as such transfers are expressly saved.

6
AIR 1926 Nag (207)
7
(73) 1873 Pun Re No. 63 p.(100)(DB)
8
AIR 1938 Mad 100 (102)

5
Actionable Claim according to Transfer of property Act 1882

 Whether with or without considerations

It clear that a gift of an actionable claim can validly be made under this section’
 Form of assignment

Actionable claim shall be affected only by the execution of an instrument in writing. An assignment
by way of valid trust deed is valid.

 No particular words are necessary to constitute assignment

A transfer of an actionable claim need not be in a particular form or be couched in technical

language. But the words used must sufficiently indicate the transferor’s intention to the transfer the
claim.

 Registration an actionable not necessary

No registration necessary for the transfer an actionable

 Completeness of the transfer and the notice of the debtor

A transfer of an actionable claim is complete on the execution of the instrument signed by the
transferor. The transfer of an actionable claim does not depend upon the giving notice to the debt.

 Transfer of mortgage debt

A notice to the mortgagor is not necessary in order to render its assignment valid. Until mortgagor
receive notice of the transfer the mortgagor validity make payments to the mortgagee and to have a
credit for them against transferee9.

 All the rights and remedies of the transferor, by way of damages or otherwise, shall vest
in the transferee

Actionable claim pending a suit for its recovery there is necessarily involved also transfer of the
transferor’s right in a decree which may be passed in the favour in the pending litigation and the
moment a decree passed in his favour by the court of law, that decree is also automatically
transferred in favour of transferee virtue of the assignment in writing already executed by the
transferor.

9
Commentary The transfer of property Act 1882 by Justice (R) Muhammad Naseem Chaudary.

6
Actionable Claim according to Transfer of property Act 1882

 Assignor’s liability after assignment

Transferee can suing transferor for price paid for transfer and for costs of litigation against debtor.
Transferee held was entitled decree against transferor.10

 Principle of “ Caveat Emptor” applies to the purchaser

The principle of “Caveat Emptor” applies to the purchase of an actionable claim. The person who
takes a fixed deposit receipt in assignment in the normal course of banking business being not under
any obligation to enquire before taking the assignment.11

 Demand draft-recovery of amount- remedy lies in suing drawee and not drawer

Transferee of actionable claim may sue or institute proceedings for same in his own name without
obtaining the transferor’s consent to such suit or proceedings and without making him a party
thereto.12

 Partner’s share of transfer

Only an agreement to transfer no assignment deed was executed, there was no transfer of the
partners share. Where statute requires a deed of transfer, title cannot pass merely by admission or
relinquishment.13

 Insurer- right to sue

The insurer in the absence of an assignment can only bring an action in the name of the insured and
not in his own name.

 Firm dissolved

Section 130 are not applicable to a dissolved firm having a mere right to sue for damage for breach
of contract by one of partners.

 Common law
 This section contains a special scheme which has some of the features both of the English
Common Law and the principle of equilty. This section is not applicable at Muhammadan law.

10
AIR 1927 Rang 129 (129)
11
AIR 1956 Mad 570 (574)
12
PLD 1965 Kar.519(p.534)
13
PLD 1957 kar 379(p.385)

7
Actionable Claim according to Transfer of property Act 1882

 Goods

Lottery tickets are goods and not actionable claims. Sales of lottery tickets. Levy of sales tax there
on is within the legislative competent of state legislature.

 Possession

An assignment in law is an act by which one person transfers to another or causes to vest in another
his right or title to something before the object of the transfer has become property in possession of
the assignor.

Transfer of policy of Marine Insurance

According to sec 130-A:

A policy of marine insurance must be transferred by assignment, unless it contains terms expressly
prohibiting assignment, and may assigned either before or after loss.

 Marine policy assigned by the endorsement or customary manner.

 Insurer having paid up loss to assured could sue tortfeasor in his own name.
 Respondent/ Insurer having paid up loss to aggrieved party, could maintain action in
their own name.

Notice should be in writing

According to sec 131:-

“Every notice of transfer of an actionable claim shall be in writing, signed by the

transferor or his agent duly authorized in this behalf, or, in case the transferor refuses to sign,
by the transferee or his agent, and shall state the name and address of the transferee”.

Every notice of transfer should be in writing signed by the transferor and duly authorised. In case of
transferor refuses to sign he shall state the name and address of the transferee.
There are some exceptions regarding notice:-
 Necessity of notice for the completion of assignment.
 How to given the notice
 Notice to be given within a specific reasonable time period.

8
Actionable Claim according to Transfer of property Act 1882

 Debtor cannot waive the defect in notice.14

Warranty of solvency of debtor

Section 133 of Transfer of Property Act, 1882 deals with Warranty of solvency of debtor
Where the 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, where
the transfer is made for consideration, to the amount or value of such consideration.15

Mortgaged debt

Section 134 deals with 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 such recovery: secondly, in or towards satisfaction of the amount for the
time being secured by the transfer; and the residue, if any, belongs to the transferor or other person
entitled to receive the same.16

Debts secured by a mortgage of immovable property or by a pledge of movable property are

excluded from the definition of actionable claim. Actionable claim therefore under the section
means a claim to unsecured debt. A claim for damages, i.e. for an unascertained sum of money or
a claim for means profits does not come within the definition of actionable claim.

