Introduction
In India, the Transfer of Property Act, 1882[1] deals with the laws relating to the transfer of properties. However, this act does not incorporate all types of properties, or all types of transfers neither does it include all the rules regarding the different modes of transfer. Hence, the Transfer of Property Act, 1882 is not exhaustive in nature. There are other Acts which codify and deal with the various kinds of properties such as The Sale of Goods Act of 1930.[2]The Transfer of Property Act does not deal with the transfers by operation of the law. This act only covers transfers between living persons and mainly deals with the transfer of immovable properties. Though, some of the provisions of the said act also apply to movable properties. This Act also deals with the ‘actionable claims’ and transfer of the same.
Meaning and Definition of Actionable Claims
In layman terms, actionable claim means a claim or a debt for which one can take an action for recovery. It signifies the existence of a claim for the enforcement of which, one can approach the courts of law. Actionable claim is defined under Section 3 of the Transfer of Property Act. This Section was included in the said Act by the Amending Act 2 of 1990.
According to Section 3,[3] “an actionable claim is a claim to any debt which is not secured by mortgage of an immovable property or by hypothecation or pledge of a movable property, or to any beneficial interest in movable property which is not in either actual or constructive possession of the claimant, which the civil courts recognize as affording grounds for relief, whether such debt or beneficial interest be existent, accruing confidential or contingent”.
In simple words, actionable claim means–[4]
- Claim to an unsecured debt
In view of actionable claims, debt does not only mean a loan, rather any obligation to pay a certain amount of money may be called as a ‘debt’.
Debt is of two types- Secured debt and unsecured debt.[5]A secured debt is one in which the creditor takes security from the debtor which can consist of both movable and immovable property for the repayment of money. When the debt is secured by an immovable property, it is a mortgage. On the other hand, when the debt is secured by a movable property, it is secured by pledge or hypothecation. Secured debts do not fall under the purview of actionable claims.
An unsecured debt is the exact opposite of this. It refers to all monetary obligations of a certain amount of money that is not covered by any security which is in the form of a mortgage, pledge or hypothecation. Actionable claims only include claims for an unsecured debt. Thus, to qualify as an unsecured debt the following requirements are there:
- A monetary obligation
- Not covered by security
- Certain sum of money obligated
In the case of Sunrise Associates vs Govt. Of Nct of Delhi & Ors (2006) [6] the court stated that an actionable claim may be existent in present, accruing, conditional or contingent. Hence, the three kinds of unsecured debt are as follows:
Existent Debt- When a debt or sum of money has already become due and is payable and enforceable at present is called an Existent Debt.
Accruing Debt- Accruing means something which increases over a period of time. When a debt or monetary obligation is due in present but is payable on a future date, it is an accruing debt.
Conditional or contingent Debt- When a debt is conditional or contingent it becomes payable on the fulfilment of the said condition or contingency. When the stipulation is in control of the parties, it is a conditional debt. Whereas, when the stipulation is beyond human control of the parties, it is a contingent debt.
2. Debt or beneficial interest in a movable property
When a person has the right to possess a movable property, then it is said that he has a beneficial interest in the said movable property. However, if that property is not in his possession, then he has an actionable claim over that property. Thus, the requirements to constitute an actionable claim in this situation are-
- Movable Property
- The said movable property is not in the possession of the claimant
- The claimant has the right of possession over that movable property
It is important to note that if the movable property is already in either actual or constructive possession of the claimant, then he cannot claim possession and it will not constitute an actionable claim. Further, the claimant’s right of possession must be a legal right recognized by the law.
