ACTIONABLE CLAIM

Para 6 of S. 3 of the Transfer of Property Act, 18823 defines "actionable claim". This
provision was inserted in the Act by way of the II Amendment Act of 1990 and reads as
follows: "'actionable claim' means 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 movable 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."4
Thus, as per this section, an actionable claim is a claim to:
i) "any unsecured debt, or
ii) any beneficial interest in a movable property that is not in the claimant's possession,
either actual or constructive."
The two above mentioned claims are aptly recognised by the Courts to afford relief. Apart
from these two, there are other kinds of claims as well that are actionable in nature and can
afford relief. A claim for secured debt, tortuous suits of nuisance or defamation, etc., is an
example of such claims. However, these are not covered under the definition of actionable
claims as provided under the Transfer of Property Act, 1882.
In order to understand what all constitutes an actionable claim, a proper perusal of
"unsecured debt" and "beneficial interest in movable property" needs to be undertaken.
2.1. Unsecured Debt
A debt includes a sum of money due and payable by an individual to another. The amount
due includes the money payable at a point in time. It may also include the amount that is not
due now but might become due and payable at some future point of time. Hence, that money
which becomes payable at a future date because of some present obligations is referred to as
debt.
Debt is mainly of two types, as mentioned below and shown in Diagram 1:
Diagram 1: Types of Debt

2.1.1. Secured Debt

In this type of debt, the debtor gives some security in either an immovable property or a
movable property to secure its payment. When the property given as security is movable, it is
known as a pledge. It is governed by Ss. 148 to 181 of Chapter IX: "Bailment" and, more
specifically ", Bailment of Pledges" of the Indian Contract Act.5 In the other case, when the
property given as security is immovable, it is considered a mortgage. Ss. 58 to 98 and 102 to
104 of Chapter IV: "Of Mortgages of Immovable Property and Charges" of the Transfer of
Property Act, 18826 deals with a mortgage of immovable property.
Yet another situation is that of hypothecation. It refers to a situation where an individual or
an organisation borrows a particular sum of money from the lender to purchase some
particular asset(s). The feature that distinguishes it from other types of debt is that the asset(s)
for which the loan was taken becomes the property of the lender if the borrower fails to
discharge his debt.7 This is also governed by various general provisions of the Indian
Contract Act and specific provisions of the Securitisation and Reconstruction of Financial
Assets and Enforcement of Security Interest Act or SARFAESI Act of 2002.
2.1.2. Unsecured Debt
When a debt is not secured by way of security through pledge, mortgage or hypothecation, it
is referred to as an unsecured debt. It includes all kinds of monetary obligations of a certain
amount of money. It goes beyond the conventional concept of a loan granted by a lender or
creditor to a borrower or debtor. It includes monetary obligations like rent and payment of
price on the sale of a property. A transaction is referred to as an unsecured debt when it
satisfies the following three conditions, i.e.:
i) existence of a monetary obligation,
ii) no security to cover such monetary obligation and
iii) certainty as to the amount of money obligation.
However, not every kind of debt qualifies to become an actionable claim. In the case
of Sunrise Associates v. Government of NCT of Delhi,8 Hon'ble Supreme Court observed
that an actionable claim could be claimed in debt "existent in prasenti, accruing, conditional
or contingent". Therefore, only the following three types of unsecured debts are referred to as
actionable claims to an unsecured debt:
1. Existent Debt
It refers to a debt that has become due, payable and is enforceable presently.
Example: Mr S, the seller, sells his land to Mr B, the buyer, for monetary consideration of Rs.
10 lakh. It was agreed between the parties to the sale that the price of the sale transaction has
to be paid then and there at the time of its execution. Hence, in such a case, where the sum of
money becomes payable right then, it is an existing debt.
2. Accruing Debt
The monetary obligation has already become due in this kind of debt, but it is payable only
on a future date.
Example: Mr E is an employee working for Mr A, the employer, for a salary of Rs. 50,000.
The contract of employment provides that Mr E shall receive his salary for the month on the
last day of that month. In this case, the salary is due throughout that period but it becomes
payable only when the last day of the month comes. Therefore, it is a kind of accruing debt.
Thus, Mr E cannot claim it before the last day of the month, i.e. the day on which it becomes
payable.
3. Conditional or Contingent Debt
A debt is termed as a contingent or conditional debt when it becomes payable only on the
fulfilment of the condition or contingency contemplated by the transaction.
More specifically, when the stipulation enumerated is within the control of the party to the
agreement, it is known as a conditional debt.
Example: P agrees to pay Q Rs. 10,000 if Q buys the house of R. This is a conditional debt as
fulfilling the condition stipulated herein depends upon Q's conduct. He can claim Rs. 10,000
from P only upon the satisfaction of this condition on his part.