Assignment of rights under policy of insurance against fire

Section 135 Assignment of rights under policy of insurance against fire deals with

“Every assignee, by endorsement or other writing, of a policy of insurance against fire, in whom
the property in the subject insured shall be absolutely vested at the date of the assignment, shall
have transferred and vested in him all rights of suit as if the contract contained in the policy had
been made with himself”.

Assignment of rights under policy of marine insurance

Section 135-A Assignment of rights under policy of marine insurance deals with

14
Of transfer of actionable claim, Goyle’s A Commentary on the transfer of property act 1882.
15
http://www.lawnotes.in/Section_134_of_Transfer_of_Property_Act,_1882#Notes
16
Ibid.

9
Actionable Claim according to Transfer of property Act 1882

(1) Where a policy of marine insurance has been assigned so as to pass the beneficial interest
therein, the assignee of the policy is entitled to sue thereon in his own name; and the defendant is
entitled to make any defence arising out of contract which he would have been entitled to make if
the action had been brought in the name of the person by or on behalf of whom the policy was
effected.

(2) Where the insurer pays for a total loss, either of the whole, or in the case of goods, of any
apportion able part, of the subject-matter insured, he thereupon becomes entitled to take over the
interest of the insured person in whatever may remain of the subject matter so paid for, and he is
hereby subrogated to all the rights and remedies of the insured person in and in respect of that

(3) Where the insurer pays for a partial loss, he acquires no title to the subject matter insured, or
such part of it as may remain, but' he is thereupon subrogated to all rights and remedies of the
insured person as from the time of the casualty causing the loss, in so far as the insured person, has
been indemnified by such payment for the loss.

(4) Nothing in clause (e) of section 6 shall affect the provisions of this section.The respondent
consigned certain goods to the Railway for dispatch. They were insured. They were damaged
during transit, and the Insurance Company paid the total loss. The respondent assigned all its
rights, including the right to sue, to the Insurance Company.

The respondent consigned certain goods to the Railway for dispatch. The goods were insured.
They were damaged during transit, and the Insurance company paid the total loss. The respondent
assigned all its rights, including the right to sue, to the Insurance Company17

There are synopsis regarding sec 135-A

 Insurer- Right to sue

In the absence of assignment an insurer can only bring an action in the name of insured but not on
his name.

 Person Subrogated whether entitled to sue his own name

This section is not merely regarding subrogation but regarding assignment.

17
UNION OF INDIA V. SRI SARADA MILLS LTD. [1972] RD-SC 238 (28 September 1972)

10
Actionable Claim according to Transfer of property Act 1882

 Subrogation

Subrogation under to a contract of under marine insurance act 190618 not applicable here

 Carriage of goods by air

This section could not apply related to the Carriage of goods by air

 Assignment

Under this section assignment is entitled to sue

Incapacity of officers connected with courts of justice

Sec -136 Incapacity of officers connected with courts of justice deals with
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.

Saving of Negotiable Instruments

Sec 137 Saving of negotiable instruments deals with

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.

Conclusion
Actionable claim is a claim to any debt, other than a debt secured by mortgage of immovable
property or by hypothecation or pledge of moveable property, or to any beneficial interest in
moveable property not in possession either actual or constructive, of the claimant, which the civil
courts recognize as affording grounds of relief whether such debt or beneficial interest be existent,
accruing or conditional or contingent. So the actionable claim is a very important for the transfer
of property

18
marine insurance act 1906
11
Actionable Claim according to Transfer of property Act 1882

12
Actionable Claim according to Transfer of property Act 1882

Jugalkishore Saraf Vs. Raw Cotton Co. Ltd.19

Legal Crystal20 Citation: legalcrystal.com/638544

Court: Supreme Court of India

Decided On: Mar-07-1955

Reported in: (1956)58BOMLR517; [1955]1SCR1369

Judge : Bhagwati,; S.R. Das and; Imam, JJ

Acts : Code of Civil Procedure (CPC), 1908 - Sections 47 and

146 - Order 21, Rules 11, 11(2), 16, 17 and 17(1) - Order
22, Rule 10; ;Transfer of Property Act - Sections 3, 5, 8,
130 and 132

Appellant: Jugalkishore Saraf

Respondent: Raw Cotton Co. Ltd.

THE END

19
LegalCrystal - Indian Law Search Engine
20
www.legalcrystal.com

13
Actionable Claim according to Transfer of property Act 1882

Bibliography

Website

 http://www.lawnotes.in/Section_134_of_Transfer_of_Property_Act,_1882#Notes
 http://www.lawzonline.com/legalencyclopedia/a/Actionable-Claim.html
 http://www.ipropertybook.com/bnm/actionable-claim
 www.legalcrystal.com
Law Cases

 AIR 1926 Nag (207)

 1873 Pun Re No. 63 p.(100)(DB)
 AIR 1938 Mad 100 (102)
 AIR 1927 Rang 129 (129)
 AIR 1956 Mad 570 (574)
 PLD 1965 Kar.519(p.534)
 PLD 1957 kar 379(p.385)
 UNION OF INDIA V. SRI SARADA MILLS LTD. [1972] RD-SC 238 (28
September 1972)

Books

 Of transfer of actionable claim, Goyle’s A Commentary on the transfer of property

act 1882.
 Commentary The transfer of property Act 1882 by Justice (R) Muhammad Naseem
Chaudary

 Sinha R. K., “The Transfer of Property Act”, 9th Edition 2

Act

 marine insurance act 1906

 Transfer of Property Act 1882

14