Define Actionable claim and discuss the mode under the Transfer of Property Act.

Question: Define Actionable claim and discuss the mode under the Transfer of Property Act. [BJS 1991]

Find the answer to the mains question of Property Law only on Legal Bites. [Define Actionable claim and discuss the mode under the Transfer of Property Act.]

Answer

Section 3 of the Transfer of Property Act, 1882 defines an actionable claim 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 movable property not in 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 contingent.”

Essential Elements of an Actionable Claim:

• Unsecured Debt: The debt must not be secured by mortgage, pledge, or hypothecation.
• Movable Property: The claim must relate to a beneficial interest in movable property not in the possession of the claimant.
• Recognised by Civil Courts: The claim must be such that it is enforceable in a civil court.
• Can Be Existing, Future, or Contingent: Actionable claims include debts or interests that are already due, accruing, or contingent on some event.

Examples of Actionable Claims: Unsecured loans or advances, Rent arrears and Lottery winnings

Transfer of Actionable Claims (Section 130 TPA):

Section 130 of the Act provides the mode of transfer of actionable claims.

1. Transfer by Writing

The actionable claim must be transferred by an instrument in writing, signed by the transferor or his authorized agent.

2. Effect of Transfer

Once executed, the transferee gets the legal right to recover the debt or claim.

The transfer is complete upon execution of the written document; registration is not mandatory unless required under the Registration Act.

3. Notice to Debtor (Section 131)

Although not mandatory, serving a notice of the transfer to the debtor or concerned party protects the transferee from any future payments made by the debtor to the original creditor (transferor).

Legal Effect of Transfer:

• Upon transfer, the transferee steps into the shoes of the transferor.
• The transferee acquires the same rights and liabilities as the transferor had.
• No greater interest can be passed than the transferor possesses.

In Doriaswami Mudaliar v. D. Aiyangar (1925) 48 MLJ 432, Madras High Court held that although Section 130 of TPA does not prescribe any language or wording of transfer from the language used, the intention has to be visible. 

An actionable claim represents a transferable, unsecured monetary or beneficial interest in movable property, enforceable by law. Under the Transfer of Property Act, its transfer must be done through a written instrument, and notification to the debtor, though not compulsory, ensures legal certainty. This framework balances the rights of both the assignor and assignee while protecting third-party interests.