Actionable claims
Actionable claim is a species of property and hence is capable of ownership and transfer. Sec. 3 of
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the Transfer of Property Act, 1882 defines actionable claim to be a claim -
(i) to any debt other than a debt secured by mortgage of immovable property or by hypothecation
or pledge of movable property, or
(ii) to any beneficial interest in movables not in possession actual or constructive of the claimant,
(iii) which the Civil Courts recognize as affording grounds for relief, whether such debt or beneficial
interest be existent, accruing, conditional or contingent.
In brief, an actionable claim means -
(i)a claim to an unsecured debt, or
(ii) a claim to any beneficial interest in movable property not in possession of the claimant.
An actionable claim is similar to what is known as a chose-in-action (in England) ie. personal
property, not in the possession of the claimant, which can only be recovered by taking action in the
court.
A 'debt' is an obligation to pay a liquidated or definite sum of money. If the amount of money is not
certain, it is not debt. A debt may be payable in future, or it may be conditional (due only if a
condition be fulfilled) or contingent (payable on a certain contingency e.g. an amount due under a
policy of insurance).
Debts secured by a mortgage of immovable property or by a pledge of movable property are
excluded from the definition of actionable claim, as they are secured debts.
The phrase 'beneficial interest' refers to a claim under a contract, to movable property. However, a
claim for damages (under a contract or tort), ie., for an unascertained sum of money or a claim for
mense profits, does not come within the definition of actionable claim.
Illustrations -
● A owes Rs. 1000 to B. B's claim is an actionable claim.
● A borrows Rs. 1000 from B and mortgages his house to him.
The mortgage debt is not an actionable claim.
● A contracts 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 of Rs. 1000. B has a right to claim the damages from A but
this claim is not an actionable claim.
● A contracts to sell to B bales of cotton deliverable on a future day. B has a beneficial
interest in the goods and it is an actionable claim.
Instances of Actionable Claim-
. Unsecured debt.
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. Right to claim benefit of a contract for the purchase of goods; beneficial interest under a
subsisting contract is an actionable claim ( Jaffar Mehr Ali v Budge Jute Mills (1907) 34 Cal
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289.
. Arrears of rent [Daya Debi v Chapala Devi (1959) 63 CWN 976].
. Maintenance allowance payable in future.
. Annuities under a deed of wakf (Mt. Bibi v Abdul Aziz AIR 1936 Pat 527)
. Amount standing to the credit of the member of a provident fund.
. A share in partnership; interest of the partner in a dissolved partnership (Mulchand v
Shamdas AIR 1941 Sindh 73).
. A claim for return of earnest money.
. Right of vendor to recover money left with vendee.
. Money due under an insurance policy (Official Assignee v Hukum Chand AIR 1941 Mad 147).
. Fixed deposit in a bank [Anantaraman v Official Liquidator (1940 Mad. 157]
. Hire-purchase agreement [Krishnamurthi v Kamalakshi (1983) Kant 233].
Instances of Non-actionable Claim
. A debt is an actionable claim, but a debt which has passed into a decree is not an actionable
claim; as here the action has already been taken while an actionable claim means something
which can be enjoyed only after taking action [Afzal v Ram Kumar Bhudra (1886) 12 Cal 610].
. The right to recover damages for breach of contract is not an actionable claim. Because after
a breach of contract, nothing is left but a right to sue for damages which is not a beneficial
interest in the contract (but a mere right to sue for nonperformance of the contract)
(Hirachand v Nemchand AIR 1923 Bom 403).
. Secured debt (e.g. debt secured by a mortgage).
. A claim to mense profits (unascertained sum).
. A copyright [Savitri v Dwarka (1939) ALJ 575]
Transfer of Actionable Claims
. Mode - Sec. 130, T.P. Act, prescribes the mode of assigning of alienating an actionable
claim. The assignment may be by way of sale, mortgage, gift or exchange. The transfer must
be effected by an instrument in writing signed by the transferor or his duly authorized agent.
An endorsement on the back of a document comprising the actionable claim is enough.
. Effect - The assignment takes effect from the date of the execution of the writing and its
effect is to vest all the rights and remedies of the transferor in the transfèree [Sec.130 (1)].
The transferee may sue for the actionable claim in his own name without obtaining
transferor's consent and without making him a party to the suit . After the assignment, the
transferee is the only person who is entitled to recover the claim. The assignment has also
the effect of subjecting the transferee to all the liabilities and equities to which the transferor
was subject in thereof at the date of the transfer (Sec.132).
was subject in thereof at the date of the transfer (Sec.132).
For instance, a debtor has a right to set off any counter claim against the transferee which he could
have done against the transferor.
(3) Notice - Although a notice of transfer to the debtor is not necessary to perfect the title to the
transferee, but until the debtor receives notice of the transfer in accordance with law, his dealings
with the original creditor will be protected. The transferee, therefore, in his own interest, must give
notice of the transfer to the debtor as early as possible. Once he does this the debtor becomes
liable to pay the debt to him alone. However, in respect of transfer of 'arrears of rent', such notice
will not be necessary.
Sec.131 lays down that every notice of transfer of an actionable claim shall be in writing signed by
the transferor (or his agent) or in case the transferor refuses to sign, by the transferee or his agent,
and shall state the name and address of the transferee.
Illustrations
(a) A owes money to B, who transfer the debt to C. B, then demands the debt from A, who, not
having received notice of the transfer, as prescribed in Sec. 131, pays B. The payment is valid, and C
cannot sue A for the debt.
(b) A transfers to C a debt due to him by B, A being then indebted to B. C sues B for the debt due by
B to A. In such suit B is entitled to set off the debt due by A to him; although C was unaware of it at
the date of the transfer.
(c) A executed a bond in favour of B under circumstances entitling the former to having it delivered
up and cancelled.
B assigns the bond to C for value and without notice of such circumstances. C cannot enforce the
bond against A.
(4) Incapacity - Sec. 136 says that no Judge, legal practitioner or officer connected with any Court
of Justice shall buy, or traffic in, or agree to receive any share of or interest in any actionable claim.
Case Law
In Doriaswami Mudaliar v D. Aiyangar (AIR 1925 Mad 753), it was held that
(1) even though Sec. 130 does not prescribe any language or wording of transfer, from the language
used, the intention must be clearly discernible;
(2) the whole of the debt/beneficial interest must be transferred, a part cannot be transferred, as a
single cause of action will be split up into a number of causes of action; and,
(3) the letter of transfer must be addressed to the transferee.