Furthermore, when the condition precedent is outside the control of humans, such a becomes
a contingent debt.
Example: P promises to pay Rs. 10,000 to Q if it rains on a particular day. Since the
contemplated stipulation is beyond their control, the debt incurred is a contingent debt. It
becomes payable from P to Q only when it rains on the specified day.
2.2. Beneficial Interest in Movable Property
Movable property is not defined in the Transfer of Property Act, 1882. However, it is defined
under various other legislations. S. 3(36) of the General Clauses defines a movable as "a
property of every description except immovable property".9 Furthermore, Para 1 of S. 3 of the
Transfer of Property Act, 188210 defines "immovable property". If this section is read in
conjunction with S. 2(9) of the Indian Registration Act, 1908,11 it would become clear that
movable property includes the following:
i. "standing timber
ii. growing crops and grass
iii. fruits upon and juice in trees
iv. property of every description, except immovable property."12
Beneficial interest refers to the right of an individual to possess a movable property. Hence,
when an individual has the right of possession of the movable property, it is considered that
the individual enjoys a beneficial interest in movable property. It converts into an actionable
claim only when the individual so entitled is not in possession of that movable property.
Thus, the essentials to constitute an actionable claim in respect of a beneficial interest in a
movable property are:
i. "The property must be movable property,
ii. the claimant has the right of possession of the movable property, and
iii. the claimant is not in possession of the movable property."
Example: Mr X sells his motorbike to Mr Y, who has discharged his obligation by paying the
price of Rs. 40,000 to Mr X. Subsequent to such payment, Mr Y acquires the right of
possession of the motorbike. But if Mr X refuses to transfer the possession thereof, Mr Y has
the legal remedy to approach the Court of law and claim possession of the motorbike.
It is worth noting that the possession referred to here could be actual
possession or constructive possession. If the claimant has possession of the movable property
in either of the forms, then he does not get the right of actionable claim.
Example: If Mr X hands over the keys of a motorbike to Mr Y in the above illustration, then
Mr Y is said to be in constructive possession of that movable property. Hence, now Mr Y
cannot approach the Court to claim possession as he is already possessing the movable
property, be it constructive.
Furthermore, the possessory right that claimant enjoys must be a legal one, i.e. recognised by
law.
Example: Mr M sells ten wheels to Mr L for which he has already paid Rs. 10,000. Mr M is a
minor and, therefore, incompetent to enter into a contract. Here, even though Mr L has
fulfilled his part of the contract, then also he cannot claim possession of 10 wheels. It is
attributable to the fact that a contract with a minor is void ab initio.13 Thus, L's right of
possession is not recognised by law and is not an actionable claim.
3. NATURE OF ACTIONABLE CLAIM
The Sale of Goods Act, 1930, governs the transfer of property of movable nature. It only
pertains to the "sale of movable property". More precisely, it deals with the transfer of the
term "goods" as defined under S. 2(7) of the Act.14 It states that "'goods' means every kind of
movable property other than actionable claim and money".15 Thus, actionable claims are not
covered by the provisions of the Sale of Goods Act. This is because they are defined and dealt
with under the Transfer of Property Act.
An interpretation of this definition aptly conveys that an actionable claim is of the nature of
the movable property. The definition expressly excludes actionable claims from the ambit of
movable property being referred to as goods. Such an exception is provided to exclude a
particular item from a class. Had the actionable claims been immovable in nature, the need to
except them from the definition of goods being movable property wouldn't have arisen.
Furthermore, there are two types of movable properties, i.e.:
i. Tangible Movable Property: It refers to that kind of movable property that can be
touched, felt, etc. It can be possessed in its physical form for its physical existence.
Example: car, house, furniture, jewellery, etc. All these properties can be felt and possessed in
their physical form.
ii. Intangible Movable Property: It refers to that kind of movable property which is
devoid of any physical existence. It exists in the form of rights and obligations
capable of enjoyment. Their existence comes into knowledge when an individual
possessing such right approaches the Court of law to claim it.
Example: Actionable claim is an apt illustration as it is available in the form of a right
possessed by the claimant that can be enforced through action in a Court of law.
Thus, an actionable claim is in the nature of the intangible movable property.
4. TRANSFER OF ACTIONABLE CLAIMS
Ss. 130 to 137 of Chapter VIII of the Transfer of Property Act, 1882 deal with the transfer of
actionable claims.16 This Chapter provides general principles that must be borne in mind
while transferring actionable claims.
4.1. S. 130: Transfer of Actionable Claim
This section states that an actionable claim can be transferred:
i) "with or without consideration
ii) by way of an instrument in writing duly signed by the transferor or his agent duly
authorised in this respect."