Following claims are considered as Actionable Claims: [4]
Claim for the arrears of rent– (Daya Debi vs Chapala Debi) [7]
Claim for the money due under an insurance policy (Varjivandas Jamnadas vs Maganlal Chhabildas) [8]
Right to get back the purchase money when the sale is set aside (Muttapukuntla Chinnapareddi vs Masineni Venkataramanappa) [9]
Right of a partner to sue for an account of the dissolved partnership firm (Bharat Prasad vs Paras Singh) [10]
The Right to get the proceeds of a business (Alkash Ali vs Nath Bank) [11]
Right to claim benefit under a contract for the purchase of goods (Jaffer Meher Ali vs Budge-Budge Jute Mills Co) [12]
Claim for unpaid dower of a Muslim woman (Amir Hasan Khan vs Mohd. Nazir Hussain)[13]
Claim for return of earnest money[14] (Lalchand vs Hussainio)
Following claims are not considered as Actionable Claims:
Debt which are secured by mortgage of immovable property or hypothecation of movable property (Imperial Bank of India vs Bengal National Bank) [15]
Copyright, patents and trademarks (Savitri Devi vs Dwarka Prasad) [16]
Decree or judgment of debt (M. Govinarajulu Naidu vs D.H. Ranga Rao) [17]
Claim for mesne profits is a mere right to sue and not an actionable claim (Jainarayan vs Kishan Dutta) [18]
Right to get damages under the law of torts or for the breach of a contract (Motilal vs Radhey Lal) [19]
Transfer of Actionable claims under the Transfer of Property Act
Section 130 of the Transfer of Property Act, 1882 deals with the transfer of actionable claims. [20] The mode of transfer of an actionable claim is described in the section. It states that any type of actionable claim, with or without consideration will be made effective by the execution of the instrument recognized legally in written form only. The particular instrument must be signed by the transferor or his duly authorized agent. The transfer of claim takes place only after the execution and signing of the instrument.
Exception to Section 130– This Section is not applicable on the transfer of marine or fire policy of insurance.
Section 132 of the Act defines the liability of the transferee of an actionable claim. After the transfer of actionable claim comes into effect, all the liabilities, rights and remedies which vested in the transferor, after the execution vests in the transferee. (ICICI Bank Ltd vs Official liquidator of APS stars industries ltd) [21]
Section 133 provides for the warranty of solvency of debtor.
Section 134 of the act deals with the mortgaged debt. The section states that if the transfer of an actionable claim is made by way of mortgage for securing an existing or future debt, firstly, the sum of money should be applied in payment of the cost of such realization and then towards satisfaction of the amount secured by the transfer.
Section 135 deals with Assignment of rights under policy of insurance.
Section 136 talks about the Incapacity of officers connected with Courts of Justice.
Section 137 of the act states that sections 130 to 136 of the act are not applicable to stocks, shares, negotiable instruments, debentures and on mercantile documents of title to goods.
Conclusion
The Transfer of Property Act, 1882 covers the laws relating to actionable claims and the transfer of such actionable claims. Actionable claim is a claim or a debt for which one can take an action for recovery by approaching the courts of law. Actionable claim is defined under Section 3 of the Transfer of Property Act. Further, Section 130 of the act lays down the procedure for transfer of an actionable claim. The scope of Property law is expanding day by day and actionable claim is a vital concept in the domain of debt and property. The Transfer of Property Act deals with all these concepts extensively.
References
[1] THE TRANSFER OF PROPERTY ACT, 1882
[2] THE SALE OF GOODS ACT, 1930
[3] Section 3 in the Transfer of Property Act, 1882
[4] Pragya Rakshita, ‘Actionable Claim- What it is and what does the Law say about it?’ (Ipleaders online blog, 15 June 2020)
[5] Janhavi Deshmukh, ‘Actionable claim and transfer of actionable claim’ (Law Times Journal, 12 April 2021)
[6] Sunrise Associates vs Govt. Of Nct of Delhi & Ors, AIR 2006 SC 1908
[7] Daya Debi v. Chapala Debi, AIR 1960 Cal 378
[8] Varjivandas Jamnadas vs Maganlal Chhabildas, (1937) 39 BOMLR 493
[9] Muttapukuntla Chinnapareddi vs Masineni Venkataramanappa, AIR 1942 Mad 209
[10] Bharat Prasad v. Paras Singh, AIR 1967 All 15
[11] Alkash Ali v. Nath Bank, AIR 1951 Assam 56
[12] Jaffer Meher Ali vs Budge-Budge Jute Mills Co, (1907) 34 Cal 289
[13] Amir Hasan Khan v. Mohd. Nazir Hussain, AIR 1932 AII 345
[14] Lalchand v. Hussainio, (1927) 97 IC 257
[15] Imperial Bank of India v. Bengal National Bank, AIR 1931 PC 245
[16] Savitri Devi v. Dwarka Prasad, AIR 1939 AII 305
[17] M. Govinarajulu Naidu v. D.H. Ranga Rao, AIR 1921 Mad 113
[18] Jainarayan v. Kishan Dutta, 3 Pal 575
[19] Motilal v. Radhey Lal, AIR 1933 AII 642 (V20)
[20] Section 130 in the Transfer of Property Act, 1882
[21] ICICI Bank Ltd v. Official liquidator of APS stars industries ltd, AIR 2011 SC 1521
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