Thus, oral transfer of actionable claims is not permitted. However, its registration is not
necessary, and no separate instrument of transfer is to be effected.
Example: an endorsement of the promissory note transferring the actionable claim is
sufficient.
When he puts his signature or thumb impression on the instrument, it executes the actionable
claim. On such transfer, the transferee of actionable claim gets all the transferor's rights,
liabilities, and remedies. The transferee can enforce it without the need to take the consent of
the transferor or make him a party to the suit thereto. He can sue in his own name.
Marine and fire insurance and S. 38 of the Insurance Act, 193817 are exempted from the
application of this provision. This is attributable to the fact that mere assignment of these
insurance policies does not amount to entitling the transferee of the ownership of the subject
matter insured.
4.2. S. 131: Notice to be in writing, signed
The notice is not necessary to ensure perfection of the transferee's title of actionable claim.
However, the dealings of the debtor with the creditor are protected until the former receives
the notice of such an assignment in observance of the conditions enumerate under S.131 of
the Act. It states that:
i) "The notice of transfer of the actionable claim has to be made in writing.
ii) It must be signed by the transferor or his agent authorised on his behalf.
iii) However, if the transferor refuses to sign it, then, in that case, it must be signed by the
transferee of actionable claim or his duly authorised agent."
The Hon'ble Apex Court has clarified that S. 131 of the Act does not prescribe any time limit
for the service of notice. It must be within a reasonable period of time and unconditional. 18
4.3. S. 132: Liability of Transferee of Actionable Claim
The principle behind this section is that the transferee gets no better title than the transferor.
Thus, the transferee takes all the equities and also the liabilities of the transferor to which the
latter was subject at the time of such assignment.
Example: Ms A assigns a debt to Mr B due to her by Mr C. This transfer to Mr B was in
discharge of debt owned by Ms A to him. Now, Mr C files a suit against Mr B for debt due to
Ms A by Mr B. Here, Mr B is rightly entitled to set off the debt due to Mr C by Mr A, even
when Mr B was not aware of such debt at the time of assignment of actionable claim.
4.4. S. 133: Warranty of Solvency of Debtor
In the case of assignment of a debt, the transferee runs the risk of losing the claim when the
debtor becomes insolvent. Therefore, as a precaution, the transferor of the actionable claim
warrants the solvency of the debtor at the date of assignment. But this is subject to contract to
the contrary. Further, it is limited only to the amount or value of the consideration for which it
is transferred.
4.5. S. 134: Mortgaged Debt
Since an actionable claim is a property, its transfer by way of a mortgage is possible. When
one debt is transferred to cover an other debt, whether existent debt or future debt, it is
referred to as a transfer of actionable claim by way of a mortgage. This section provides the
below-mentioned preposition under which the amount so realised could be appropriated:
i) "the debt received by the transferor or recovered by the transferee is to be applied in
payment of the cost of such recovery.
ii) it is to be applied towards satisfaction of the amount secured by the transfer.
iii) if any residue remains after the above-mentioned payments, the remainder is to be given
to the transferor."19
4.6. S. 135: Assignment of Rights under Policy of Insurance against Fire
This provision was inserted by the Amendment Act of 1944. It states that the asignee of fire
insurance policy in whom the property of the subject matter of policy is absolutely vested at
the date of assignment, it would have the effect of transferring and vesting in him all the
rights to sue just as if the insurance policy was entered into by him.
4.7. S. 136: Incapacity of Officers Connected with Courts of Justice
The persons mentioned under this section are not legally qualified to make transfers of
actionable claims. The object behind this disqualification of "Judges, legal practitioners and
officers connected with Courts of Justice" is to ensure that the judiciary remains impartial.
The observation of the Privy Council is relevant in this regard: "It is of great importance that
no officer of a Court of Justice should be even exposed to the suspicion that in the discharge
of his official duties, his conduct may be influenced by any personal consideration."20
4.8. S. 137: Saving of Negotiable Instruments
Furthermore, this Chapter is not applicable to negotiable instruments and other instruments
mentioned thereunder. This is because they are governed by other laws and statutes.
Example: Negotiable instruments are governed under S. 137 of the Negotiable Instruments
Act, 1881.21
Therefore, for a valid transfer of actionable claim, transferor and transferee both must be
qualified and competent to effectuate such transfer. The property so transferred should be
transferrable within the provisions of S. 6 of the Act.22
5. JUDICIAL PRONOUNCEMENTS
5.1. Instances of Actionable Claim
The Apex Court, while considering the issues involved in Lachmi Koeri v. the State of
Bihar,23 reiterated the position laid down in Rameshwar Narain Singh v. Rani Reknath
Koori24 and held that a transfer of arrears of rent could be very well effected as per the
Transfer of Property Act provisions. This is so because it is a kind of transfer of actionable
claim.
The case of Sunrise Associates v. Government of NCT of Delhi25 relates to the right of an
individual to take part in a lottery. Hon'ble Supreme Court held that this right confers a
beneficial interest in a movable property. This is because the purpose behind such transaction
is to won the draw. A lottery ticket in itself is nothing of value. It derives its value from the
fact that it depicts a chance to conditional benefit of winning the lottery prize. Notably, the
prize money won is of a value greater than the consideration paid for its transfer. Thus, the
transfer of such right is a beneficial interest in movable property. Therefore, the lottery was
found to be an actionable claim.
Thus, some examples of actionable claims can be enumerated as under:
 Claim in respect of arrear of rent26
 Claim for getting back the earnest money27
 Claim for insurance amount due under the policy28
 Claim to get the sale purchase money back on account of setting aside the sale
transaction29
 Claiming benefit under purchase contract of goods30
 The claim of a partner to sue for the account of the partnership firm that has been
dissolved31
 Claim to receive the business proceeds32
5.2. Claims not recognised as Actionable Claims
Several kinds of claims are not actionable claims as per the definition enumerated under the
Transfer of Property Act, 1882, and therefore, they cannot be transferred.33
In Jugal Kishore Saraf v. Raw Cotton Limited,34 the Apex Court found that since the action
is necessary in case of a decree or a judgement debt, it cannot be termed as an actionable
claim.
In the case of Moti Lal v. Radhey Law,35 the Hon'ble Apex Court held that the right of
claiming damages, whether it arises out of contract or un-liquidated damages arising out of
tortuous liability, cannot be regarded as an actionable claim. This is undoubtedly a monetary
obligation but does not amount to unsecured debt. It is attributable to the uncertain sum of
money involved. Furthermore, it is also not a limb of an original transaction which is a must
for a claim to become actionable. But it includes the principal money and the interest charged
thereupon for them being a specific nature of the debt. On the other hand, damages are of
uncertain nature and, therefore, not an actionable claim.
Example: In case of tortuous wrongs like a nuisance, defamation, etc., the damages claimed
are of uncertain nature. They are personal in character and attached to immovable property.
Thus, they cannot be transferred. Let's say Mr X defames Mr Y, who possesses the right to
sue Mr X to claim damages. However, the right is very personal in its character, and only Mr
B can sue Mr A in respect of this claim. Thus, it cannot be transferred.
Similarly, in Jai Narayan v. Kishun Dutta,36 the Court found that mesne profit cannot be
regarded as an actionable claim as it is un-liquidated in nature. Further, it is neither a claim to
a beneficial interest in movable property. Thus, it is a "mere right to sue".
Moreover, rights under trademark, patent and copyright are also not termed as actionable
claims. This is due to the reason that they already vest in the individual who possesses them.
They are the individual's intellectual property, and hence, another person cannot be permitted
to claim under them. They are governable under their respective legislation and cannot be
transferred as actionable claims.37
Thus, some examples of claims not recognised as actionable claims are:
 A judgement debtor a decree38
 Right to get damages that arise out of contractual or tortious wrong.39
 Claim for getting mesne profit40
 Claim under trademark, patent and copyright41
5.3. Other Relevant Decisions
The intention to transfer the debt depicted by receipts in writing is an essential element to
validate the transfer of an actionable claim, as held in the case of Simon Thomas v. State
Bank of Travancore.42
In the case of State of Kerala v. Mini Shamsudin,43 the Hon'ble Court observed that despite
the fact that actionable claims are covered under the definition of "goods" under the Sale of
Goods Act and are therefore, movable property, they are not governed under the provisions of
the Sales Tax Act.
6. CONCLUSION
After studying every relevant provision of the Transfer of Property Act and other relevant
statutes and the ratio of various decisions, it could indeed be concluded that actionable claims
as defined under S. 3 of the Act are transferable in nature. It is a movable property of
intangible nature that could be assigned as per the provisions and rules mentioned in Chapter
VIII of the Transfer of Property Act. An actionable claim could be a claim for (a) an
unsecured debt or (b) a beneficial interest on movable property. However, it must be borne in
mind that not all unsecured debts are actionable claims. Only a particular existing, accruing
or contingent or conditional debt would qualify to be an actionable claim and thus, become
transferable. Furthermore, some people are barred from transferring actionable claims under
S.136 of the Act. This is done to maintain the trust of the public in the institution of justice
and judiciary and to maintain its integrity.